Ever since “Liberation Day”, when Donald Trump started spraying tariffs around like imitation blood from a fake gunshot wound, pundits and politicians have been letting us know that the financial world will never be the same again.
It seems the established system of international trade is being rapidly dismantled by a man who has led six companies into bankruptcy, managed to even make casinos lose money, and is actually banned from doing business in the largest city in the country he is supposed to be running.
The imposition of ‘Trumponomics’ threatens to usher in radically different trading regimes for the leaders of the free (and not so free) world and massively more expensive grocery shopping for the rest of us.
That is of course unless those leaders can kiss the presidential arse with sufficient enthusiasm to persuade the owner of that (presumably orange?) backside to strike a deal.
Or perhaps the US bond market will collapse, forcing Trump to pull the plug on the economic auto-eroticism of his Project 2025 masters in the same way the Truss empire collapsed after briefly getting the residents of Tufton Street all hot and bothered.
Then we can breathe a sigh of relief as the system goes back to screwing us over in the more conventional way that we have all grown used to.
Muskovite bandits
You see, just because Trump has unveiled his own peculiar method of spreading misery, poverty and chaos around the world, we shouldn’t let that blind us to the fact that the system he is so keen to overturn has been doing a pretty good job of achieving exactly that for decades.
Now, clearly anything the Muskovite (see what I did there!) bandits in the White House are trying to do, from deporting gay make-up artists, to banning dissent or erasing black history and women’s rights, is at best bat-shit crazy, at worst bordering on fascistic, and either way needs to be resisted.
However, all this penguin-taxing, 90-day-pausing, 150% reciprocal, iPhone-exempting madness does at least shine a light on a few under-reported truths about the way the world does business, such as …
Not all international trade is international
Because corporations and billionaires – unlike workers, asylum seekers and every Brit since Brexit – can move themselves and their money wherever suits them, a huge amount of what’s called ‘international trade’ is neither trade nor international.
For example, car makers often manufacture components in one country before shipping them across a border or two to where the workers get lower wages and the company doesn’t have to worry about pollution, unions and all that nonsense. Then they send the assembled parts back to where they started. This is called ‘intrafirm trade’. About half of US ‘exports’ to Mexico are transfers of this sort. They never enter the Mexican market, there’s no meaningful sense in which they’re exported to or from Mexico, but they still add to the trade deficits that Trump gets so worked up about.
When companies from Primark to Tesla move production to Bangladesh or China, this represents economic migration on a huge scale with no need to involve small boats or people smugglers. It drives down wages and working conditions and is less about trading internationally than it is about making money off the backs of some of the poorest people in the world.
God is not a stockbroker
‘The markets’ are of course an entirely human construct, a well-dressed bookmaker for the better-off. But economic correspondents report their movements as if they are a force of nature, like the weather. One day there are storms and stocks go down, the next sees serene calm and prices rise. Either way, the judgements of ‘the markets’ about the state of the economy are treated as if they emanated from some omniscient power rather than the offices of the Ruperts and Rishis running hedge funds for Goldman Sachs.
The truth is, when we’re told that ‘the markets’ didn’t like this or reacted well to that, what actually happened was that traders chose the easiest way to make money that day. Like the shorters who racked up millions selling stock when Trump first announced his huge tariffs or the President’s mates who pocketed even more by miraculously guessing he was about to change his mind. Like stockbrokers all over the world, both groups made fortunes without contributing a single thing to the economy.
Free trade is only free for the boss
The system politicians like to trumpet as ‘free trade’ is often nothing of the sort, at least not if you assume it means that people and countries are free to work or trade where and with whom they like. In fact, for years most trading nations have been forced to operate under what Norm Chomsky calls “the rules-based system”; that is where America sets the rules and everyone else does as they’re told.
For example, the US, as the world’s largest economy, decides which governments are so evil they must be sanctioned (eg Cuba, Venezuela, Iran) and which governments are beacons of freedom where trade can flow freely (eg Israel, El Salvador, Saudi Arabia), and the rest of the world falls in line even though year after year they pass motions at the United Nations telling America to change the policy.
The rules of this system allow multi-nationals like Nike and Google to roam the world exporting low wages and gobbling up tax breaks.
As Chomsky says: “What are called international free trade agreements are not free trade at all. The trade system was reconstructed with a very explicit design of putting working people in competition with one another all over the world.”
The dumbest trade war
No doubt Trump will continue to be dragged off the golf course to announce that he’s opened another front in what The Wall Street Journal calls “the dumbest trade war in history”.
As we consider what his cruel decisions might mean for everyone’s future spending power, it’s worth remembering that we already live in a world so messed up that tech companies avoid paying billions in tax by moving their headquarters while workers in Bangladeshi garment factories survive on £3.39 a day. So, as American activists like Robert Reich, Heather Cox Richardson and Bernie Saunders are making clear, stopping Trump is essential but should be only the start of building back better.
