Trump, tariffs, and what will happen? The US doesn't actually run a foreign trade deficit...

The US foreign trade deficit for 2024 is 918 billion dollars. 58 percent of this deficit stems from trade with China (295 billion dollars) and EU countries (236 billion dollars). US President Trump has increased tariffs (customs duties), stating, “China and countries we consider friends are exploiting us.”

Now, let's get to the heart of the matter. What the US calls a foreign trade deficit is not a deficit like that of Turkey or a country whose currency is not a reserve currency... The US does not run a foreign trade deficit. It does not pay a direct price for consuming more than it produces. Its currency is a reserve currency. It prints dollars, gives the money, and takes the goods. It doesn't just stop at printing dollars and importing goods. On top of that, it gives US Treasury securities to countries that run a foreign trade surplus, such as China, Japan, and EU countries. It makes countries with foreign trade surpluses increasingly dependent on the dollar.

Thanks to the US dollar being a reserve currency, the US can purchase as many goods and services as it wants from anywhere in the world for the cost of paper, ink, printing, and labor. According to a report by Özer Şeyda Uyanık in Ekonomim Newspaper on November 28, 2024, the total printing cost of a 100-dollar banknote is 9.4 cents. Roughly a 1000-unit value in exchange for a one-unit cost.

In essence, while the US can give paper to the world and receive any product it wants, and while it is effectively taxing the world, what happened that led Trump to increase tariffs to reverse this order? Moreover, a significant portion of the imports that supposedly cause the foreign trade deficit is actually contract manufacturing done in various countries around the world on behalf of multinational American companies, which is then brought into the US...

The US increasing tariffs will have two effects. One is that prices in the US will rise, creating inflationary pressure. The other is that the profits of multinational American companies will fall. It won't be limited to this; it seems like a lot is going to change in the world.

LET'S START BY REMEMBERING THE TRUMP ASSASSINATION ATTEMPT

While we can almost guess how the large multinational companies and the FED will react, let's wait and see for now. But if we remember that the FED is not an American state institution and is under the control of 8 families, it would not be a prophecy to say that different reactions that will deeply shake the world are coming.

On June 28, 2024, I made the following post on the X (formerly Twitter) platform:

“On the Biden-Trump debate on TV…

Trump looks like he will be elected. However… The FED had assassinated 2 American Presidents. This time, they might try it before he is elected.”

Was it a prophecy? It was not. There was an assassination attempt on Trump on July 14, 2024, and as I was explaining the details of this prediction in 12 Punto on July 15, 2024, I briefly recalled the history of reserve currency in the world, the FED, the assassinations of Abraham Lincoln and J.F. Kennedy, and the disputes these presidents had with the FED. If you are interested in the subject, I am sharing the link to the article from that date. To grasp the relationship between the dollar and events, I recommend you read that article and then return to this one.

https://12punto.com.tr/yazarlar/meric-koyatasi/trump-suikastini-onceden-tahmin-etmek-44065

Behind the dollar being the world's reserve currency lies the Second World War, the Bretton Woods agreement gathered before the war even ended, the IMF and World Bank established before the war ended, and the UN, NATO, and the US Navy, whose establishment it led after the war.

In this case, the cost of the dollar is not just the paper and ink expenses as we mentioned above. Behind it is the power of the US Navy and the expenditures made to maintain this power. I will touch upon this subject again in the later parts of the article.

STAGES OF THE IMPERIALIST SYSTEM…

Trump's decision to increase tariffs shows that the neoliberal order, which was introduced by the US in the 1980s and became widespread after the end of the Cold War in the 1990s, has reached its end. What will be established in its place? To be able to estimate, let's recall the stages in previous periods under headings.

FIRST STAGE: The period from the beginning of human history as we know it until the Industrial Revolution. Go using military force, occupy, seize the values produced, raw materials, human capital, children, and youth.

SECOND STAGE: The period after the industrial revolution. Produce industrial goods, seize foreign markets with military force, prevent rival countries from entering the market. Sell industrial goods at high prices, seize agricultural products and raw materials at low prices. Transfer wealth to your own country by running a foreign trade surplus. Indebt them. Prevent them from gaining economic independence. (The fundamental reasons for the First World War and the Second World War) After the Second World War, wars were paused during the Cold War and the bipolar world order. This system continued until the 1990s through industrial goods or through profit transfers of direct foreign capital investments.

THIRD STAGE NEOLIBERAL PERIOD: The Cold War and the bipolar world ended. In a unipolar world, globalization was pursued with the development of trade and technology. Two main features of the neoliberal period; goods could be bought and sold freely without getting stuck behind customs walls, and capital could circulate freely. In this period, finance capital came to the fore alongside industrial capital. Due to the free circulation of goods, the spread of technology, and increasing competitive conditions, large multinational companies could not set prices as they wished for industrial products. In this period, the weight in the imperialist resource transfer mechanism shifted to indebtedness. Indebt them, make them dependent on you, both earn interest income and use their natural resources cheaply. In this period, regional proxy wars and regional unrest gained weight instead of major wars.

THE FUTURE IS COMING VERY FAST

What will happen from now on? Has Trump lost his mind? While he has the seigniorage right of the dollar in his hand, and while he can buy as many goods as he wants from any country by giving paper, why does he now want to return to the previous stage of the imperialist system by selling goods produced by American workers?

The neoliberal order created a very serious income inequality both within countries and between countries. It cannot be said that it has fully emerged from the 2008 crisis it entered. On the other hand, the most important pillar of the neoliberal order, the principle of free circulation of goods, benefited China more than the US. If China's growth at this speed continues, the possibility of it surpassing the US in the near future seems certain... Trump has attacked the most important pillar of the neoliberal order with customs tariffs. We are experiencing the pains of a new change.

There are two possible changes after the neoliberal order. First of all, time has started to flow very fast. The time we are talking about here is not the time we measure by the world's rotation on its axis and around the sun. While the world rotates on its axis again, it passes a meridian (longitude) relative to the sun every 4 minutes, and completes its rotation on its axis in 24 hours. And it completes its rotation around the sun again in 365 days and 6 hours. What we are saying is the spirit of the time, the rapid change in inter-class relations, individual-state relations, social structures and political systems and forms of government, and even war techniques in parallel with developments in technology and economy... Especially with artificial intelligence, robots, and quantum computers, the future we expect seems to be coming much sooner than we expect.

SCENARIOS FOR THE FUTURE AND ABSURD QUESTIONS

We cannot write history from today. But if we look carefully at history, especially economic history, we can make a note for the future and predict what might happen more or less.

There are two paths ahead of us. Either we will prioritize more democracy and the social state... Or we will turn into digital autocracy regimes in many countries of the world, under the control of giant technology companies and dictators cooperating with them.

Constitutions and fundamental rights that have been shelved, technological capabilities that can make people make decisions in the direction desired by technology companies in every field from consumption to voter preferences through social media platforms and algorithm management, will throw consumer preferences in the market economy and voter preferences in democracies into the trash. Algorithms will decide everything. And the tiny deputy dictators in the countries will silence anyone who raises their head.

Unfortunately, we are witnessing that the ideal of more democracy and the social state is regressing even in Western European countries. After the socialist system collapsed in the bipolar world, the capitalist system no longer needed more democracy and the social state to market itself.

So, what kind of relationship should we establish between digital dictatorships and US customs tariffs?

I cannot produce a prediction for what will happen after this point, but I can generate questions. Some of the questions might be absurd enough to grate on the ears. Since it is being discussed that the US is looking for a transition to another order while it has the opportunity to buy whatever it wants by giving paper, I think it is time to ask an absurd question.

NEW GENERATION DOLLAR BILLIONAIRES

The giant technology companies that will keep digital authoritarian regimes in many countries of the world under control are not just on Wall Street, they are now in the White House... Like absurd comedy Hollywood movies where stories of maniacal rich men trying to take over the world are told...

The American Central Bank, the FED, has been under the control of 8 families who have held world finance capital since the 18th century. Traditional industrial capital and multinational American companies are also on the stage for at least 4 generations.

Almost all of the new generation technology giants who are influential in the White House right now started this business with a computer in their home garages. They did not inherit a legacy. They possess much more wealth than the wealth of families who have accumulated wealth for generations or the wealth obtained by multi-partner companies. Let alone their grandchildren, the children of these rich people have not even reached the age to take over the businesses yet...

The old generation of wealth owners and multinational-multi-partner US companies will be negatively affected by these customs tariffs. Although the stock market values of technology companies belonging to the new generation of dollar billionaires have fallen, the decline in wealth there will not be permanent. The question is: Could there be a conflict of interest between two different wealthy segments? Let's think about this especially with the question of who will own the new reserve currency.

Yes, the US dollar is a reserve currency... But it is not the US state that prints this money, but the FED, in which 8 families are partners. The relations between the FED and Trump are quite tense. On Friday evening, FED Chair Powell said the following in summary at a meeting at the American Institute of Economic Journalists with a very diplomatic tone: “The impact of the tariffs will be greater than expected. There will be higher inflation and lower growth.”

CAN CHINA CREATE A NEW RESERVE CURRENCY?

The dollar is a reserve currency. However, the US has a debt of 36 trillion dollars to the world.

Behind the reserve currency are production power and a navy. When they have asked me for years whether the dollar would lose its reserve currency feature and a new reserve currency, especially cryptocurrencies, would come in its place, I have always given this answer: “The dollar will lose its reserve currency feature after a major war in which the US is the loser.”

I think a bit of the increase in China's military power and a bit of the changes in technology could evolve into different scenarios.

There is no war yet. A Bitcoin-type cryptocurrency issued by a group of Japanese entrepreneurs whose backing is not very clear cannot become a reserve currency out of nowhere. Furthermore, even if bitcoin is used as a medium of exchange, it has no measurement function. It's like a rubber meter. One moment you look, it's 25 thousand dollars, the next year you look, it's 100 thousand dollars. If no one knows how much bitcoin to pay for 1 ton of wheat as an example, that thing cannot even be money, let alone a reserve currency.

SO WHAT ABOUT CHINA?

Behind the dollar and the Pound, which was the reserve currency before it, there was serious industrial production power, finance capital, and the power to lend to the world. Both countries had immense naval power. What is China's situation? Behind China is an immense production power. Previously, England and the US had the gold standard behind their money in addition to their production power. England abandoned the gold standard in 1931 and the US in 1971. China has more than 2 trillion dollars (government bonds) accumulated as a foreign trade surplus, which it can use as a kind of gold standard.

So, since China has such an accumulation, can it finance countries with foreign trade deficits with organizations like the IMF, World Bank, and models like US and UK banks?

If it can indebt other countries to itself with the power it has, and if it can back these reserves, just like the gold standard, for a while and create a new reserve currency?

CHINA AND THE US NAVY

These are questions that stand in the open. To ensure the conditions are not incomplete, it is also necessary to question the state of the Chinese navy. The first name that came to my mind was my dear friend, retired Admiral Cem Gürdeniz. We had a long phone conversation and there were very important details. The details are the subject of another article. But I am giving a very short summary.

“After the Cold War ended, the US Navy dropped from 600 ships to 294 ships. And only 164 of these have propellers turning. The others are in maintenance. The US could not see China's development after 2010 and rapidly closed shipyards starting from 1990. There are no personnel left in the shipyards to build ships. They cannot keep up with China's shipbuilding speed. China's capacity in merchant ships is exactly two hundred times that of American shipyards. Again, according to the former Secretary of the Navy (EL Tore), in warships, the US can only build in 7 years the warship that China produces in one year. And he says the US cannot close this gap before ten years. China does not let any warship get closer than two thousand miles to its own borders with the power of its current navy..”

Let me add an addition here. The annual US defense budget is approximately 1 trillion dollars. Trump is thinking of cutting this and says to Europe, I will no longer protect you. 500 billion dollars of the 1 trillion dollar defense budget belongs to the navy. So, we said in the sections above that the cost of a 100-dollar banknote as a reserve currency cost was 94 cents. We must also add 500 billion dollars of navy cost on top of that. However, the supposedly financed foreign trade deficit is 918 billion dollars. If customs tariffs had not been increased, it would have rapidly exceeded 1 trillion dollars within a few years.

WILL DIGITAL MONEY COME TO DIGITAL TOTALITARIAN REGIMES?

Bitcoin and similar crypto assets cannot be a reserve currency. But what if Trump and the new generation technology giant wealth owners, who will want to disable FED sovereignty, issue a new cryptocurrency against the dollar with this power they have...

Trump has already made the first tiny move anyway... He issued his own coin.

It is important news, but I missed it. My friend, retired Admiral Cem Gürdeniz, reminded me. In the meeting Trump had with bankers the other day, he proposed 100-year US Treasury bonds for the 36 trillion dollar US debt. We are talking about 100 years...

Looking at these, it's as if.... The dollar could suddenly be replaced by a new cryptocurrency under the control of technology giants.

I am very curious about what the FED and those who are owed 36 trillion dollars will do.

There is cold water in the fridge…