Everybody is talking about Trump tariffs. So far, whether it’s our leaders’ relentless emphasis on the bumpy ride ahead, the hordes of experts giving Trump the thumbs down or the ethno nationalistic folks like Calvin Cheng cheering for China’s 奉陪到底 and that restaurant in Chinatown discriminating against American customers.
Suffice to say that the announcement of Trump tariffs on “Liberation Day” has caused much anxiety which led to criticism, mockery, chest-thumping etc. What you won’t see too much of, is optimism. There is a very good article in the Wall Street Journal that adopts a contrarian view. The rationale of Trump tariffs can be summarised in the following paragraphs:
The core of Intellectual Trumpism runs as follows: The global economy is characterized by large, policy-induced imbalances in both trade and capital flows. These are caused at root by the decisions of some large economies—Germany, Japan and especially China are the usual suspects—to subsidize production by suppressing consumption in their domestic economies. This creates “surplus” output that they foist on the U.S.
This view isn’t wrong, so far as it goes. Those economies and others historically deployed a range of policy tools to boost exports. In China, the most egregious manifestations are direct subsidies for exporting companies. Less visible to foreign eyes is the financial repression: the deliberate suppression of domestic interest rates and political control of credit to subsidize businesses (which benefit from cheap borrowing) at the expense of consumers (who receive less income from their saving and investment). Such policies can take many forms. In Germany, extensive subsidies shield large companies—meaning exporters—from the worst energy-price consequences of Berlin’s dumb net-zero climate policies. Households pay full freight for electricity.
The net effect of all these policies is a massive transfer of resources in these countries from households to producers, in the expectation that the U.S. will absorb all the products that domestic consumers can’t.
For a Singaporean perspective, Kenneth Jeyaratnam broke it up nicely for us.
This article explains quite well what I have been saying about Trump’s tariff policy. On one side you have the countries which fetishise production over consumption and subsidise exporters while taxing their consumers heavily. These include China, Japan, South Korea, Vietnam, Germany and the EU. Singapore is part of this group even though it runs a trade deficit with the US. On the other side is the US which favours consumption over production and has even unwittingly subsidised the transfer of manufacturing abroad. Consumption is much more lightly taxed. There is no VAT for instance. The result is that the US runs a huge trade deficit which is financed by the producing countries in the form of accumulation of claims on the US, principally purchases of US Treasuries. This allows American consumers to keep on spending with a stable exchange rate
Like the other super producers but much more, the PAP see no benefit to their citizens enjoying a higher standard of living through consumption and have taken greater and greater steps to force or incentivise them to save. CPF curbs heavily the disposable income of the masses as do taxes on consumption like the ever rising GST and the world’s highest taxes on car ownership. The Government runs huge surpluses in the Budget and disguises a lot of saving as spending such as grants to HDB and transfers to endowments and trust funds. It forces Singaporeans to run up huge Medisave balances because it heavily restricts their use. The MOH Budget is a black hole that Lawrence Wong refuses to explain. Welfare spending is kept to a minimum and Singaporeans’ wages are capped by the absence of a minimum wage and competition with cheaper foreign labour at all levels. LHL says this competition is healthy and keeps Singaporeans on their toes. The Government believes that giving Singaporeans cash only results in more imports so prefers any handouts to go into CPF. As a result of PAP policies consumption has fallen to 31% of GDP in contrast to a “normal” level of 50-60% in other countries and the US’s 70%. The current account surplus (which is the trade surplus plus services) has risen to 37% of GDP.
If there is any point in Trump’s tariffs if is to make America a producer again. Tariffs act as a tax on consumption and also incentivise domestic production over imports. Cutting taxes on domestic manufacturing and eliminating regulations play the same role
The irony is that this is not a zero sum game. All countries could enjoy a higher standard of living and faster growth if the producer group of countries expanded their domestic demand which would result in more imports and lower current account surpluses.
Whether Trump tariffs will work out the way the optimists predict or not, all this make sense to me, but how are you going to convince the old sticks in the mud and a whole generation of TikTokers? The aunties with their free white lightning trolley bags. The irony is, our government keeps encouraging us to think out of the box. Well, this is thinking out of the box, but then “by right” …
Thinking out of the box means being counterintuitive and not going “by right”! What an irony. I made the following video for the sake of Singaporeans who don’t want too much depth and details:
So far, most people are only focusing on the economic aspects of Trump tariffs. There is another aspect or another objective. Some writer in Taiwan predicted in his book launched some time last year that Trump would win the presidency and China would invade Taiwan in 2025 during his term. He’s not the only one. Quite a number of observers shared his opinion. Just like with me, you can choose to believe/agree or not to, but I think there is obviously something that the CIA knows and we don’t. Chinese netizens in recent days have captured images of loud and bold 统一 in the airport in Beijing. You can interpret it as another harmless “missile” shooting into the Strait of Taiwan, or it could be a warning for imminent action.
Sure, like what the experts say, Trump tariffs could hurt the US economy badly. But what’s certain now is that it will probably hurt China more; so much so that China will be economically weakened to such as extent that the emperor will perish the thought of waging war.
Trump’s other intention translated into Chinese would be 把中国搞穷就打不起来了. Ironically, the best time to go to war (for China) would be a time when people are jobless, hopeless, addicted to the feel good factors of nationalistic chest-thumping on the media and feel like they have nothing to lose. I can’t say for sure whether Trump is making the right or wrong move but I would rather have Trump tariffs than a war in Taiwan. At any rate, America’s losses that might be incurred due to Trump tariffs may be chicken feed compared to the losses sustained if they were to really go to war with China. What do you think?
Ps. I’m just a writer. I have no credentials which qualify me to give “expert” opinions but I do have a pretty good track record of proving the experts wrong.
The following videos by Jiang Feng are interesting and informative. I may not agree with everything being said. Just for info.
Chinese military getting hands-on experience fighting alongside Russian soldiers in Ukraine. China’s hypocrisy in declaring neutrality has been exposed.