Tariffs Divert Again from Productive Investment, Silk Road Link
The steel and aluminum tariffs announced by President Trump are his second attempt — following "tax reform" — to improve the U.S. economy while being blocked from following through on his "build American infrastructure" platform which won him the election. This attempt is likely to be no more successful. Neither the absence of corporate taxes nor the absence of some metals imports can match the presence of new investments in the U.S. physical economy, new technologies, and new infrastructure platforms, and thus growing real productivity.
"Trade adversary" China's extremely moderate reaction to the tariffs contrasted sharply to "allies" in Europe and Canada. Chinese Foreign Ministry spokeswoman Hua Chunying said on March 2 that world trade could be harmed:
"The basis for the global recovery is still unstable. All countries should make concerted efforts to cooperate to resolve the relevant issues, instead of taking trade-restrictive measures unilaterally." But European Commission President Jean-Claude Juncker, after first vowing retaliation on March 2, made specific threats the next day:
"We will put tariffs on Harley-Davidson, on bourbon, and on blue jeans — Levis. We cannot simply put our head in the sand." (President Trump responded with a tweet threatening to tax European auto exports.) Canadian officials vowed retaliation. Bernd Lange (Germany, SPD), head of the European Parliament's Committee on International Trade, said, "With this, the declaration of war has arrived."
When the actual tariff targets are announced this week, there will be no "ally exemptions" for Canada, German, South Korea, etc., according to White House Director of the Office of Trade and Manufacturing Policy Peter Navarro and Commerce Secretary Wilbur Ross, who appeared on Sunday talk shows.
The reaction of the Republican establishment, Business Roundtable, etc., has been to demand that the tariffs be levied on China alone. Business Roundtable head Josh Bolton stressed this on Fox News Sunday, claiming that "China's excess steel capacity" is the real source of all steel exports to the United States. The Washington Post, in its March 3 lead editorial "How To Make Trump's Terrible Trade Decision a Bit Less Terrible," explained,
"If the end result were a package of tariffs on steel and aluminum from China and Russia only, that would be a more acceptable outcome ... in terms of clarifying U.S. geopolitical commitments."
The crime of this is that China's export earnings throughout this century have been turned into investments in real productive infrastructure projects at home and increasingly abroad, and into U.S. Treasury securities; and now, Chinese economists and officials repeatedly offer large investments of these into a U.S. infrastructure investment institution, to augment U.S. national credit capacity.
These proposals are an integral part of the Chinese invitations to the United States to join the Belt and Road Initiative. And they represent what has enabled the world economy to recover, such as it has, from the 2008 crash. Now another crash is looming, and this partnership, together with Lyndon LaRouche's proposals for the U.S. economy, are the only way to prevent it.