“You put the lime in the coconut and drank both.”
– coconut, Harry Nilsson
Trade breakdown and sorting
Breakdown and sorting of world trade through President Trump’s tariff policy has many consequences. Long established trade relations come with interdependence. A sudden break or limit these bonds will pull the rug from under the way people all over the world pursue their livelihood.
The United States imports and consumes a huge amount of goods and products made in China and other Asian countries. Trump’s trade tariffs put the export-driven economic model of these countries at an extreme risk.
America is over 30% of global consumer spending. If tariffs limit the country’s ability to export goods to the United States, they leave a massive oversupply. Therefore, they have two options: an increase in domestic consumption. Or reduce production.
Certainly, it is more advantageous for these countries to increase domestic consumption. Alternatives are widespread layoffs, surges in unemployment and a deep recession. But increasing consumption is easier than anything else.
Not everyone is trained to work for a week. And I shop until I drop on the weekend. In some countries, people have a cultural dislike of spending money on things that go beyond basic necessities. Appearing humble to friends and neighbors is more important than indulging in luxury or showing off unnecessary consumption.
For example, the individual savings rate in China is 45.9%in the US, it’s 3.6%. In other words, the Chinese people have more than 12 times the savings rate of their American counterparts.
The possibilities for Chinese consumers are enormous compared to actual consumption. But it is trapped by historical cultural trends.
So if China can no longer sell its exports to the US and it cannot compensate for this with domestic consumption, it will be forced to reduce production.
This is different
As a percentage of GDP, exports account for about 20% of the Chinese economy. In comparison, the US explains export accounting 11% of the economy. Nevertheless, China’s dependence on exports could be even worse.
For example, in Vietnam, exports as a percentage of GDP accounts 87% of that economy. The losses for American consumers affect both China and Vietnam. However, the impact will be large for Vietnam.
The ordered tariffs and trade sorting of breakdowns also affect the US. Trump believes sorting will be an advantage for working Americans. Even if this is true, it will take more than 10 years for it to occur. In the meantime, we can expect a recession (or two) within the US economy.
During JPMorgan Chase’s recent first quarter revenue calls, CEO Jamie Dimon placed the possibility of a US recession with a 50-50 coin flip. You know the reason as well as Dimon.
The trade war, enduring inflation and budget deficits were some of the concerns he pointed out. When asked how the current economic and political situation compares to the past, Dimon I made a comment What’s different this time:
“This is different. This is the global economy. The most important thing for me is that the Western world stays together economically when we get through everything, in order to keep the world safe and free, and militarily.”
The difference that Dimon refers to is Trumpism. Trump is trying to restructure the economic framework so that America can update its focus and put America first. For Trump, bringing together the Western world economically and militarily is a secondary concern.
Trumpism
The rationale for Trumpism was outlined by Secretary of State Marco Rubio at a Senate confirmation hearing on January 15, 2025. excerpt What he said:
“From the victory at the end of the cold, the long cold war created a bipartisan consensus, which was that we reached the end of history, that all nations in the world would become members of democratic, western-led communities, one family and the citizens of the world.
“In many developed economies here in the United States and around the world, near-religious commitment to free and free trade at the expense of the national economy has reduced the middle class, put the working class in danger, ruining industrial capabilities, and pushing critical supply chains up to the hands of enemies and fiancées.”
Rubio’s words summarise the leadership beliefs shaping policies under Trumpism. They also contextualized Trump’s recent trade tariff policy.
But while Trumpism properly diagnoses the challenges facing America, the solutions being tried are well. Trump’s tariff policy doesn’t recognize that the role that government deficits have been made possible through endless credit creation has in perpetuating trade imbalances. They also do not tackle Chinese currency manipulation tactics.
Trumpism and the declining dollar
The trade deficit itself is not a problem. The problem is that the trade deficit will go wild without restrictions due to infinite credit creation, which is only possible in Fiat currency.
Trumpism is trying to correct the symptoms of trade imbalance at the backend of tariffs, rather than sniffing them out on the root cause with honest money and balanced budgets. Without honest money and a balanced budget, all attempts to correct trade distortions are pointless. Overall, they may make things worse.
Trump’s initial efforts with Elon Musk and Doge were on the right track. Reducing government spending and eliminating deficits is a practical step to reducing trade deficits.
But Trump’s recent actions are against it. Last week, he proposed a first time while the tariff madness was ongoing. 1 trillion dollars Defense spending budget. This ensures that the fiscal deficit for fiscal year 2025 exceeds $2 trillion.
Inevitably, all Fiat currency will eventually reach the end of the road. In the case of the US dollar, the end of the road is now right in front of you. Foreign central banks and governments are looking at what is coming. Dollar Index I slid below 100. Gold prices have been pushed up $3,300 per ounce. These are signs of approaching crackups.
How will this unfold in the coming months?
Will the US dollar collapse and burn like countless other Fiat currencies throughout history?
Will the Federal Reserve and major banks conspire to support the system through heavy handed schemes of market intervention and therefore extend the end-mise?
Leadership, as defined by the Constitution, throws 112 years of Fiat Money through the window and returns to sound money to gold and silver -?
Your guess is as good as us. Anyway, you can resort to a lot of confusion and destruction first.
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From the heart,
Mn Gordon
For economic prism
Trumpism and the decline of dollars to economic prism
