Trump's Tariffs? An Economic Doctrine "Bluff"

Trump's tariff lottery begins: Who will be most impacted? Amid praise and economic concerns, few recognize the EU and Euro may be the true targets of this strategic "bluff".

Since the end of World War II, the United States has been importing significantly more goods and services from the world than it exports, exchanging them for electronic numbers stored in Federal Reserve computers. In the era of fiat currencies, when an exporter ships a good today, they essentially receive an electronic bank statement from the importing country's central bank.

For almost 80 years, the American economy - widely considered the world's strongest - has thrived within this equation, establishing itself as a net importer. For nearly a century, Americans have been driving cars produced in China and Japan, smoking Cuban cigars, and drinking Italian wine.

Let's step back into history and return to the months of intense negotiations following September 2, 1945, when the world conflict was declared over. Hypothetically, if the United States, the war's victor, had imposed on Japan the reparation of delivering 2 million cars annually, the world would have risen against such immorality.

What wasn't requested then became a reality: Japan exported approximately 2 million cars to the US annually, doing so consciously and willingly to obtain American dollars - essentially numbers inside Federal Reserve computers.

Hypothetically, suppose the US government had one day told Japan that a sudden "virus" had made their computers go crazy and these dollars no longer existed. What could Japanese dollar account holders have done? Could they have taken back their cars? Certainly not!

The answer is nothing! They could have done nothing. Just as Russia and Russian citizens holding dollar reserves no longer available to them cannot do anything, due to the blocking of their savings through American sanctions.

The narrative always pushed by politicians and media about a country's wealth deriving from being a net exporter collapses like a rotten pear falling from a tree.

A country's real wealth is not measured by its exports - goods produced internally with sweat for others' enjoyment - but by the algebraic sum of internally produced goods, imported goods, and subtracted exported goods. This sum represents the actual quantity of goods a country truly enjoys, thus its real wealth.

After all, if the United States is unanimously considered the world's largest and richest economy while being a perpetual net importer, how can one not believe this perspective?!

The reasons go beyond this concrete example. There are economic doctrine logics, supported by accounting mathematics. In a closed economic system like our planet, the algebraic sum between importing and exporting countries is always necessarily zero.

We are facing a purely physiological problem: for every entity wanting to export a good, another must be willing to import it.

This brings us to the article's theme and current topic: the "tariffs" that Donald Trump, even before taking office at the White House, has been threatening with extreme fury to impose on those intending to export goods and services to the United States.

Naturally, opinions vary widely, and as always, political considerations and aligned media privileged propaganda over truth.

The first consideration, understanding who truly gains when a good leaves a country, is that the effect of tariffs threatened by Trump should be understood as pure masochism aimed at punishing those providing real goods in exchange for electronically created numbers.

Tariffs would effectively force Americans to decrease their quality of life unless supported by internal production capable of replacing imported foreign products.

At this point, asking why Trump wants to do this becomes mandatory. Many have rushed to provide their explanations. Both in Europe and in the BRICS+ area, governments and media seem deeply concerned about potential tariff effects on their economies.

Some attempt to justify Trump's actions with theories about the need to rebalance the commercial balance inherited from Biden. It's almost laughable to hear such theories, given that the deficit is essentially the same commercial balance Trump left to Biden in January 2021 - and the same situation that has persisted in the United States for almost 80 years.

What's even more problematic from an economic doctrine perspective is the reading many economists and traders provide, claiming tariffs are preferable to currency devaluation for reducing commercial deficits. This statement is entirely reckless.

In a world where international financial asset transfers exceed real goods transfers, maintaining exchange rates nullifies the tariffs' intended effect on the commercial balance. Positioning tariffs as an alternative to currency devaluation to rebalance imports and exports is an incorrect interpretation of Trump's action.

Let me explain better: if I impose 10% tariffs on Chinese products, reducing Chinese exports while maintaining unchanged Chinese investments in dollar financial assets, I will achieve a yuan devaluation against the dollar. When this devaluation reaches 10%, I will have nullified the tariffs' effect. The Chinese can then return to exporting under the same previous conditions.

Therefore, if Trump truly wants to reduce the commercial deficit, he cannot ignore a significant dollar devaluation against other currencies, which would make US products more convenient.

So the question remains: why does Trump want to impose tariffs?

It's difficult to be inside the Tycoon's mind, but certainly a fundamental point of his political program is to strongly restart production within the United States. Another certainty is his strong allergy to massive commercial surpluses from countries like China and Germany.

While China has clearly shifted toward economic policies characterized by wide governmental deficits to support internal demand, Germany and the euro Europe have no intention of moving in this direction.

With high probability, Trump's tariff "bluff" is not directed at BRICS+ countries but seems precisely aimed at bringing down the EU and all its rules that have led the continent to consume less and Europeans to the brink of third-world status. With an elitist class that has penetrated Washington's deep state to give life to the globalization era - an era Trump seems intent on ending.