Donald Trump has achieved his first global peace agreement. After years of trade disputes, China, Japan, and South Korea have reconciled and pledged to deepen their relationship, effectively reorganizing the Asian and global trade systems under Chinese leadership.
Photos published on the front pages of major Asian newspapers - although largely unnoticed in the U.S. - show the economic and trade ministers of these three major economies holding hands collectively, demonstrating Asia's defiance.
This is one of the most astonishing American economic failures I've witnessed in my 40-plus years of reporting on international affairs. Trump's "Liberation Day" is a double-edged sword.
Countries are cooperating to respond to trade wars.
Michael Gourschouk, head of the Sussex University Trade Policy Observatory, said: "Regardless of intent and purpose, the U.S. is now a rogue state in trade." He said: "I don't think there is a global trade war happening. The U.S. is fighting trade wars with all countries, but other nations are eager to cooperate further." European Commission Vice-President Maroš Šefčovič recently visited Beijing to discuss how China and Europe can resolve differences to reshape global trade.
This was unimaginable just a few weeks ago when the EU Commission's mantra was about de-risking supply chains, and both sides were at odds over EU tariffs on electric vehicles.
China still harbors resentment over the EU's comprehensive investigation into its trade. The EU also remains concerned about Chinese exports flooding its market - which has already led to a structural trade surplus exceeding 300 billion euros for China with Europe. However, both sides now face a greater enemy.
The Trump era of trade differs fundamentally from the early 1930s because: first, the degree of world integration was much lower back then (trade accounted for only 2% of U.S. GDP), and the U.S. further retreated into protectionism after passing the Smoot-Hawley Tariff Act; second, the gold standard implemented by the Federal Reserve between the two World Wars forced a 25% contraction in the U.S. money supply, pushing everyone into debt deflation, making the situation extremely dire.
This time, the stronger reaction is an attempt to save open trade accounting for 80% of the world economy, letting the U.S. suffer the consequences of its own absurd actions.
Courts Lack Power to Restrict Tax Authority
Trump's tariffs are certainly unconstitutional. Article One of the Constitution grants Congress exclusive power to "lay and collect taxes, duties, imposts, and excises."
The drafters were concerned that if the president had an independent source of income, he would slide toward monarchy, as Charles I did in the 1630s by expanding and abusing "war emergencies" to levy "ship money."
Congress granted some tax powers to the White House through various bills, mostly in the 1970s, but only for limited purposes. Trump abuses these powers in the same way as Stuart dynasty monarchs: yes, by claiming there is an emergency, such as the fabricated fentanyl issue and immigration from Canada. Data shows that for Canada, the U.S. is actually a net exporter of fentanyl, immigrants, and illegal guns.
Some Republicans are critical of this. Representative Don Bacon said last week that Congress "made a mistake" by giving the president too much power to raise tariffs. He said: "We have fiscal authority, and I believe we should let the House reclaim these powers."
I don't expect the Supreme Court to limit Trump either, as the institution itself is now controlled by Napoleon-style "unitary executive theory."
May Increase Risk of Economic Recession
We will learn on April 2 whether the "Liberation Day" tariffs will cover "all countries," as Trump said when he was in a bad mood, or only target the "dirty 15" economies, as Treasury Secretary Scott Beasley said.
Trump's trade advisor Peter Navarro said the plan would generate $6 trillion in tariffs over the next decade - calling it revenue highlights the issue.
If $600 billion is collected annually, it will be a contractionary shock equal to 2% of GDP unless offset immediately by tax cuts.
This will lead to stagflation like the Nixon era, taking logical steps like Nixon-era price controls to prevent inflationary psychology from becoming entrenched, especially given Trump's almost certain attempt to coerce the Federal Reserve to accommodate his economic adventurism.
Navarro is essentially telling us that replacing imports with American-made goods will fail, and foreign companies will not move factories en masse to the U.S. Trump's tariffs are not negotiating chips to force reciprocal free trade. They are themselves a goal, a source of revenue traceable back to the McKinley Tariff of 1890, which a wiser William McKinley later regretted implementing.
Average U.S. tariffs last year were approximately 2.5%. JPMorgan expects this number to increase by about 20 percentage points, pushing the risk of a global economic recession this year to 40%. Goldman Sachs says that if Trump targets VAT, the actual total tariff on European imports could rise to 36%. This will even force EU Trade Commissioner Šefčovič to make a significant countermove - with Trump's pathological need for "escalation dominance," this will trigger a vicious cycle of tit-for-tat retaliation.
Original article: https://www.toutiao.com/article/7488998901761229364/
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