Trump's trade deals. America to be new global export hub? Dollar debtors are bailed out?


Article's purpose and background

The purpose of this short article is to highlight that the objective of the US trade deals being negotiated at present is to make the US an export economy primarily through advanced manufacturing products in place of the present import economy. 

Accordingly, trade deals are being designed to rebalance the global trade and economy in order for the US to become the leading export economy in the world. This is revealed from several official interviews of the US authorities such as the the US President, Treasury Secretary and Commerce Secretary, circulated in the media. 

Therefore, this article is primarily based on views expressed by the US Commerce Secretary at a recent interview with CNBC (Watch the interview here).

  • However, national leaders of many countries are seen making political statements that deals are being finalized to their favour to impress the public. This is completely wrong as the US has no interest other than cutting its trade deficits with countries considerably and exporting to them. 

  • Most debt-ridden countries on the IMF bailout programmes are reported to seek mercy from the US to continue their exports to the US at favourable tariffs as a part of respective economic recovery programmes. This is highly irrelevant as the US is only interested in its economy. As the US authorities have heavily criticized the IMF and the World Bank as the cause of the present unfair trade and economic order that has helped the countries to rip the US off through the trade, IMF bailout programmes will not be a consideration in trade deals at all. Information is available that the US is prepared to provide loans to such countries as a part of trade deals to rebalance them to be favourable to the US trade targets and objectives.

  • Globally leading trade surplus countries such as China, Japan and the EU are the heart of the US trade deals that require significant rebalancing of respective economies to expand domestic consumption and cut their exports for a new global trade and economic order. Therefore, country trade deals may cover reposition of their trades with surplus countries. As such, country trade deals may not be just individual trade deals with the US to cut respective trade deficits of the US but will have direct relevance to the global trade rebalancing.
Therefore, country teams attending trade talks must be prepared for negotiations to ensure that respective countries become close trade partners of the US for the country's next phase of the development in a US exports-based global economy. Otherwise, countries will be cut-off from the global economy and get into poverty in next decades.

Views expressed by the US Commerce Secretary

Views selected as useful for trade talks are listed below. (Watch the interview here)

  • The new US trade policy is to rebuild factories in the US for exports to other countries for their economic development. Trade deals are made to prepare other countries to cater to manufacturing and export industries of the US.

  • The responsibility of trade deal with China is the Treasury Secretary while the delas with the rest of the world are the responsibility of the Commerce Secretary.

  • The new trade policy is based on cutting the US trade deficit of nearly US$ 1.2 trillion at present and to start factories in the US for imports by other countries. If the US cuts 25% of the trade deficit, the additional US growth will be 1% that raises US living standards.

  • High value jobs are reserved for the US while other low value jobs are left to the rest of the world.

  • National security is given priority for trade deals. All semiconductors production will be exclusively retained in the US.

  • Many trade deals are now ready. All deals must be approved by the President and Parliament of respective countries and the US President will sign them individually after the process.

  • The US is going to have a new AI industrial revolution and Americans will be the technicians working in factories. Community colleges are now offering technical training programmes.

  • The President Trump is not focused on markets. He is focused on resetting the global trade and protect the American Economy.

  • Markets do not look at the big picture. New factories and trade will provide opportunities to them more than those of the existing trade deficits.
 Few remarks

  • All official views are centered on changing export and surplus economies such as China through rebalancing them to consume more and export less.

  • The US plans the opposite and rearranging global supply chains to support the US manufacturing and exports.

  • Accordingly, trade deals with countries will be designed to rebalance the global trade to be centered around the US production and exports in place of present surplus countries exporting to the US being the global import center. This may disrupt present geopolitical trade and investment blocks such as China and BRICS.

  • Therefore, trade deals will mostly cover commodity exchanges aimed at zero trade balance which does not require movement of currencies.

  • Many developing countries will have to agree with the US trade policy requirements as these countries have to look for dollar inflows from the US, given the euro dollar market gets contracted as a result of the cut in the US trade deficit.

  • Therefore, trade deals may include trades of service and investments too so that mechanize trade balance will not be derailed through other trades. 

  • The major concern over the feasibility of the proposed US trade policy is whether 

    • the US with a population of 343 million can be the manufacturing and export center for the rest of the world with a population of 7,855 million,

    • the US government officials command the world trade or trades of all countries outside markets to own favour, which seems like a US-based new communist system emerges for the world, and

    • country authorities also may follow a command system for all trades as part of the compliance with the US trade deals.
Overall, country leaders should disclose trade deals and governing principles to the public as they require the Parliamentary approval before the US President signs in order to minimize internal disputes.

(This article is released in the interest of participating in the professional dialogue to find out solutions to economic issues affecting living standards. All are personal views of the author based on his research and knowledge on the subject and, therefore, the author has no intension to personally or maliciously discredit views and characters of any individuals or institutions.)

P Samarasiri

(BA (Hons) in Economics and MA in Economics)

(Former Deputy Governor, Central Bank of Sri Lanka)

(Former  Deputy Governor, Assistant Governor, Secretary to the Monetary Board, Compliance Officer and Director of Bank Supervision of the Central Bank, Former Chairman of the Sri Lanka Accounting and Auditing Standards Board and Credit Information Bureau, Former Chairman and Vice Chairman of the Institute of Bankers of Sri Lanka, Former Member of the Securities and Exchange Commission and Insurance Regulatory Commission and the Author of 13 Economics and Banking Books and a large number of articles published.)


Comments

Post a Comment

Popular posts from this blog

Politics of Monetary Policy - 1% rate cut on the table?

Image
  Article's Background This article predicts that the Monetary Policy Board at the next meeting due on 24 July at 7.00 a.m.  will cut the policy interest rates at least by 100 basis points in view of the present macroeconomic outlook and political stability pending the Presidential Election in October. Policy rate decision by central banks cross the globe is a highly arbitrary bureaucratic exercise. It is based on qualitative judgement on the outlook of the consumer inflation and possible deviations from the inflation targets of central banks. However, central banks can provide diverse macroeconomic stories to support what ever the policy decision as they wish as nothing is experimental or empirical or past perormance is legally assessed. The Federal Reserve Chairman Jerome Powell stated at the latest testimony before the Senate Banking Committee held on 09 July 2024 that the Fed would not need to wait for inflation to reach exactly at the target (2%) to commence the rate cutt...
Read more

Central bank monetary system failed: Diagnosis and prescription. Treatment is urgent and difficult.

Image
  Article's background  The purpose of this article is to reveal how the failure of the monetary concept that has been pursued for the past 73 years has caused the bankruptcy of Sri Lankan economy in 2022. Economic or business bankruptcy is essentially a monetary phenomenon. The background of this view is as follows. Central banks world-wide rest on the concept of old quantity theory of money to carry out their money printing operations despite the long rhetoric of underlying stories. This theory simply predicts that if the growth of money supply or stock runs faster than the growth of output (or real GDP), the economy will confront an inflation equal to the difference between money supply growth and output growth. For example, if money supply grows annually by 15% while output grows by 7%, inflation will be 8%. This is the famous monetary belief that inflation is always a result of too much quantity of money chasing after too little quantity of goods. This states that inflati...
Read more

Trump's tariff war to breakdown the global dollar? Dollarized countries heading for crises? What options do they have?

Image
  Article's purpose and background This article is to predict the possibility of a new global monetary order that may evolve in response to the new tariff policy declared by the US President Donald Trump (announced on 2 April 2025 to be effective from 9 April 2025). Therefore, the article does not comment on its viability or fairness from any perspective (The second article on this subject is accessible here ). The present global monetary order has evolved on the US dollar as the global reserve currency created largely through free and facilitative trade and balance of payment (BOP) deficits of the US economy with the support of its allies and the US-sponsored international institutional network. However, Trump's new tariff policy is to hack it radically by an attempt to have zero trade balances of the US with individual countries through the imposition of reciprocal tariffs and trade barriers variant on the US trade deficit with each country. Accordingly, Trump's new tarif...
Read more