America’s Golden Age has resulted from global interaction. It seems to me that Trump’s isolationist policies could bring this period of prosperity to an abrupt end.
US based corporations like United Fruit Company and Standard Oil became global power houses by exploiting – you might even say plundering – the resources of foreign countries.
And the agreement to use the US dollar as the world’s reserve currency has given the American financial system special advantages.
Trade agreements have been good and bad for America, but on balance, I would say they have been more good than bad.
With the benefit of hindsight, America’s leaders may have been reckless in ceding heavy manufacturing to China and the electronics and garment industries to low-wage countries around the globe.
Such policies have cost hundreds of thousands – perhaps millions – of American jobs, but it has helped to restrain domestic consumer prices.
It has also enriched US-based corporations, bringing everyday Americans increased dividends and profits from their stock market investments. And it created domestic jobs as America’s global corporations grew.
Perhaps most significantly, global trade and diversified industrial production have generated a robust international economy, from which America has benefited.
In China, India and the Far East, new markets have developed with the emergence of a growing consumer class.
In any case, the ship has sailed. Global trade is now a fact of life. Trump is like King Canute, standing on the shore and ordering the waves to go back.
What’s more likely to result is the kind of depression that afflicted America many decades ago after a similar protectionist surge.
America could also lose its privileged position in the financial market. World powers were advocating a change in the reserve currency provision even before Trump.
Of course, that would not be all bad for Uncle Sam. There are costs as well as benefits in being the world’s reserve currency. But it would certainly be a shock to the economic status quo.
Regrettably, I do not possess the expertise – or access to adequate tools – to forecast all of the complex reverberations ahead, but from what I know, I fear Trump is steering the American economy over a cliff.
Tariffs and the Great Depression
