The Art Of Dealing With Trump S Tariffs

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We’re facing an economic crisis – we’ve just been hit by a massive tariff on our US exports. We need to….oh wait! They’ve been lifted! Phew, what a relief, time for us to …what? They’re on again? Help!
If you’re confused, I’ve a theory or two on how this thing works.
Hint: look at US president Donald Trump as a businessman, and the US as a business he owns. He’s running the country the way he runs his own businesses, for better or worse – usually for the worse.
So don’t expect any rational thoughts or actions from him.
What this means is we no longer can look at the US as this sober, stolid,benevolent force in the world any more. We must look at it as an increasingly random force and deal with that accordingly.
That’s hard. We’re facing a huge economic power thrashing about in the late stages of its existence. The Malay proverb about durians and cucumbers colliding is worth pondering about. Here, the cucumbers always get hurt.
Facing the Trump reality
I guess that’s the reasoning behind the advice of not to take sides. However, not taking sides is also a decision of taking sides – the other side – by each of the sides. That could even be worse than actually and openly taking sides.
There will be pain with the tariffs for all sides. Tariffs hurt – that’s exactly the reason for their existence – but uncertainties hurt the economy even more. Nobody is going to escape getting hurt.
But playing nice isn’t a guarantee we won’t get hurt either. Look at how Canada, a traditional ally of the US, is being treated. Friendships and alliances don’t mean anything any more, at least as far as the US is concerned.
Here’s the reality we need to accept: Trump wants his tariffs, and he’ll have them no matter what. All the arguments about fairness in trade etc is just a smokescreen.
Ask Australia, Singapore and other countries that have trade deficits with the US, and yet still got whacked with tariffs. Check the random list of tariffs Trump imposed (and mostly paused, for now) and try to find an economic rationale. You can’t, because there’s none.
Effect on Malaysia
Trump wants tariffs to raise revenue to replace the money that’ll be lost when they cut the income taxes on their rich citizens. Or else the budget deficit, and hence the national debt, will just balloon, the way they ballooned in Trump’s first term.
Hence when the EU, and even Elon Musk, proposed zero tariffs with America, Trump didn’t bite. Otherwise, they could’ve easily claimed victory and moved on to other battles. No, Trump must have his tariffs, no matter what.
Tariffs, however, won’t necessarily hurt everybody equally. Malaysia is in a pretty good place to survive the US tariffs. Much of our exports to the US, semiconductors for example, are exempted. Other goods (gloves, as I wrote last week) can’t be easily manufactured in the US, while other competitors such as China are heavily affected by tariffs.
Like it or not, the US will have to continue importing Malaysian goods, even if it means paying higher prices.
How the US got rich
Here’s a fact that isn’t mentioned enough: the US is wealthy, and became immensely so, by a few multiples, over the past few decades. The three tech billionaires standing behind Trump at the inauguration on January 20 – Elon Musk, Jeff Bezos and Mark Zuckerberg – were collectively worth over a trillion dollars at the time.
That private wealth is beyond what a few countries can muster. People don’t even talk about billionaires any more, they talk about centi-billionaires, meaning those who have at least a hundred billion. Billionaires are so passé.
So, the US has done well with globalisation. As for manufacturing, nobody robbed the US of manufacturing – it was gladly given away by American businesses in the name of growing shareholder value. Look at how successful Apple is, especially after it offshored almost all of its manufacturing.
That’s how things are with goods, and hence why the US has trade deficits in goods. However, the US enjoys a huge surplus with almost every country in services, which the US had focused on, after getting rid of much of their manufacturing.
While this fact is conveniently kept quiet, many countries, including the European Union, are already looking into it, and may come up with their own solutions which will hurt the US tech companies. And others will follow. The Law of Unintended Consequences looks set to apply.
Fight together
Given that tariffs were meant to divide the world’s countries to make them easier to deal with, our only solution is to come even closer together. It’s time for Asean to look into tighter economic integration as in Europe, with what used to be called the Common Market, and is now the European single market.
The process won’t be easy, just as it wasn’t for Europe. But we have incentives to start the process, and to make sure it succeeds.
Success will make us stronger, while failure will mean we’ll be easily picked on by any big power. We must succeed.
Much has been said about the US alone accounting for almost a quarter of the world’s trade. That’s true, but that also inadvertently points to the importance of the other three quarters of the world which has been much neglected as we all pursued the almighty dollar.
Time to start focusing on them.
Having the last laugh
Let smarter people deal with this. I’ll just sit back at home watching the world becoming more and more weird and dangerous every day. I’m glad I don’t really have to deal with it, though I shudder thinking about how my kids would have to.
Here’s another thing I don’t have to deal with. Having worked with many Americans, I used to be embarrassed when they pointed out the silly things of my own country – the lack of freedom, the corrupt and rapacious politicians, the random and self-defeating and self-enriching ways of the leaders who steer the country, etc etc.
I was embarrassed because those accusations were mostly true. But I won’t be embarrassed any more because after what’s happening now, I don’t expect many Americans to sneer and look down on me and my country.
If they do, I’ll just say “look at your own country bro”, and sneer right back at them with pleasure.
And since sneers are a service and not manufactured goods, and since I’m not exporting them to the US, they can’t put a tariff on me for that! - FMT
The views expressed are those of the writer and do not necessarily reflect those of MMKtT.

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