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Opinion
America First to No Avail
By Lan Xinzhen | NO.30 JULY 26, 2018
America First was U.S. President Donald Trump's slogan during his election campaign back in 2016, with many U.S. citizens voting for the Republican candidate precisely because this populist concept appealed to their enthusiasm and inspired their nationalism.

Since taking office, Trump has kept his promise and followed through with America First, but in an unexpected twist that has meant withdrawing from international organizations and launching trade wars with other World Trade Organization members. The Trump administration's economic policies have already begun to do serious damage to the global financial landscape and disrupt the global industrial and value chains. If maintained this could ultimately hinder global economic recovery and disrupt global markets.

Trump's methods have brought the United States few benefits, conversely harming the country's wider interests and creating more financial burdens for American companies and consumers. The imposition of additional tariffs on steel imports from certain countries has driven up the price of steel and increased production costs for industries which rely on steel as a raw material such as car and motorcycle manufacturing. Worse still, these industries face even greater pressure as their products are the target of retaliatory tariffs imposed by other countries seeking reprisal. In response to tariffs imposed on U.S. motorcycles by the European Union, motorcycle brand Harley-Davidson announced on June 25 that it would move some of its operations overseas, a strange development given that Trump's campaign promised to return manufacturing jobs to the country.

Meanwhile, retaliatory tariffs from China imposed on U.S. agricultural products will lead to a plunge in the price of farm produce, dealing a blow to the same farmers who backed Trump in large numbers during the election.

While Trump has correctly identified the problems of the U.S. economy—trade deficits and the dearth of employment caused by the dismantling of the country's labor-intensive manufacturing—he has attempted to resolve them in all the wrong ways.

He has tried to portray the biggest economy in the world as a victim of globalization, ignoring the fact that the global financial system has been long underpinned by the dominance of the U.S. dollar, which has been the predominant reserve currency around the world since the 1940s.

Previous U.S. administrations have all tried to maintain the dollar-dominated global financial system and Trump is no exception, simply because this is in line with the country's interests. However, in order to maintain the dominant status of the dollar, there needs be enough to satisfy global demand for the currency. The United States has facilitated the global supply of dollars by adopting a zero-interest policy and printing banknotes. The currency is then spread around the world through U.S. investors and consumers.

Every year, a large proportion of the increase in global trade is produced by U.S. consumers, and this guarantees that there are enough U.S. dollars in the market. The consequence of this is that trade deficits appear between the United States and almost every other major economy. In other words, the country has to suffer trade deficits if it wants to keep the dollar's status as the world's dominant reserve currency. Trade surpluses with other major economies would lead to an insufficient supply of dollars in the global market and would force international consumers to choose other currencies for cross-border transactions. If that were to happen, the dollar's dominant position would be weakened and the United States' interests harmed.

Trump had wanted to give domestic companies a more competitive edge in price by imposing tariffs on imported products. However, such an approach has instead damaged the interests of U.S. companies which have already begun to set up factories overseas.

However, the fact that Trump has successfully managed to safeguard the interests of some U.S. industries by imposing additional tariffs, including steel producers, should not be overlooked. Yet compared with the hi-tech and high value-added financial and service industries in which the United States leads globally, the U.S. steel industry is in decline and Trump's protection of an ailing sector will do little to bolster the national economy.

As a consequence, Trump's economic policies implemented in the name of America First not only harm other countries economically, but also damage U.S. interests. Ultimately, America First will come to nothing.

Copyedited by Laurence Coulton

Comments to lanxinzhen@bjreview.com

 

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