How to understand Donald Trump’s tariff

How can investors analyze Donald Trump policy analysis? This is a burning question now, Markets stumble After the US President announced the definitions on Wednesday, which exceeded that protectionist in the thirties of the twentieth century.

It is seen although the lens of economic thinking in the prevailing twentieth century-whether John Mainard Kins or free bids such as Milton Friedman-appears that such definitions tell himself strangely. In fact, the so -called liberation day announced by Trump’s slaps of economic madness to the point that it may seem that psychologists have been explained better than economists.

However, I would like to claim that there is a great close economic expert at this moment: Albert Herchman, the author of an amazing book published in 1945, National Authority and foreign trade structure.

In recent decades, this work has been greatly ignored, indicated by Jeremy Adeleman, the Printestone historian who wrote the biography of Herscheman. No wonder. The German Jewish economist suffered from this shock in the Spanish Civil War and Nazi Germany that when he arrived at the University of California, Berkeley, as an economist, he decided to study Autarky.

More specifically, the catastrophic protectionism was used in the thirties of the twentieth century to develop a framework for measuring economic coercion and the practice of domination (the academic word of bullying). However, this analysis was largely ignored by the trade economists, because it was inconsistent with both Keynesian and neoliberal ideas.

Instead, the main effect of the book on anti -monopoly analysis was. Use Economist ORRRIS HERFINDAHL later Hirschman ideas to create Corporate concentration index, It was adopted by the US Department of Justice, among other things.

However, if Hirschman is alive to see Trump unjustly his identification strategy in the Pink White House park this week, he will not be surprised. Neolibral intellectuals often sees politics as a derivative of the economy. But Hirschman looked at this in the opposite direction, on the pretext that “as long as a sovereign nation can boycott trade with any country with its mirrors, the competition for more national power permeates commercial relations.”

He considered “trade … a model of imperialism that did not require” invasion “to buy weaker commercial partners,” says Adeleman. This is close to how Trump’s advisers analyzed the economy. But it is completely different from how Adam Smith or David Ricardo watched commercial flows (which they assumed that they have relatively strong players).

Some economists tend to this transformation. After Trump spoke immediately, American economists – Christopher Clayton, Matteo Magiuri and Jesse Shrgeger were released. paper The growing field of the “Geological Economy” is determined, inspired by Hirschmann.

When the trio began for the first time in the search schedule, four years ago, “almost anyone seemed interested” with ideas, because they were at odds with the current frameworks, Maggioi recognized. But attention is now increasing, he says, expecting an intellectual shift waving on the horizon, which can be compared to what happened after the global financial crisis. For example, the American Finance Association meeting for this year was distinguished by a new session on the geological economy, as Morris Otold, the former chief economist of the International Monetary Fund (and Hirchman’s fan), presented a strong power letter.

This work has already produced three topics that investors should pay attention to. First, and most importantly, the trio analysis shows that it is dangerous for small countries to become very dependent on any major commercial partner, and they are Submission To measure such weakness.

Second, they argue that the source of the dominant force in America today is not manufacturing (because China controls the main supply chains), but instead is financial and structured around the dollar -based system.

Trump’s tariff, therefore, it is basically an attempt to challenge last Higon (China), but its financing policies are an attempt to defend existing domination. (I would like to claim that hegemony in technological power is still disputed.) This discrimination is important for other countries trying to respond.

Third, the trio argues that the dominant force does not work in a similar way. If the fatwa has a share in the market by 80 percent, for example, it usually has 100 percent control; But if the market share decreases to 70 percent, the dominant power collapses faster, because weakness can see alternatives.

This explains the reason for the failure of the United States to control Russia through financial sanctions. This style may be operated on a wider scale if other countries interact with the aggressive Trump tariff by imagining and developing alternatives to the dollar -based financial system. It seems that the infiltrators cannot be photographed – so that they are not.

Is this analysis frustrating? Yes. But it should not be ignored. And if investors and policy makers want the shock to want to encourage themselves, they may notice something else: on all difficulties, Hirschman was optimistic for life-or “possibilities”, as preferred to say. I think people could learn from history to improve the future.

Trump ignores this lesson now, with dark consequences. But no one should.

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