Sanctions, Tariffs and NATO Breaking at the Seams - Former Allies Are Now at Each Other’s Throats
Agitation and Propaganda
Two plain-looking gentlemen who we must remember this week: American Senator Reed Smoot and Congressman Willis Hawley the authors of the Smoot–Hawley Tariff Act adopted in the summer of 1930 which played a little known but crucial role in world history.
The Smoot-Hawley Act became the US business response to the Great Depression raised US tariffs on over 20,000 imported goods — the highest tariffs of that century. A thousand of prominent economists begged President Hoover not to do that and one of his closest advisers later recalled.
Thomas Lamont, banker, adviser: "I was practically begging Hoover to block the bill because it would fuel nationalism across the world".
It was the Mormon preacher Smoot who plunged the world economy into chaos. A series of trade wars which degenerated into a full-scale war. Two years before, the economic forum held by the League of Nations held in Geneva instead of Davos encouraged politicians to be more open and to decrease customs barriers. But the effect was opposite. It was the beginning of the "an-eye-for-an-eye" tariff battle. 23 countries were embroiled in the economic chaos: from Canada to Germany and Italy where, as Lamont had foreseen, Nazis took the wheel.
Donald Trump, US President: "When it comes to a time when our country can't make aluminum and steel let's be frank, without steel and aluminum you don't have much of a country. Your country's not the same. We need it for protection. We'll sign the papers next week. We'll protect you".
After the import of solar panels and washing machines was banned in 2017 the adoption of the 25% protective tariffs for steel and 10% for aluminum became yet another step towards making America great again. But despite all their promises to the WTO America will have to make China, EU, and many others less great. Yes, these are the new rules of the game.
Donald Trump, US President: "I don't blame the other countries. When I was in China I told President Xi whom I greatly respect: I don't blame you. How can I blame you for earning $500 billion per year from us? Somebody ratified those deals and they should be ashamed. Our steel and aluminum industries are decapitated but we'll fix that".
Steel and aluminum are strategically important metals. Recently, Trump stressed that the US shouldn't buy steel from the states it's going to wage war against. It seems that until now, the US has waged war only against terrorists but terrorists don't sell steel. The trade war was announced at the same time the economic aide from Beijing arrived in Washington.
forbes.com:
"One of China's top economic aides, Liu He, is in the US this week to discuss trade cooperation. It seems unlikely that Liu will change the negative attitude of the US towards China".
Instead of hospitality, the guest receives a sucker punch. Beijing officials are sure to respond. Many observers assumed that Liu didn't just come to negotiate but to explain to the American partners what tectonic shifts recently happened in the Chinese political system.
tass.ru:
"The amendments to the Chinese constitution introduced by the Communist Party have recently been revealed. The Party suggested removing the two-consecutive-term restriction for the president and vice-president of China from the Constitution. It will allow President Xi Jinping to be elected for the third time in 2023".
The complex system of collective continuity that didn’t allow more than two consecutive terms was formed thanks to Deng Xiaoping. It was the result of the violent and dramatic war within the Party that ultimately forced the top Chinese officials to agree not to rock the boat and not to nominate new leaders like the Great Helmsman, Mao Zedong. And now — a new Helmsman. Chinese market socialism now has a strong national leader who wants to make his country great again, the way Trump does.
Hua Chunying, Foreign Ministry: "We encourage the US to keep their protectionism in check. If other countries follow the American example it will inevitably have an impact on all world trade".
Mei Xinyu, Ministry of Commerce: "Mr. Trump made his statements when Liu He arrived in the US. He did it to exert pressure on China. Such strategy can scare small countries, but China is big. Many have tried to scare us during the last 30 years".
To be fair, only 2% of US steel imports come from China. And the physical volume decreased by a half during the last year. China produces 800 million tons of steel per year. Besides, it's also the world's largest aluminum-producer Obviously, it's about national pride rather than money. Indeed, more and more countries are willing to match their pride against others.
europa.eu:
"The EU has been a close security ally of the US for decades. We will not sit idly while our industry is hit with unfair measures that puts thousands of European jobs at risk. The EU will propose countermeasures against the US to rebalance the situation".
Tadaki Yamaguchi, Japan Steel Information Center: "Washington's unwise and naive step will spark a backlash even from their allies and damage the branches of the US economy that aren't connected to the industry".
There will be a long line of those harmed and offended by Trump. And Turkey, the NATO-ally of the US that sells the Americans a million tons of steel per year will surely be there. The same historical pattern: like the US, China, India, Israel, and many other countries, Turkey has a tough national leader who's ready to defend the national honor by rallying Turkish patriots. Currently, all leaders and all parties on all continents are right. It usually means that there will be no one to blame.
Recep Tayyip Erdogan, President of Turkey: "Look who's over there. What are you doing here, little girl? She has a Turkish flag in her pocket. If she dies for her country she'll be covered by a flag by the will of Allah".
The perplexing logical sequence that links national pride to the interest of national corporations and national capital transformed several harmless trade arguments into the WMD arguments during the last century.
The story of senators Smoot and Hawley and their 1930 Tariff Act is quite a timely reminder.
nytimes.com:
"A classified military exercise last week examined how American troops would mobilize and strike if ordered into a potential war on the Korean Peninsula. Pentagon officials cautioned that it does not mean that a war is inevitable. Commanders who attended the exercise in Hawaii were told that roughly 10,000 Americans could be wounded in the opening days alone. And the number of civilian casualties would likely be in the hundreds of thousands. Senior military leaders fear that a stray incident could spark a sudden conflict for example, a search of a Korean ship as a part of the economic blockade of North Korea. Although the planning is continuing, the operation has yet to be given a formal name. Special Operations units, however, have already been assigned to specific task forces with names such as Trident and Falcon".