US president-elect Donald Trump views countries in mercantilist terms as competing empires, as they were centuries ago.
Politicians usually moderate their rhetoric once an election has been won. Trump is doing no such thing. He is escalating, throwing down gauntlets at any country that comes across his morning news feed.
Unlike a libertarian leader such as Javier Milei of Argentina, who promotes free-markets and the elimination of tariffs, Trump is an old-school mercantilist. He wants to raise hefty tariffs on everyone, starting with America’s largest trading partners.
Mercantilism was the dominant economic policy of the empires of the 16th to 18th centuries. It viewed other countries, or empires, as rivals in the pursuit of prosperity. The gain of one, it was believed, could only come at the expense of another.
Mercantilist policies restricted imports and encouraged exports, in the belief that a trade surplus was the only way in which an economy could attract money (primarily gold and silver at the time) and thus become more prosperous.
Protectionism was the order of the day: supporting domestic industry by making foreign imports more expensive, through tariffs, was how it was believed an economy grew and created jobs. Many large companies were essentially parastatals, operating under a warrant from the government, and enacting foreign policy overseas.
It was mercantilism that motivated the establishment of colonial empires. Since imports were considered bad for the economy, an empire couldn’t simply trade with other countries to satisfy their need for raw materials and manufactured goods. It was much better, so the logic went, to own a foreign company outright, and establish a monopoly over its resources and industry.
The outcome was a world consisting of several major empires, each competing for dominance over the less developed world. Trade wars were routine, and often spilled over into sporadic violence, piracy, military conflicts, or all-out wars.
Tariffs
“The most beautiful word in the dictionary is ‘tariff,’ and it’s my favorite word,” Trump told the Economic Club of Chicago in October. He views tariffs as offensive weapons, to be used to dominate and cow foreign nations.
This view of international trade and tariffs is, of course, grossly mistaken. I’ve debunked Trump’s view of tariffs before, so I won’t rehash it. Suffice to say that tariffs on all imports would cause chaos for business (according to the Brookings Institute); would lead to persistently higher prices for customers (ditto); Trump is consistent, and consistently wrong, on tariffs (says the Cato Institute); Trump does not remember America’s disastrous experience with the 1930 Smoot-Hawley Trade Act (says the American Enterprise Institute); tariffs will cost households thousands of dollars and slash GDP growth (according to everyone except a producer lobby group quoted by Trump); and tariffs create jobs primarily in the lobbying industry (according to Reason).
They’re a terrible idea, m’kay?
In reality, having a trade deficit with another country makes a country richer. By buying things from foreign countries for less than they could have been produced domestically, importers now have both the goods and leftover cash.
Adam Smith, who wrote the book that sounded the death knell of mercantilism, explained that Scotland could easily make wine by growing grapes in hothouses, but that their own wine would cost them 30 times the price of wine imported from France. By buying wine from France, they would save 29 thirtieths of the cost, which they can then spend on other things.
Exports don’t make a country richer. Imports make it richer, and exports merely pay for them. You can’t eat gold. Prosperity is based on the productivity of the people, not on the money earned from exports.
As P.J. O’Rourke wrote: “imports are Christmas morning; exports are January’s MasterCard bill”.
Expansionist rhetoric
That Trump views the world in mercantilist terms is evident from the aggressively expansionist rhetoric he has unleashed since his election.
He did not campaign on retaking the Panama Canal, but has since threatened to do so unless Panama reduces transit fees for US vessels.
He did not campaign on annexing Canada, but has since proposed making it the 51st state.
Instead of viewing Mexico as a partner with coinciding interests, Trump has blamed many of America’s own problems on Mexico, going so far as to threaten military action against drug cartels on Mexican soil.
He did not campaign on acquiring Greenland from Denmark, but now wants it under US control, for… reasons.
Trump doesn’t see foreign countries as potential trading partners, or potential allies, but as commercial rivals, against whom US interests can only be assured by military or economic force.
His worldview is not so different from that of Vladimir Putin, who considers the breakup of the USSR a great tragedy and aims to restore the tsarist Russian empire through revanchist military means, in order to recapture control of strategic geography and key resources.
Putin wants to be Peter the Great. Trump wants to be George III (and is equally mad).
Mexico
Mexico, which became the US’s largest trading partner in 2023 as supply chains were moved away from China in the wake of the pandemic, has long been a partner of the US not only in trade, but in actively stemming the flow of migrants from central America and suppressing the criminal cartels that supply America’s $150 billion annual demand for drugs.
Instead of strengthening that partnership, for both economic and political reasons, Trump has threatened not only to raise a 25% tariff on all Mexican imports, but literally to invade.
There is no international law under which the US could conduct targeted operations against drug cartels without violating Mexico’s sovereignty and provoking a military defence.
Mexico’s president, Claudia Sheinbaum, rightly told Trump: “Mexico does not produce weapons. We do not consume synthetic drugs. Unfortunately, what we do have is the people who are being killed by the crime that is responding to the demand in your country.”
Trump’s position, essentially, is that Mexico is either deliberately lax on both migrants and drug cartels, which is an insult to Mexico, or incompetent, ditto, or insufficiently tyrannical. In response, he has threatened both a trade war and military intervention, until cooperation improves.
This, from the guy who campaigned on stopping the “endless wars”.
Canada
Trump is equally hostile to Canada, the country’s second-largest trading partner after Mexico. What Canada did to set off Trump is unclear, but besides being “woke”, it seems Trump misunderstands what a trade deficit is.
“No one can answer why we subsidize Canada to the tune of over $100,000,000 a year?” he ranted on his personal social network. “Makes no sense! Many Canadians want Canada to become the 51st State. They would save massively on taxes and military protection. I think it is a great idea. 51st State!!!”
In addition to promising to slap 25% tariffs on Canadian imports, which Trump idiotically considers to be a tax on Canada, he has been taunting Canada’s prime minister, Justin Trudeau, by calling him the “Governor” of the “Great State of Canada”.
Although Canadians brushed off Trump’s comments as a tasteless joke, the implications for the US of Canadian statehood would be, well, interesting.
While US importers would still be paying the same amount for Canadian-made goods, a new state would have all the rights of the existing states. By population, Canada is almost exactly as large as California. That means it would, like California, get 54 electoral college votes, and 52 representatives to Congress. Those votes would almost certainly go primarily to Democratic Party politicians in the future.
One wonders if Trump considered the implication of permanently moving the US to the left by annexing Canada. Oh, who am I kidding. Trump doesn’t consider the implications of anything he says.
Panama
The Panama Canal was started by France in what was then Colombia, in the late 19th century. The project ran into severe difficulties. In the early 20th century, the US tried to acquire France’s interest in the Canal project, but Colombia rebuffed it.
Not to be denied, then-president Teddy Roosevelt supported the secession of Colombia’s Panama province, and signed a treaty with the newly formed Panamanian government to pursue the project.
This was described at the time as “an act of war against Colombia”, an “act of sordid conquest”, a “vulgar and mercenary venture”, and “gunboat diplomacy”.
Almost a century later, in 1999, ownership and control over the Panama Canal finally reverted to Panama, under a treaty signed by former president Jimmy Carter in 1977.
Trump considers this treaty to have been a mistake, being an “act of extraordinary generosity that has been bestowed to (sic) Panama”. Can’t have generosity, now, can we?
He is complaining of Chinese influence in Panama, and supposedly “exorbitant” transit fees charged by the Panama Canal Authority.
“We will demand that the Panama Canal be returned to the United States of America in full, quickly and without question,” he told an audience a few days ago. “I’m not going to stand for it. So to the officials of Panama, please be guided accordingly.”
Just like that. Trump, far from wishing to end those endless wars, clearly wants to add to the list of America’s “splendid little wars”.
Greenland
Greenland has resources. America wants them. It is also strategically located in the Arctic. America wants that location, too.
Trump could have offered to invest in Greenland to extract those resources, or buy them from Greenlandic mining companies. He could have proposed a strategic military partnership with either Greenland itself, or with Denmark, to establish American bases and assert influence over the Arctic region in the face of expansionist ambitions of both Russia and China.
But he didn’t do that. Instead, he has simply proposed to buy Greenland from Denmark, of which it is an autonomous territory, and he will not take “no” for an answer.
“For purposes of National Security and Freedom throughout the World, the United States of America feels that the ownership and control of Greenland is an absolute necessity,” Trump posted to Truth Social.
Greenland is not cooperating. Its prime minister, Múte Egede, responded in writing: “Greenland is ours. We are not for sale and will never be for sale. We must not lose our long struggle for freedom.”
Denmark, for its part, has announced a massive package of defence spending focused on Greenland. Who would have thought, a decade ago, that Denmark would ever need to beef up its military readiness against a threat arising from the United States.
Mercantilism
This is the world as Donald Trump understands it. Schooled in business, he views countries like companies, each competing against rivals to maximise their own revenue, control resources and suppliers, and minimise the revenue opportunities of their competitors.
Rivals are to be acquired, or dominated, or crushed.
Trump’s rhetoric suggests he wants to turn the dial back a couple of centuries, to the mercantilist world of empire and conquest, with America in the place then occupied by the British Empire.
This will not lead to a more peaceful world. On the contrary, it will lead to more war.
It will also not lead to a more prosperous world. Mercantilist tariffs and protectionism not only impoverished the losers in the colonial scramble for resources, but also stifled the growth of the economies of the winners.
The world turned away from mercantilism, and towards global free trade, for a good reason. One hundred and fifty years ago, when that transition began, the world’s total production amounted to about $2 trillion (in 2011 dollars, adjusted for inflation). In 2022, the world’s production added up to $130 trillion.
Ninety-eight and a half percent of the world’s total GDP can be attributed to the switch from mercantilism to global free trade. Trump wants to turn the clock back.
[Image: American Empire as envisioned at the time of the original “splendid little war”, the invasion of Cuba in 1898. Public domain image first published in the Philadelphia Free Press]
The views of the writer are not necessarily the views of the Daily Friend or the IRR.
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