By Joe Montero

Donald Trump entered to the applause of his inner circle of supporters on 1 April, to announce his Liberation Day. This is where he announced a new wall of tariffs against impots from the rest of the world. Choosing April Fool’s Day will prove to be ironic. Trump and his backers have chosen to inflict serious wounds on their own nation and hurt most of the rest of the world as well.

In Australia, all of us will experience something of the fallout from this tariff war.

First for some background.

Trump and his oligarch cronies don’t see their trade war in the same way. They present the tariff wall to protect America from unfair trade, and as a path to rebuilding the nation’s manufacturing. This is nonsense. These tariffs are a tax imposed on American citizens and businesses. American importers will pass this onto consumers. For a country that now imports a great deal, it will mean escalating prices for everyday needs. Businesses will close and jobs will be lost. Domestic manufacturing won’t revive because rising prices means Americans won’t be able to buy their products.

The Trump related faction of American big business doesn’t care less. There is one basic reason for this. They are the core of an alliance of shareholders in banking, venture capitalism, and Silicon Valley, whose fortunes depend on trade in financial and other assets. Their profit depends on asset price rises, and not on producing what we consume. Even the Internet moguls produce nothing. They take billions because they own and control platforms. The exception of Elon Musk, who has invested in manufacturing doesn’t change this reality.

This group has risen to the ascendancy for two reasons. The conditions of United States capitalism are that it is a process of slow decline, and that the return in the trade in assets for the money invested is much larger than the return for money invested in manufacturing and providing the services we need in everyday life. Their ways are parasitic, and the appropriate term to define them is as the Financial Oligarchy. of the Twenty First Century.

A tariff wall will cause asset prices to rise, and this is good for Donald Trump and company. But the price will be a lot of damage to the economy. This is the great contradiction between individual greed and the interests of society. Greed will bring harm to the vast majority of Americans; and it will bring harm to the peoples of other nations.

There is a good side to this. It raises opposition. Americans are already fighting back. The rest of the world is starting to fight back as well. Tariffs imposed on nations are pushing them towards alternatives for international trade and financial transactions. The BRICS alliance rose out of this. It’s expanding quickly, as ever more nations seek to join it. There is a push to rely less on trade with the United States by turning to alternative markets. The world is imposing counter tariffs on American exports.

Australia is caught up in this shift in international trade and finance. The tariff wall will hit our economy. It already has through raising insecurity and the impact on investment patterns. And this is only the start. Australia has been hit with a 10 percent tariff on all exports to the United States.

Given that Australia’s exports to this destination are fairly minor compared to those going to other destinations, the negative impact on the trade in goods might be fairly limited. Australia’s close integration to the United States is mainly through investment capital, and it’s on this that it will have the major impact.

The reality is that the biggest and most important part of investment capital in this country comes from the United States. It permeates all areas of big business, and the Australian government borrows from American banks to pay its way. The number of dollars this amounts to is not the subject here. The fact is that any change to the flow of this capital will have a profound impact on the Australian economy and all who live in this country.

The story of United States investment in Australia is that it has been conditioned by changes in the country of origin. The shift from making things to the dominance of trade in assets has been mirrored here. The tariff wall and specific tariff on Australia’s exports will accelerate the dominance of banking, venture, capital, and Silicon Valley, unless Australia acts to stop it.

There is another part to the tariff wall. Trump announced that countries trading with those it doesn’t approve of, or try to find alternatives, will have more tariffs put on them and that various other means would be applied to force them to reconsider.

It happens that our biggest trading partner is China. There is also substantial trade with Japan, Indonesia, and other Asian nations. Trade with Europe is also substantial. Australia is therefore in a good position to develop this further to protect ourselves from the impact of the American tariffs. At what point will this bring retaliation. We only have to consider what is being done to Canada, Mexico, and Europe to get a good idea.

The graph below shows which whom Australia traded the most in 2019-20.

The same pattern applies today and don’t expect this to change mush after Trump has gone.

Australia’s interests lie in putting an end to reliance on American investors. Not to replace it with reliance on investment from somewhere else. The point is that too much reliance on another country gives that country too much power over Australia. Investment sources should be diversified, and domestic investment should take priority over foreign investment. This is basic.

Trade war will inadvertently end up benefiting China most of all, because China has the capacity and will to play a key role in building alternatives and now happens to be he manufacturing centre of the world. This is a challenge to the global order under the domination of the United States.

The nature of Australia’s economy is that private investment is not capable of meeting the need, and this requires direct government investment in building the economy on a sound foundation, shifting it from reliance on trade in assets to reliance on the provision of goods and services in a sustainable way. Australia should stand for fair trade between all nations, based on mutual respect and equality, and opposition to trade war.

But this is a political decision that requires the courage to do it from our political leaders. They don’t have this courage at the present. If our leaders fail to stand up, the responsibility falls on the rest of us to push until change comes about.