Unlike the prior administration who was more than willing to give away America’s wealth and power, President Trump understands US economic power. And he is using the wealth and power of the United States to the country’s full advantage.
President Trump knows that since the US is holding all of the aces it is time to use them and really start winning.
The US economy is the world’s largest
America’s economy is bigger than the combined economies of the rest of the G7. Our total annual output which will exceed $20 Trillion this year, is almost 25% of the world’s total. The US economy is more than 40% larger than China and 12 times larger than Russia.
In addition, when countries trade, the universal currency used is the US dollar. That gives us power over the finance and banking community.
Rebuilding our Military and US global strength
Our military has been depleted over the last decade. During the Obama administration, Congress insisted on slowing the rate of growth of government spending, mostly by cutting wasteful and often counter-productive social programs. But Obama insisted on cutting defense spending too.
He said that for every dollar reduction in spending for social programs, a dollar had to be cut from the defense budget. As Congress willingly cut domestic spending they also weakened the armed forces.
The military always wants to maintain a sufficient force so that the country is well protected. In addition, the military also wants to have enough resources to be able to fight two major foreign conflicts at the same time. After Obama, our military leaders said that the armed forces could not meet that goal.
Since many of our adversaries sensed a military weakness, there was little reluctance to fear US retaliation for any actions. That left the US and much of the world, in a vulnerable position.
After virtually wiping out ISIS and after dropping heavy bombs in Syria and Afghanistan, Trump convinced Congress to vastly increase spending for the military.
Trump adopted the policy-tested Reagan position of “peace through strength.”
So now the world sees a rapidly growing US economy and an increasingly powerful US military. Trump is using these to reach the solutions to the problems.
The first option when solving disputes with other countries is always the use of our economic power.
Trade Tariff War
Trump first tackled the negative balance of trade issue. He saw that hundreds of billions of dollars flow out of the US each year. Much of the dollars end up in China.
Trump saw that the trade deals negotiated with Canada, Mexico, the European Union, Japan, South Korea, China and others, were lopsided in favor of our trading partner.
Those agreements ended up limiting the amount of goods and services the US manufacturers can sell in foreign markets while encouraging the foreigners to sell their goods in the US.
For instance, European car makers pay a 2 ½% tariff when they sell a car in the US. US car companies pay a 10% tariff when they sell a car in Europe. Almost all of the agreements with other trading partners are similarly lopsided.
Trump, whose goal is completely free trade with no tariffs on anything, used his power to bring a quick resolution to this imbalance. He imposed crippling tariffs on almost all of our trading partners, knowing the tariffs will hurt their economies far more than their retaliation will hurt the US.
Trump has also used sanctions to encourage all worldwide businesses to restrict trading with Russia, North Korea, Iran and Turkey. He knows the international companies value their business relationships with the US more than with the sanctioned countries.
The economic pressure that Trump is applying will likely have very positive results.
Because of the lopsided trade agreements, US companies could not fairly compete worldwide. Soon trade agreements will be re-written to open up foreign markets to US manufacturers.
The European Union, Mexico and South Korea have already met with Trump and have agreed to start working toward really free trade.
The sanctions will be crippling. And if our adversaries continue the bad behavior, Trump will ratchet up the pressure. Eventually, they will all have to meet with Trump and negotiate resolutions or their economies will collapse.
For whatever reason, the prior administration did not take advantage of the America’s US economic power. In fact, they dispute the concept of American exceptionalism instead striving for a more equal position with other countries.
All that did was weaken the US.
President Trump has changed that and he will “make America exceptionally great again.”
Michael Busler, Ph.D. is a public policy analyst and a Professor of Finance at Stockton University where he teaches undergraduate and graduate courses in Finance and Economics. He has written Op-ed columns in major newspapers for more than 35 years. @mbusler www.facebook.com/fundingdemocracy