In the late Eighties, the sclerotic Soviet economy appeared doomed. It seemed to many that Mikhail Gorbachev and his free-market reforms were the only hope of avoiding collapse. But Gorbachev only ever seemed to get halfway. He declared that central planning would no longer be necessary, and that factories could decide for themselves what to make, but he never got around to giving these factories the support they needed to retool themselves. His reforms got so far that they introduced new demands and rules and bottlenecks; they never got far enough that they came up with solutions to the problems they had introduced.
In an ironic reversal of the Gorbachev situation, Trump is trying to turn a globalised, free-market America into a more controlled and locally-based economy. Like Gorbachev, Trump has gone so far as to translate that demand into harsh economic reality: stop importing things right now, or get crushed by tariffs. But the companies now expected to do their patriotic duty for Uncle Sam have absolutely no support from the state.
When push came to shove, Gorbachev didn’t really want much in the way of actual markets; he wanted all the market efficiency while still maintaining Soviet top-down control of the economy. Not able to handle the pull from these radically two different directions, the USSR economy broke apart, and soon the USSR itself went with it.
If Trump were on course to make his programme work, he would be mimicking the way the Chinese government supports businesses that are affected by changes of policy. If the CCP were to decide that aluminium imports were suddenly unacceptable, companies using aluminium would be told where a new mine would be opened, which banks would lend capital to that project, which company would be in charge of construction, and when these companies would have to switch to being entirely domestically sourced. If they do not perform their patriotic duty, or if they actively harm the social stability of China, companies can indeed be destroyed or taken over by the state.
But there is still a social contract there: a deal in which both parties have duties and responsibilities. Trump has now suddenly and violently duplicated all the duties that companies in China might have toward their country, but he has done nothing to assume any of the responsibilities of the Chinese state. The result is a halfway house of sorts; one that is likely to simply destroy much of the American business community unless there is an immediate change of course.
America needs reform — who inside the country would even deny it at this point? On a purely abstract level, there are very few Americans who would oppose the idea of their country rebuilding its manufacturing capacity. But the current execution is akin to trying to do a sharp fighter jet turn while flying a slow and fully laden passenger plane. Whether due to a lack of time, energy, or care, Trump’s reforms are all being made with the chainsaw rather than the scalpel. Reforming the government bureaucracy has turned into firing tens of thousands of workers almost at random, leading to many mistakes and more inefficiency rather than less. Reforming America’s structural trade deficits, on the other hand, now looks like a Khmer Rouge death march for companies that are even partly reliant on components or raw materials from abroad. If you’re an American manufacturer, you should just buy American bauxite from an American bauxite mine, and then send it to an American aluminium smelter. If you cannot (the US currently has no operational bauxite mining) and your business collapses, then that’s not Trump’s fault, that’s your fault.
The practical details here — the fact that it takes 20 years to build a mine, but you’re somehow supposed to have it ready in 48 hours — are treated like they basically do not matter. In this way, Trump’s reforms clearly go way too far: the things he is asking American industry to do cannot be done. You can’t just impose huge penalty fees on a system of trade that America depends on to get its food and medicine and electronics and expect it to work out, and the end result of this policy is likely to be empty shelves and shortages: yet another parody of the late-stage Soviet Union. The systems we depend on have become too complex for us mere mortals to grasp; Trump seemingly neither has the patience or inclination to even try to understand them before transforming them utterly.
When asked what he thought of the ongoing stock market crash as a result of his tariff announcement, Trump recently said that, while he didn’t like the market going down, sometimes you simply had to take “medicine”. The Gorbachev years had its own, similar term: the USSR was to be saved through the application of “shock therapy”. Trump’s “medicine” here is just an inversion of Gorbachev’s own mix of totalising reform and lethal indecisiveness. It’s an interesting choice of words, nevertheless: most kinds of medicine are just as capable of killing as they are of healing, if administered at the wrong dosage or the wrong time. The Soviet Union learned that lesson the hard way in the Eighties; now it may just be America’s turn.
“Trump’s ‘medicine’ here is just an inversion of Gorbachev’s own mix of totalising reform and lethal indecisiveness.”
But changing American industry is actually only a part of what Trump now wants to accomplish. His surrogates are starting to talk about the dollar’s status as the global reserve currency as a problem in and of itself. By tariffing everyone at the same time, and essentially taking a sledgehammer to the entire global trading system, Trump could conceivably end the dollar’s reserve status fairly quickly. But this is a truly monumental change that would touch upon the life of every person on the planet. What the effects of doing that would be, though, nobody really knows.
Even more stunningly, Trump is also planning on upending the infrastructure of trade itself, even as he’s declaring a tariff war on the rest of the planet. In just over a week, the US is now set to implement an incredibly radical change: ships that are made in China, or belong to companies who own a ship made in China, will now have to pay large penalty fees whenever they dock at a port in America. Ostensibly, this money will be used to re-create an American shipping industry. There’s just one problem: that industry simply doesn’t exist at present, and more than half of all the world’s ships are now made inside China.
None of what I’ve said is in any way an argument that America shouldn’t have tariffs, or that it cannot be reformed. It is only to say that these tariffs will not do what they’re supposed to do, and that these reforms will end up pushing America toward the very dissolution that people are trying to avoid. But America is now so hopelessly stuck in negative polarisation that making such an argument is almost impossible. Right now, people are either for Trump or against Trump, and no more nuance than that is really in demand. To be against Trump but for tariffs, or for Trump but against these tariffs in particular, is to piss into the wind. Towards the end, the USSR was similarly polarised: the ability to discuss things across the social divide slowly dwindled, until all you could do was to simply pick a side.
Unfortunately for America, the part where everyone simply starts picking sides has only just begun. If one considers the issue of Trump’s 2 April tariffs in terms of American domestic politics, it’s clear that the way in which they are being handled is a constitutional ticking time bomb. According to the constitution, issues of tariffs and taxation belong to Congress, not to the president. Congress has delegated power over tariffs to the president, but this delegation of power was meant to handle emergencies. Trump is of course claiming that the chronic trade deficits of America constitutes a sort of global emergency, but the critical point here is that this argument sits at the razor’s edge of what is even reasonable. One could easily make the argument that by deciding — as a single individual! — to change the entire world economic order and impose massive new de facto taxation on Americans, Trump has now taken the step from being a duly-elected president to being a sovereign and unaccountable king. Ominously, there’s probably quite a few Americans who would be fine with that idea.
Equally ominously, California’s governor, Gavin Newsom, recently made noises about how his state might want to simply negotiate a separate trade arrangement with Asian economies rather than go along with Trump’s plans for American autarky. What Newsom is saying here is in fact openly seditious and completely unconstitutional, but to many opponents of Trump, his ideas are now far from unthinkable or even undesirable. It probably doesn’t even need to be said that the issue of tariff nullification played a significant part in the lead-up to the American civil war. In fact, Newsom’s loose talk actually shows us that there now exists a viable, well-ordered path toward some sort of breakup of America. During the height of the Covid crisis, the federal government essentially lost control over the states, which ended up forming various ad-hoc regional organisations to coordinate their responses. These ad-hoc organisations at the regional level aren’t regulated in the constitution and are probably quite illegal, but in the heat of the Covid panic, none of that seemed to matter.
If the end result of these various dramatic Trump reforms is to break parts of the American economy, the pressure on Newsom and other blue state governors to do something will become increasingly urgent. If that happens, then it is not at all unlikely that blue states will once again come together into ad-hoc “confederacies”, which will then coordinate their policies, and even set their own trade policy vis-à-vis the rest of the world. Sure, this would be completely illegal; sure, the founders of America wouldn’t like it at all. But what does that even matter when you can say the same thing about the mad king trying to wreck the global economy? Nobody thought the Soviet Union could break up either, until one day it simply did.
Once a young nation, America is now old. Once the home of optimism, America is now despondent. The 250th anniversary of the great American revolution is just a year away, but who knows whether there’ll be anyone left in the mood to celebrate. There is actually a non-zero chance the entire country might be in some form of bankruptcy or technical default on its debt before then; in fact, all of Trump’s reforms up until this point have only made the deficit situation worse, not better.
Given all this gloom, it is hard to fault Trump for flipping over the table. But in doing so, he’s not truly treading new ground. Today, just as happened a generation ago, a controversial man is suddenly upending an imperial system that has become too slow, too divided, and too indebted to survive for much longer. Those who fail to learn from the past are doomed to repeat it — and Donald J. Trump has never been a man to care much about dusty old books.
