Transcription – 2025.04.23 – Danny Haiphong
218K views as of April 26
DANNY HAIPHONG: Welcome to another live stream. It's your host, Danny Haiphong. Hit the like button as you come on the program and we're about to get started. Before our guests come on, I want to introduce what is at play here:
Trump just blinked first in his own trade war on China, after Beijing warned it would retaliate against any country supporting US efforts to isolate China via trade and tariffs. Trump responded in less than 24 hours by promising to lower tariffs. This is a clear sign that Washington is backing down. But from the start, it has been China pulling the trigger, vowing to fight until the end and moving quickly to ditch the US dollar, actions shaking up the global economy and the declining US Empire. To break down what this turning point means, not only for the US & China, but also the rising multipolar world in the global economy; I'm joined by two leading economists and friends of the show. We have Michael Hudson, he is an economist, a professor, an author. He has written dozens of books, including his latest, the"Destiny of Civilization." Michael, so good to be with you today.
MICHAEL HUDSON: Good to be here. Thanks.
DANNY HAIPHONG: And we have Professor Richard Wolf; he is an economist, the co-founder of Democracy at Work, and his latest book is Understanding Capitalism. Thanks so much Professor Wolf, for joining us today.
RICHARD WOLFF: My pleasure. Thank you.
DANNY HAIPHONG: Let's get right to it, gentlemen. I'm going to play what Donald Trump just announced when it comes to this tariff debacle. Here is what he had to say in response to the media, which asked about what the latest move by the Trump Administration is going to be now that the tariffs are, at present – incredibly high, 150% to 200% plus. Here we go:
TRUMP: 145% is very high, and it won't be that high. It's not going to be that high. It got up to there. We were talking about fentanyl where various elements built it up to 145. No, it won't be anywhere near that high. It'll come down substantially, but it won't be zero. It used to be zero. We were just destroyed. China was taking us for a ride.
DANNY HAIPHONG: So the tariffs are no longer going to be 140% plus or even 200% plus anymore. Professor Wolf, this is, of course, Donald Trump. He says one thing and does another all the time. But could you just begin by outlining what this is, the trajectory of this trade war, as you have seen it? What does it mean not only when it comes to the Trump Administration's policies, but also this declining empire that we have been talking so much about?
RICHARD WOLFF: Well on many levels, this was eminently predictable.
First of all, it's very old news when a powerful economic player runs out of their dominant position and discovers that others seeking to compete with their dominance have outdone them. The formerly small producer figures out how to beat the big one by making the product cheaper or making the product of a better quality. That's what every business coming up tries to do. You start small, and as you get successful, you target bigger and bigger competitors until you become the dominant one yourself.
That's the story of the United States. We were an unimportant corner, a little piece of the British Empire, producing very few things at the low end of technology, and then shipping them, like cotton, to England – where they made all the textiles and all the clothing and all the rest. The reality is that the little guy becomes dependent on the big one, wants not to be dependent, and realizes that they have to outcompete the big one if they're ever going to get that big themselves.
So what the United States did to Britain, the Chinese have recently done to the United States. It was in the cards. It should have been foreseen. It should have been understood. But a generation or two of Americans preferred to deny all of that history, to not look at it, to not ask the obvious question, can what we did to Britain be in turn done to us? Had they asked that question in any kind of serious way, the unambiguous answer would have been, yes. It's really not a question of whether. It's mostly a question of exactly when and how.
And the when and how has arrived.
China is the agent of this thing, China has set itself the goal. By the way, Japan did it before. Japan came out of World War II destroyed and set itself the goal. For example, how do we become an economic powerhouse, which they had been before? And [then they asked], what is the most successful product in the West? Answer, the automobile.
What is it we have to do to regain our power? Answer, produce an automobile better or cheaper, or both, than the United States. That's what Toyota is, that's what Nissan is. They did it, and it took them decades to do it. And they used the government working closely with huge Japanese corporations like Toyota or Mitsubishi or Nissan or Mitsui to do that. And the Chinese have now done them one better. By the way, the Chinese also focused not on the fossil fuel cars, but on the electric cars. And guess what? In the world today, the best and cheapest electric vehicles come from China. They did it. And not just in cars, but that's one thing we're seeing.
And that means the United States has a choice. It can try to squelch, to stop, to undercut the Chinese. That's one way to respond. And the other way is to say, "[squelching and stopping don't] usually work," which is true. And maybe what we ought to do is sit down with the Chinese, have them teach us what they've figured out that they can do better than we do. We still have much to teach them. And maybe we can work out a way.
The British tried to stop the Americans. That's the Independence War we celebrate every 4th of July in this country. The British failed. They tried a few years later, the War of 1812. They were beaten again. Then they stopped trying. With nuclear weapons, we don't have that luxury. We can't do that, that will destroy everything. So maybe we ought to understand and say what Mr. Trump [did yesterday was] his usual grandstand bloviating about China, "I'll hit him with a tariff" and all of that theater, which I know is important for him domestically, politically with his base. But as a strategy, it's a stone-cold loser. And somewhere, somebody is letting him know, "uh-oh, this is not gonna work."
Let me underscore it this way. Ever since he started playing with the tariffs, every company that either sells to or buys from the United States is looking to do less business in the United States and more business everywhere else. Because let's remember, no other country is heaving tariffs at everybody. China isn't doing it. Russia isn't doing it. India isn't doing it. Brazil isn't doing it. We're the only ones, and we're not that important anymore.
If you look at China and the BRICS together, that's a bigger, wealthier, and much larger market than the United States has been, is now, or will be. And therefore the logic is, back away if you're the producer of something sold in the United States. Go find your market somewhere else. The rest of the world will buy Mexican avocados, you know. There's an interest in avocados. They don't have to come to the United States. Canada has electricity to sell and the Chinese need it. They can cut a deal with the Chinese. The United States is doing things whose end result, in my opinion, will be the economic isolation of the United States. And that will not be a road to prosperity. Quite the opposite.
MICHAEL HUDSON: Well, Richard's right. The United States is the only country that has actually weaponized its foreign trade, its foreign currency, and the dollar. But Danny, after your happy talk about China, and somehow Trump promising to renegotiate tariffs, Treasury Secretary Besant chipped in, and the Wall Street Journal just reported that he dismissed reports that Trump was going to unilaterally lower taxes for negotiations, but said that the final determination is going to be "fluid" and "several options." And a senior White House official just told the Wall Street Journal that, yes, the China tariffs are likely to come down to roughly between 50 and 65 percent. And the administration will consider a tiered approach similar to the one that the House Committee has suggested for China last year.
Fifteen percent levies on items that the United States doesn't look at as a threat to national security, like the toys and consumer goods exported to Walmart by China that keeps American retail prices down. But 100% for items deemed as strategic to America's interest. And the White House said, "President Trump has been clear: China needs to make a deal with the United States of America." Well, that was the lead item in the Wall Street Journal and the others today. The stock market is up 4% yesterday and today (we're talking about Wednesday, the 23rd of April). Four percent is an amazingly high jump. It's rolled back much of the panic after Trump's speech last week. It's as if, somehow, everything's gone back to normal and we're all friends again.
Has Trump made irreversible changes in U.S. policy, in world trade, and world finance? That's really the key. Can all of this be rolled back, and the stock market can go up again and interest rates can go down again, and everything's good.
Well, the price of gold has not gone down. That's still up over $3,500 an ounce. And the real question is, "will China make a deal?" Is President Xi going to call President Trump and say, "I'm so glad you're only taxing us 100% on anything having to do with national security. And since you, President Trump, have said again and again, that we [China] are your existential enemy, then everything is national security." Do you really expect China to cancel its export controls on rare earths, on metals, and key products that the United States needs?
The United States has a six-month supply of rare earths, and it takes about 5 years to put together a rare earth mining and refining process on all of the rare earth ores that the United States has out west. Maybe Trump will ask Japan to share its own reserves. A few years ago, when China blocked rare earth exports to Japan, they saw what was coming. And once they renewed economic relations, Japan built up a huge stockpile.
The United States didn't do a stockpile. The United States really believed that China doesn't have any choice except to rely on the United States. And that somehow these threats to the Cold War that are made by Congress and by Trump and by his whole staff, again and again saying China's our number one enemy, that China will think that's only "rhetoric" for domestic consumption. It doesn't look like China is going to really reverse what it's been doing.
The logic of China is to say, "Okay, the deals that you've made regarding Russia, trying to set Europe against Russia to drain it, so that you can keep all of your military forces that you're withdrawing from Poland, withdrawing from Europe, and put them in the China Sea, in the Philippines, in Japan against us. We realize that your intent is to go to war with us. Your military has said there's going to be war by 2026. That's next year. So I don't think we're going to lower our tariffs against you. And we're not going to somehow begin exporting the goods that you need to make your military armaments to attack us, as you've just said. We'd be crazy to sell you the rope to hang us with." (As Lenin phrased that in a different sense many years ago).
It looks like China's the designated enemy because it's been so successful, that its size and its industrial power gives other countries in BRICS and Asia, Africa and Latin America, an alternative to reliance on the dollar that they never had before. Certainly not 70 years ago at the Bandung Conference. So the question is, what really has changed?
I don't think that much has changed, and the market is sort of in a dream that somehow everything can be negotiated, as if there were not a Cold War. But it's all about the Cold War. And it's all about Trump keeping the tariffs, even at 10%, and the threat of keeping the tariffs against Europe and other countries up to 40%/50%. He said, "Yes, it's true. I can roll them all back. But other countries are going to have to give us something back, something that we want in exchange for not raising tariffs and disorienting all of their foreign trade and causing a depression there. The number one thing they have to give us [is to] impose sanctions upon China. They have to agree not to trade with China and to isolate it."
Well, this is not going to lead China to take a peaceful position towards the United States.
And then Trump says that they're going to have other countries that agree to [this], "we'll lower the tariffs on them," [and] they will have to finance the Cold War, they will have to take over the costs of their own defense. So that England and all of Europe are going to have to spend, I think Mr. Merz in Germany has said, 800 billion euros for making arms so that we can protect ourselves from the Russian army marching right through Poland and Germany and France to the shores of England ~ losing 50 million soldiers ~ we have to protect against this huge invasion that is imminent. We're still in the fantasy world, but it's a fantasy world that Trump is insisting on, to create bizarre economic rules that are just as serious as the tariffs that he's threatening on other countries.
It's a real reorientation of their foreign trade. And as Richard just said, they're going to begin trading amongst each other. They don't need the United States. And Trump has ended up isolating the United States itself in its attempt to isolate China, Russia and every other country that's deemed an enemy.
DANNY HAIPHONG: Professor, follow up.
RICHARD WOLFF: Danny, just to make it concrete, I did this little calculation, very obvious. I added up the GDP, the gross output of goods and services in one calendar year, the GDP of China and the other BRICS nations. I just added it up to get a sense of how big an economy they are. And then I did the same, I added up the GDPs of the so-called G7. That's the United States, Canada, Japan, Britain, France, Germany, and Italy.
In other words, the big other of the Western economic capitalist system. Well, the added up GDP of the G7 comes out to about 28% of world GDP. But China and the BRICS come out to about 35% [of world GDP]. So people should understand that China and its allies, the victims of the tariff war the United States has launched, is a much bigger, richer economic unit than the United States and its allies. And these are allies that are now angry at the United States in various degrees, because they've been hit by the tariffs too.
To see the same thing in another way, the BRICS nations together are over half the population of the planet. Whereas the United States and its G7 allies are not even 20% of the world's population. Not even. So there is no context for the United States to say, we are going to punish everybody who does business with China. If China were to do the same in reverse, that's a game China is in a better position to win than we are.
It's like choosing to have a duel with somebody and choosing the weapon they're much better at than you are. That's ridiculous. And our policy is so driven by the denial of what has happened to the world economy, to the shrinking position of the United States amidst the rising position of China. The level of denial is why the War in Ukraine is being lost by the West. They misunderstood what, in fact, Russia could do as a part of the BRICS. And now they're going to make the same kind of mistake with China. That's the amazing thing to watch here.
MICHAEL HUDSON: Well, Richard said that other countries are angry at the US and certainly their populations are. And yet, Italy's Prime Minister, Meloni, just came to America last week to meet at the White House and she said, "Number one, we're completely supporting you in the Cold War. We're going to increase Italy's GDP spent on military arms from 1.5% to 2% and we're going to spend it there. And we're going to increase Italy's purchase of liquefied natural gas from the United States so that we don't have to depend on Russia." So you have this bifurcation that Richard and I've been speaking about, I guess for half a year now, that the leaders of the European Union and pro-American political leaders are completely in favor of the Cold War with Russia, of isolating it, of bankrupting their [own] economies by not importing Russian gas and oil and depending on expensive US gas and oil.
This has caused a squeeze on consumer spending throughout Europe. And normally, the governments would give subsidies, as they have been, to homeowners that need to pay much more for their electricity or for their gas, for their cooking and heating houses. But instead, the leaders from Mertz to the European Union leaders have said, "No, we're going to spend our limited ability to run a budget deficit on military arms." So, the governments are not expressing this anger. The question is, how long can the governments follow a position against the economic interest of their labor force, their consumers, their businesses, their industry, that is all having to be dismantled as a result of the Cold War dynamics that have been put in motion and that Trump is trying to find some way of sustaining?
DANNY HAIPHONG: Thanks Michael, that was very well put. Professor Wolf, I want to pull up something, and I want both your opinions, Professor Wolf, you can start. One of the big fears about this move to isolate the United States, [where] tariffs really put the US economy, is that countries like China are going to begin to de-dollarize. And that fear was put out into the public by the Western mainstream media as these tariffs ratcheted up against China and stayed on China, even while Trump supposedly – but as Michael said, there's lots of room for negotiation here – lowered for other countries. So, first of all, please talk about how tariffs impact this de-dollarization trend, and what it means for the broader world economic order that the US sits in right now, as you have stated, as a declining empire.
RICHARD WOLFF: Well, I think for a long time, the dollar has been declining in what it means to people long before Mr. Trump, either his first or his second tour in the White House.
The dollar is part of the arrangements made at the end of World War II in Bretton Woods, New Hampshire. It was the organization [from] those meetings up there at the end of World War II. It was the architecture of the global economy that was being constructed by the victorious powers – the United States, Britain, France, and so on. And since all of the others were destroyed economically, if not militarily, it was the dollar that became the dominant new currency.
Very simply, it replaced the British pound sterling, which had been the world currency, or as close as you could be in those days. It became the dominant currency because of the British Empire. And when the British Empire gave way to the American [Empire], which was done by World Wars I and II, the British disappeared as a world power, and the Americans took their place – so did the dollar. But this was a bizarre circumstance. Germany, Japan would begin immediately to try to rebuild what had been destroyed in World War II. And by the 1960s and '70s, 20 years later, they had done it, and other countries began to follow suit.
Now, the empires of those countries were gone so they couldn't do it as quickly; France never could come back, Belgium never could, Britain never could. But the United States took off and became the dominant player, and with it, the dollar.
But as other countries rose up, they had to compete with the United States as the dominant player. And those relationships – anybody thinking about it would have said it – the relationships of the United States as "dominant" and the rest of the Europeans as "compliant", junior partners, would dissolve. And NATO, as their organization, would dissolve with it – too many competing interests. But that was before it was clear that the one country that could really come back from the devastation of World War II was China, which had not been expected. The poor were supposed to stay poor, as indeed most of the rest of the world has done.
But the Chinese didn't agree. And the Chinese turned out to be able to change all of that. Well, once you do that, and once you have not only the Chinese doing it for themselves, but being so carefully and successfully able to create an alliance, the BRICS, that is durable and growing and deepening the connections among them, well then, wow, you are watching a process in which all the conditions for a decline of the dollar are present.
And this is not about some kind of aggressive policy on the part of China. There could be such a policy, but they haven't chosen to pursue it. They are simply developing their own networks of buying and selling. And for those networks, the dollar is still convenient, they still use it.
But the actions of the United States, not their [the Chinese] actions, are making the dollar less attractive for them to use. You don't know what's going to happen to the dollar because of the interventions of the American government. Look, the dollar is down against the euro by 10% from the day that Mr. Trump became president to now.
Now, what in the world is going on? That's not [meant] to be, 10% in a three-month period?! That's as dramatic in foreign exchange as what Michael told us about the stock market changing 4% in two days. These are crazy movements. And you don't know who the United States government is going to decide to sanction. Remember that tariffs are one way of whacking the world. Sanctions are another way. And there are half a dozen countries or more that are now sanctioned.
The United States is the number one sanctioning power. No other country comes close. So the United States is giving reasons by these actions and by the up and down, herky, jerky, rise and fall to boot of these actions. [If] you make the dollar less and less [trustworthy], why would you use it? Its value is uncertain. Its vulnerability for you is uncertain. You don't want to do that. It's much better to trade with and to deal with less insecure elements of your exchange relationships. And so the dollar is less desirable.
But it's not just the dollar. They're looking for export markets outside the United States because the one here is too risky. They're looking for imports from other parts of the world because those from the United States are too risky. You know, people think there's no cost to invoking national security, something Michael mentioned a few moments ago. But that's a very dangerous game to play. If you use that very loosely, then nobody knows when it will be used against them.
The libertarian ideology (which is experiencing, for me anyway, a very welcome death these days); the notion that the world is run by good and bad governments and everything bad is because the government intervenes and everything good is when you're privatized…we are watching the United States take a hatchet to that idea.
Look at the government intervention, you know, this way, that way, one way, this way in the morning and that way in the afternoon. This is now a governmental interventionist economic system. And the ideology of libertarianism is ripped out of the window; it was never more than a gloss on the free trade idea which the United States could benefit from when it was the only game in town after World War II.
Now that it's not the only game in town, free trade is out the window, neoliberalism is out the window. And the libertarian ideology that piggy-backed off of it, it's out the window, too.
MICHAEL HUDSON: Well, Richard said the magic words. Why would other countries want to use the dollar? President Trump has said his intention is to steadily lower the dollar's exchange rate. The purpose, he said, is so we can make American industrial exports cheaper; as the dollar goes down, other countries don't have to pay as much. Well it'll make an industry manufactured export cheaper if the United States had manufactured products to export, which it doesn't have. That's what's so bizarre.
His logic of making and having a lower dollar, is that somehow it's going to help the trade balance. And it's really not about the trade balance at all, especially Vice President Vance has said, "we don't want other countries to support the dollar's exchange rate by buying more treasury securities and buying more American investments." And so President Trump has said that we're going to put a tariff on foreign purchases of bonds and stocks here, so they're going to have to pay, let's say 5% tariff.
Well, if bonds don't even yield 5% per year, that means any foreign investor in the United States is going to lose money on its investment as the dollar goes down, lowering the value of dollars in foreign currency. And at the same time, when the dollar goes down, that means that American multinational firms that have affiliates in Europe, all of a sudden whatever earnings their affiliates are able to make in Europe or countries whose currency don't go down, are going to be much more valuable than the United States. So this is going to encourage yet more investment outflow.
But I want to make another comment based on what Richard began to say. What we're seeing in China's industrial takeoff isn't simply a market phenomenon of manufacturing efficiency. It's not simply that they organize their factories better and invest more in research and development. It's a conflict of social systems.
What makes China so much more competitive than the West is it's a socialist economy where the government picks up a lot of the costs of education, of communication, transportation, and its high speed railroads that are actually run at a loss so that it can provide railway transport less expensively. Richard before mentioned the GDPs of China versus the G7. Well, the GDPs of the G7 include all of these costs of privatized natural monopolies that have been taken out of the hands of government.
All the economic rents that they're making, all the high prices and monopoly rents they're making, is counted as GDP. China doesn't do that because China provides these basic services, communications, transportation, healthcare, education, at a subsidized rate. Their GDP doesn't include this increase in financial and insurance and economic rent charges that the West has. And that's what makes these other economies, China's economy and other economies that choose to take the socialist route, so much more efficient than the West.
It's the fact that there's a conflict of economic systems that is what makes the United States designate China as the enemy. Because the United States, as Richard said, is neoliberal, it's privatization. You're seeing Mr. Musk carving up the government, getting rid of government, privatizing everything, selling off the government post office and privatizing it. Obviously mail is going to be more expensive.
We have two opposite systems. One is a system of economic war of the monopolists and the 1% that are privatizing all of the investment in productive capacity in their own hands. And the other is China that is trying to use its economic surplus to increase living standards and productivity.
DANNY HAIPHONG: Professor Wolf, I want you to follow up with this because when Michael talks about privatization, slash and burn everything, this has global ramifications in the sense that, well then what does the United States actually have to offer? We just saw Japan get into disastrous negotiations as the first country around this reciprocal tariff business. And even the Prime Minister of Japan, one of the most compliant countries to the United States, is saying they can't just take concessions. And actually, Chas Freeman, a former diplomat, said that the United States offered nothing. And so what exactly are the cards that the U.S. has to play in this trade war that seems to be imploding right now? Michael, I think you have a good foundation as to why that is. But your thought [Richard].
RICHARD WOLFF: Well, I mean, the weapon of the United States is the fact that it's a wealthy market and that the president is letting the Japanese, for example – and many others – letting them know that we are prepared to weaponize that, and whatever lip service we give to libertarianism, that's all it is. It's lip service.
We will use it when it's a convenient rationale as when public employees [are fired]: make a nonsense argument that this is an exercise in efficiency, or make an even more nonsense argument that this privatization will somehow improve the situation, out of a notion that the private is somehow always better because profit drives you to behave better than any other motivation might.
These are dying arguments. They don't apply anymore. Most of what's going on now is active government intervention, which directly violates the notions of privatization efficiency and all of the rest of it.
So you're watching a naked use of the wealth of the United States. The Japanese need to sell cars in the United States. They already produced many of them here because at earlier times, I don't know if people know this, but back in the 60s, 70s, and 80s, the United States imposed quotas on the Japanese. The way it worked was not a tariff, but you couldn't bring more than X hundred thousand Japanese vehicles to the United States in a calendar year. That was another way of protecting GM, Ford, and at that time, Chrysler.
Now it's being done by the tariff threat. Already the Japanese produce many of their cars inside the United States. I'm sure that's part of the goal of doing that. But as Michael just alluded to, American wages being what they are and the cost of business in this country being what it is – especially because so much of those costs are not socialized, not done cheaply by the government, but rather expensively by the private profit makers who run it – your cars are going to have to cost a great deal more money. And that opens up the whole danger of an inflation coming out of all of this, which is simply put behind some sort of curtain; we're supposed to discuss it as if this were not the case. And the rest of the world looks at all of this and sees it as crazy, but has to take care of its own business first, which is not to take the blow of being told that your American market is no longer going to generate the profits that you're used to, that you've been used to for 20 years. This is all being taken away from you, that's Mr. Trump's objective.
His real goal, he dare not say it, but his real goal is that producers in other countries, Japan and any other country, will be so horrified by the loss of sales in the United States, now that Americans will have to pay Uncle Sam a tariff on top of the price of the item, that they're going to lower the prices of what they sell, as a way to make the net effect of a tariff less than if it was just added to their unchanged price.
In other words, they're going to absorb the pain of compensating for the American tariff. And that makes them angry because it's clear that this advantages the United States at their expense, straight out. And they're going to yell, the private capitalists in Japan are going to the Japanese government and saying, "You're our government, we pay you taxes, do something. Make this problem go away. We can't [do this], we're making an 8% profit with a 10% tariff. We're done. We don't make any profit at all. And if that happens, we're going to lay off 50,000 workers. And if that happens, you're going to lose the next election." This is not a polite conversation.
Mr. Trump imagines that he's in a position to impose this much pain on so many countries who will just lie down, roll over, and do what they're told. We're not there anymore, it's too late for that. And the denial of that is, in the end, holding back the policy recognition.
If we had a real opposition in this country, an opposition party, they would be going to town with all of this.
Instead we have a Democratic Party which is brain-dead, which has nothing to say, which is waiting for Mr. Trump to implode, which may work. He may do so much damage and bring down so much trouble that an exhausted country will vote for the Democrats, not because they're better, but because this has proven itself to be awful. So even the people I like, Bernie Sanders or Alexandria Ocasio-Cortez…to lambaste the billionaire, I'm in favor of that and we shouldn't have them. But that's the least that could and should be said about the situation we're in.
MICHAEL HUDSON: When you talk about European exporters having a choice of, "are we going to have to lower the price of what we're selling in order to keep the U.S. market?" China is pretty immune from a lot of that, because there really isn't any U.S. competition for many of the products that China is exporting.
And in fact the real strategy at work, I think that Trump is talking about, is not in manufactured products that are interchangeable – Europe, China, and America can all make cars, maybe China does cheaper, but at least they're making the same product. But America is trying to concentrate its power in high-tech information sector monopoly and computer chips and the whole electronic revolution.
Trump thinks if we can deny China the ability to rival us technologically, to be able to make products that compete with us, then it doesn't matter what international prices or tariffs are: because whether tariffs increase prices or not, the countries that import these absolutely necessary goods, whether it's computer chips or food or whatever, they're going to have to pay whatever the supplier charges, because they're a monopoly good.
So the United States is trying to monopolize whatever sectors it can in high technology/information technology, so that it can suddenly threaten to sanction other countries – like in the 1950s after Mao's revolution in China, the United States tried to boycott food exports to China to starve it out.
Well they can't use American agriculture to starve out other countries anymore, but Trump is hoping that he can use information technology to starve out other countries to make it impossible for them to use computers or Internet transportation, if he can only get other countries to sanction them [target countries].
So all of a sudden we're, again, not in the sphere of tariffs for price competitiveness, it's tariffs to be weaponized and to destabilize the trade, especially of Europe and maybe a few other Asian countries, in order for them to boycott and sanction China so that it cannot become a rival in exporting those products that the United States wants to monopolize. So instead of the labor theory of value underlying international costs and trade, we have a rent theory of international trade: how many products can you monopolize to impose monopoly rent charges on your clients because you've blocked them from being able to produce competing products.
RICHARD WOLFF: This is very important because that would be a logical strategy if they could do it. I don't think they can do it, but yes, it's a logical strategy: if you have a monopoly on something that everybody who manufactures anything has to have, computer managed production, well then what the United States can do is siphon the surplus/profits out of everybody else in the world, let manufacturing be done in China. But they'll have to pay such enormous fees, monopoly fees to use the technology that the profit they make from their manufacturing will all be lost in the exaggerated monopoly prices they have to pay for their technological inputs.
In a way, that's the British Empire. It survived in London, because it could be the place where you went for the financing and insurance of what everybody else in the world was producing and shipping from one corner of the world to the other. They [producers and shippers] had to pay an insurance company in London, so [the insurance company] was in a position to siphon, not all of it, but a huge part of the world's wealth, so that London could be a playground for rich people in the way that New York has become.
There's this hope that maybe you could salvage [this dynamic] and it would be an "enclave America," because there isn't enough of this [siphoning] going to happen, especially now that the Chinese have demonstrated that they are very good at high-tech stuff anyway. But there will still be an ability to siphon enough to make for very wealthy suburbs of New York and Washington and Chicago and L.A. and all of that.
The rest of the country will be a mass of desperate poverty, which is a direction we seem to be going anyway. That's conceivable, although the desperate situation of Europe, which will become more desperate now, argues that they may in the end begin to realize that they have to do something to avoid being shunted into irrelevance between the Chinese on one end and the United States on the other.
DANNY HAIPHONG: I want to ask this question, gentlemen, and thanks for both of your incredibly detailed answers. Many people are observing that the Trump Administration's economic, I guess we'll call it economic war policy in the form of tariffs, has actually been a gift to not just China, but also to BRICS in terms of building momentum for its strengthening and rise. So in early April, as these tariffs were getting launched, Brazil announced that it was going to have a state visit to China with President Lula da Silva and Xi Jinping. But an anonymous diplomat said this, and I thought these comments were interesting, in response to the tariffs, this diplomat said,
"The natural path is to look for alternatives. China is one of them. I would call it a risk reduction policy referring to BRICS and boosting cooperation with them. Today, the relationship with the United States has a high level of risk. So it's a natural inclination to look for alternatives."
I'll kick it to you, Michael. Talk about how US [economic policy], I'm calling it "economic war policy" under the Trump Administration – is accelerating the strengthening of BRICS and what will be the implications of this if this is true?
MICHAEL HUDSON: It's potentially accelerating the opportunities for BRICS, but in order to make use of these opportunities, the BRICS have to actually undertake an economic balance and economic self-sufficiency that the whole legacy of the colonial period has prevented them from doing. And all of that is going to mean that they're going to have to do what the United States did in the late 19th century: have a mixed public-private economy with the public sector providing basic subsidies for agriculture, industry, and services.
It's what Germany did when it rose to industrial power, and it's what China has done simply reinventing the wheel and doing all of these policies, plus making money and credit and banking the primary public utility that is in charge of allocating resources.
It is ultimately the financial sector, the banks, that decide:
- who is going to get the credit
- for what
- and at what interest rates.
And if you leave financialization to be privatized, you're going to financialize the economy in the same way that Margaret Thatcher and Tony Blair and Ronald Reagan in the United States did to their economy. So the rest of the BRICS are going to need, I hate to say it, a socialist economic philosophy.
By the way, when the American takeoff occurred in the late 19th century, everybody called it socialist. The whole of Europe and America, almost everybody in the 1880s, the 1890s, was calling the future "socialism." There was Christian socialism, libertarian socialism, Marxian socialism, all sorts of socialism.
Everybody realized there had to be a mixed economy, there was no such thing as an "automatic adjustment process" that made equilibrium; governments are needed to play a role in allocating resources. If this is left to bankers, as the United States has done, then you let the economy be financialized.
And what do bankers lend against:
- They don't lend against the creation of new industrial investment.
- They don't lend for the creation of new infrastructure investment.
- They lend against assets already in place:
- primarily real estate, which is about 80% of bank loans in America,
- or against stocks and bonds that are already issued,
- or against any kind of collateral that they can foreclose upon.
And so, are the BRICS going to follow the neoliberal model that is insisted upon by the International Monetary Fund and the World Bank and U.S. diplomacy, Or are they going to realize that, contra Margaret Thatcher, there is an alternative, and they can follow the path that has enabled China to increase its industrial productivity and living standards so rapidly?
Well, this is where the Americans are trying to fight that with regime change.
Trump has done a favor to the world by, number one, cutting back the State Department's foreign spending, including the National Endowment for Democracy, meaning the overthrow of democratically elected leaders and putting in [US servant] regime change candidates. And Trump is now threatening in the last few days to withdraw from the International Monetary Fund and World Bank.
These were set up essentially to create a structure of world trade, and investment, and currencies, and banking that favor the United States and enable the United States to take over Britain's sterling area, to take over the franc area and to essentially break up the British and French financial empires in order to gain its financial power.
The BRICs have not explicitly developed an economic philosophy of what to do. That's what's missing. It's not simply having the money or following China's Belt and Road Initiative. You have to have an economic plan, an idea of what economic development is all about. That's been absent from the discussion so far.
DANNY HAIPHONG: Richard I would like to pose the same question to you: has Trump's trade war been a gift to BRICs? Many countries are now saying that they want to boost their relationship with the BRICs countries, especially China, now that the United States has kind of shown its hand. Your thoughts in response to Michael too.
RICHARD WOLFF: I don't want to repeat what Michael said. My short answer is yes, it has been an enormous gift, in my judgment, to the BRICs.
And I want to refer again to the Ukraine War. I think the Ukraine War was an enormous history changing gift to the BRICs. It was a test case. I want to remind everyone again: at the beginning of the Ukraine War, President Biden, State Secretary Blinken, Head of the Defense Department [LLoyd Austin], and others, predicted that Russia would fall to its knees. That's a quote. That "the ruble would collapse." That's another quote. That Russia might have a regime change in the sense that Mr. Putin would be pushed out of office.
They took a simple equation: What is the GDP of the United States in 2022? About 23, 24 trillion dollars. What is the GDP of Russia at that time? Two or three trillion dollars. Ten to one in wealth and power. And they were wrong, everything they said turned out to be different from what they thought it would be. The war didn't end. The ruble didn't collapse. Russia didn't collapse. Mr. Putin is stronger than ever. On and on and on. I'm exaggerating, but not by much.
That's about the BRICs. Russia was able to mobilize the BRICs, selling oil and gas to Russia and India, and making all kinds of other arrangements, mostly with the other BRICs countries, either to evade U.S. sanctions or to open up new markets or new sources of inputs, thereby cementing and intensifying the relationships among the BRICs countries.
Because the United States made sanctions against Russia, including excluding them from the SWIFT system, they got a tremendous boost in coming up with alternative payment systems that would make them no longer rely on the SWIFT, and therefore no longer subject to sanctions through the SWIFT system. I could go on. It was a terrible mistake, or if you like, an enormous gift accelerating the development of the BRICs.
I don't want to overdo it, the BRICs is a heterogeneous collection of countries, to say the least. Xi Jinping runs one kind of economy in one kind of way. Mr. Modi in India, runs quite a different economy. Mr. Lula in Brazil, yet again, different. The Indonesians, the most recent big country to join them, is yet again a unique situation. They have a lot of things to work out among them. But has the United States policy hampered them from doing that? Not that I can see. What I see is overwhelmingly supportive. You denounce them verbally, and I'm sure there are all kinds of maneuvers being tried.
If you take a step back at the larger picture, I would argue that it has been a gift to the BRICs, that they will get much more momentum and reach their goals much sooner because of both the Ukraine War and now the warfare against China than they otherwise would have.
DANNY HAIPHONG: Michael, I want to get you back in here.
MICHAEL HUDSON: Well, we've just covered the waterfront. That's it!
DANNY HAIPHONG: Well, I have one final question for you gentlemen, because all of us on this channel, we've talked about it with Richard, talked about it with you, Michael: this U.S. Empire [that's] in decline.
I want to close with this, because I think what we're seeing with the Trump Administration, and we saw it in a different form under Biden's Administration, we're seeing "economic warfare policy as an extension of foreign policy" is incredibly chaotic and has all kinds of contradictions, that are, I believe, difficult to understand at times.
So maybe, Professor Hudson, you could start with how do we understand the U.S. Empire in decline from what we have been discussing here on this channel: the tariffs, the sanctions, these methods of economic war which appear to be, on the one hand, an aggressive form of destroying other nations and their ability to develop, but on the other hand, also having a backfiring effect on the United States. How do you see this? What is your overall analysis of this development?
MICHAEL HUDSON: Well, I think Richard and I have just answered that question.
The United States is catalyzing the decline by bringing about the exact opposite of what it's intended to do. Already between 2020 and 2022, you had the Rand Institute making these reports that the American military and the National Security Agency, Sullivan and Blinken, pushed Biden saying, "yes, we can go to war with Russia. It's so poor and so delicate that [we want to] make it expend its money on military fighting in Ukraine.
We don't have to win and beat Russia. The idea is not to beat Russia. [We] don't want to win. [We] want the war to go on and on and on to be a steady drain on Russia. And pretty soon, the Russian population is going to rebel and say, "we want to buy consumer goods again. We don't want life to go back to what it was in Soviet times. We're going to overthrow Putin. And what we need is another Boris Yeltsin who does what the Americans want. And then they won't attack us anymore. And we can be friendly and Russia will simply fall apart."
You asked me to explain their strategy and it feels silly trying to explain their strategy.
It's so silly that one thinks it can't be real, but it really is real. It's bizarrely unrealistic.
And yet that's what happens when you actually make one narrative to give to the people as your cover story, for what you're doing to try to hurt other countries and destroy the economy, but then you actually believe the cover story yourself. [The US] believes that [it's] a democracy and other countries are autocracies, when it's the other way around.
[They] actually believe that they can somehow bleed Russia and the economy will fall apart. As if Russia says, "OK, we really don't care, move NATO right up to our borders." As if Russia is not going to fight no matter what. It's a price inelastic decision.
The belief in how the international economy works is just as silly as the economic theories that are taught in universities to economic students.
RICHARD WOLFF: Let me add something to what I think is going on.
I think Mr. Trump's "herky-jerkiness" is in part explained because, to the extent that he is a real president, he's trying to do two things at the same time and they clash.
The first thing he's trying to do is to slow down and, in his fantasy, reverse the decline of the Empire. He declaims against the Forever Wars. Let's be clear. The United States lost the war in Vietnam, it's the Communist Party of Vietnam that runs that country. They were the adversary. It lost the war in Afghanistan. The adversary there was the Taliban and they run that country now. They wanted to dramatically change the organization of Iraq.
They failed at doing that. And they are now failing in the War in Ukraine, if it was a war to prevent Russia from taking over large parts of eastern Ukraine. Okay, it's crystal clear what's going on here, we're losing repeatedly over a 35-year period or longer. Also, I think the rise of China is now unmistakable, and the relative shrinkage of the United States that goes with it is likewise no longer hidden or no longer possible [to hide]. So he's trying to slow them down with the sanctions, with the tariffs, with all of that.
But here's the second thing he's trying to do, very typical of declining empires and it typically makes the decline worse. When empires decline, the people who are rich and powerful inside those empires naturally use their positions of wealth and power to try to hold on to the luxuries, to the wealth and power, that they have been able to accumulate in the empire.
This means that the costs, the experience of the decline, is offloaded from the rich and powerful onto everybody else. Mr. Trump is trying to do, and is required to do, both of these things: 1. slow or reverse the empire's decline, and whether or not he's successful there, 2. make sure that the people at the top hold on to theirs. If the 10% richest people own 80% of the stock market, then his policy has to be focused on the stock market to keep them happy, even if that requires doing things that are not good for a declining empire.
Look at his on-again/off-again attempt to fire Mr. Powell at the Federal Reserve; to get the lower interest rates which the stock market wants, even though the risk of an inflation from the tariffs would argue against a falling interest rate.
These are contradictions and they're not peculiar to Mr. Trump, it's that he's caught quite traditionally in the dilemma of trying to reverse a decline, which is not easy to do, and trying to hold on to the wealth of the elite, which is becoming more and more difficult as the decline sets in.
Mr. Trump is in a very difficult place. The best word and adjective I can think of to capture what he's doing: it's the behavior, the policy of desperation.
DANNY HAIPHONG: Michael, any final words?
MICHAEL HUDSON: I agree with what. I think we've said it.
DANNY HAIPHONG: All right, everybody. Well, this was a great stream. I think we covered a lot of ground. I think we are moving into what is, of course, going to be escalatory. It seems like the United States Empire, regardless of Trump or anyone else, doesn't have any other cards. So we're going to have to keep a deep track on this, close track on this, especially the geopolitical and economic ramifications and their connections. I will definitely have you two back on again to do so.
But without further ado, everybody, hit the like button. That helps boost the stream and YouTube's algorithm. And it helps Richard's and Michael's message get out after we end here. You can go to the video description and find Professor Wolf's and Professor Hudson's websites below where you can find all their books and other resources. You can also support this channel there too, from Patreon, Substack and much more. So tomorrow night I'll be back at 9:00 pm Eastern with Brian Berletic. So be on the lookout for that. Gentlemen, anything you want to say before we go?
MICHAEL HUDSON: You'll be transcribing this, right?
DANNY HAIPHONG: Yes, I will.
MICHAEL HUDSON: Good, that's the key.
MICHAEL HUDSON: We've said an awful lot and moved very fast.
DANNY HAIPHONG: Yeah, of course. Well, everyone, take good care. Hit the like button as you leave here and have a good rest of your day. Bye-bye.
Photo by Valeria Nikitina on Unsplash