from The Conservative Treehouse:
Go ahead and make some money. Elevator Speech: “MAGAnomics is essentially ‘inverse BRICS.’”
Everyone who is a pragmatic critical thinker knows that China will: subsidize their targeted sectors and devalue their currency to lower the tariff impact of exports to the USA. Beijing controls the banks, and they did this before.
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As a result, the dollar value increases and imports cost less.
The Chinese imports then enter the USA at a lower price consistent with Beijing’s cost estimate as a tariff offset. Chinese actuaries are really good at this. China takes in a lower price but retains access to the USA market. That’s just how it works. The importers pay the tariff with a lowered price with a higher valued dollar. Essentially stasis is achieved in a stand-off.
Then…..
EU industrial products to Chinese manufacturing plants start to contract due to China’s aggressive cost cutting initiatives. The EU gets angry about the impact to their economy and looks for alternatives. The EU then follows the same path as China and devalues their central bank currency; further pressuring the dollar to an upward price.
Exports to the EU are now more expensive, but imports from the EU to the USA are now cheaper. Again, the EU goal is stasis.
Both scenarios create cheaper USA imports despite the Trump tariffs. However, on the EU side President Trump then ends the Marshal plan and executes a program of “tariff reciprocity” against the EU. More frustration and gritted teeth by Brussels.
[NOTE: Avoiding this squeeze also explains why U.K Prime Minister Starmer was all snuggly to Trump at Trump Tower a few weeks ago – he’s hedging.]
Exports from the USA ultimately cost more because the dollar is stronger against EU and Asia currencies. However, a stronger dollar is an offset to BRICS leverage and allows Trump to play economic chess.
President Trump then uses part of the tariff income to underwrite agriculture exports, but… here we have fun… if agriculture exports are impacted, domestic foodstuffs drop in price.
Into this dynamic Trump turns to Mexico. We have a strong dollar, all those Western Union transfers to Mexico are more valuable. Leverage is created. The economic situation then overlays the secure border dynamic and if Mexico wants to retain trade access within the USMCA agreement, the part that no one ever discusses comes into play.
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