Everyone knows that the new US president’s approach has nothing to do with fairness, even though he likes to cite it to agitate against other countries that currently fare better than the United States in some area. “Strategically,” the blusterer from “God’s own country” relies primarily on the law of the jungle.
The un-free market economy
The USA under Donald Trump only represents economic liberalism as long as it benefits them – otherwise they regulate, manipulate and threaten vigorously.
It may happen that European countries allow themselves to be taken for a ride by particularly sophisticated economic strategies. With Donald Trump, however, national egoism comes across as conceivably crude and quite blatant. Everyone knows that the new US president’s approach has nothing to do with fairness, even though he likes to cite it to agitate against other countries that currently fare better than the United States in some area. “Strategically,” the blusterer from “God’s own country” relies primarily on the law of the jungle. Economic warriors have always relied on flooding the markets of other states with cheap imports on the one hand and sealing off their own market on the other. There are examples of this from colonial history, which literally ended in disaster for economically competitive countries. However, it is no longer so easy to get China and other emerging nations down today.
by Wolfgang Sachsenröder
[This article posted on 2/6/2025 is translated from the German on the Internet, https://www.manova.news/artikel/die-unfreie-marktwirtschaft.]
“Fair is foul, and foul is fair.” This is how the three witches in Shakespeare’s drama Macbeth interpret the often-shifting distinctions between good and evil or beautiful and ugly. Whether something is fair often enough depends on the point of view and interests of the observer, and a referee’s foul call can divide an entire stadium and the TV viewers in seconds. In politics, there is often a lack of fairness towards competitors, whether they are in the opposition or in one’s own party. Adenauer’s memorable saying about internal competition is unforgettable: his escalation of the word “enemy” is: “enemy, mortal enemy, party friend.”
President Trump and the American trade deficit
President Donald Trump, who has just been re-elected, is being watched with a mixture of skepticism and fear of the worst, especially in Europe and Asia. He is extremely outspoken about international trade relations and aggressively clear about what he thinks of Germany’s and especially China’s trade surpluses. He says that China’s trade surplus of almost one trillion US dollars is unfair and that all he wants for the USA is fairness. In 2024, the Chinese surplus in the US reached $525 billion, more than half of the total US deficit. Germany is in fourth place with $76 billion in 2024, Thailand in twelfth. But his economy minister explains that a large part of this comes from American companies that in turn transfer their profits back home.
Trump has long complained that American jobs are disappearing while new ones are being created in China or preserved in Germany. He is currently demanding that factories be relocated to the US or that tariffs be paid.
What he fails to mention in such simplistic political statements are the many causes of economic imbalances, which have probably always existed in world trade.
How the ancient Romans paid for their silk imports from China is no longer known, possibly in gold or silver. For centuries, the two precious metals were the monetary turbochargers of the world economy and global trade. When the Spanish conquistadors conquered Mexico and present-day Bolivia in the mid-16th century, they began exploiting the silver mines there. By 1600, 25,000 tons of silver had arrived in Spain from there, stimulating the economy and financing the wars, all at the great expense of the Mexicans and Bolivians who had to mine it.
At about the same time, the Mughal Empire in India was at the peak of its expansion and economic power. With almost 30 percent of the world’s industrial production at the beginning of the 18th century, with textiles, shipbuilding, steel goods and agriculture, India attracted traders from the Netherlands and Great Britain. In the second half of the century, India’s wealth became its undoing. The country was gradually conquered by the private army of the British East India Company and, after an uprising in 1858, taken over by the government in London as a colony for a total of 89 years.
Two market shifts in particular stand out in the unfair history of British colonialism. One is the displacement of the Indian cotton industry, whose products, including calico, were of the highest quality and design and in demand in Europe. The first industrial revolution, with steam power and ever more efficient spinning machines, enabled English companies to conquer the world market with Indian cotton. When more cotton was produced much more cheaply with African slaves on the plantations of the New World, India had finally lost its market.
The second example is tea, which became the British national drink in the mid-18th century. It was purchased in China, but because British goods were unattractive there, it had to be paid for in silver. In 1848, the East India Company therefore sent the botanist Robert Fortune to China to break the tea monopoly. Fortune smuggled thousands of seeds and tea plants to India, established the tea industry there and showed how industrial espionage can radically change markets and trade flows. Incidentally, the United Kingdom flooded China with Indian opium to finance further imports. The two major economic centers in Asia were thus eliminated.
Similarly, the markets for tobacco and sugar changed, once in favor of the New World and then against it with cheap beet sugar. Under the free trade flag, the naval powers of Europe also asserted their dominance militarily.
In the 19th century, Great Britain was considered the “workbench of the world” and a leading nation in both technology and science. When the German Empire, unified under Bismarck, began to develop its heavy industry with the help of reparations from the Franco-Prussian War of 1870/71, this was considered extremely unfair by competitors on the other side of the channel. As is well known, this was the birth of the “Made in Germany” label, which was intended as a warning and then quickly mutated into a seal of quality. At the end of the 19th and in the 20th century, the USA joined the fray as an export nation and achieved huge trade surpluses in some cases.
We are currently observing the latest tectonic shift in trade flows in favor of Asia. China has now become the “workbench of the world” and an economic miracle has emerged from the communist planned economy.
Like Japan 60 years earlier and far beyond, Chinese industry now not only produces every conceivable good, but also top-quality technology at unbeatable prices. A glance at the online offer of Aliexpress.com destroys all prejudices still circulating. How fair that is, “fair is foul and foul is fair”, is of course in the eye of the beholder or politician.
In any case, China cannot be held responsible for all the lost jobs in Europe and the United States. The automotive industry is more a prime example of resting on past successes without adequate planning for the future. The German carmakers, who have been selling to China at a considerable profit for decades or have been able to produce in China right from the start, now only see the rear lights of Chinese electric cars.
The future of trade balances
Large trade surpluses are not without danger. They can fuel inflation, drive up interest rates or have an undesirable impact on the exchange rates of one’s own currency. Above all, however, they provoke protectionism among partners with trade deficits, as President Trump has unmistakably communicated in Davos. He offers the lowest corporate taxes in the world to companies that bring industrial jobs to the United States. He leaves unmentioned the obvious question of why these jobs have migrated in the first place.
One explanation would be that the necessary technical training, qualifications and skills for increasingly demanding manufacturing jobs are more likely to be available elsewhere. There are regional differences in Germany, too. The historical cuckoo clock industry in Baden-Württemberg has given rise to different qualifications than those in fishing and shipbuilding in the far north. Adapting to technological developments with changing demands on employees takes time and the right education and training.
Whether Trump’s warning shots will persuade many companies to relocate to the US will ultimately be decided by market forces. And whether they could lead to a reasonably consensual world trade policy is even more in the stars. Besides China, Germany is also directly in the president’s line of fire and already has enough other construction sites in its internal economic policy.
As the few historical examples have shown, world trade was and is anything but a charitable event. National interests dominate and extreme differences can quickly escalate into military conflict.
This should urge for the utmost caution, especially with regard to the potential for conflict between the US and China.
Wolfgang Sachsenröder, born in 1943, has worked as a political consultant in Asia, the Middle East and Southeast Europe and has been living in Singapore again since 2008. He is particularly interested in Southeast Asia, where he has been observing and commenting on politics for a total of 25 years. In his latest book, he describes the history of the opium trade and its political consequences to this day: “From Opium to Amphetamines – The Nine Lives of the Narcotics Industry in Southeast Asia”, published by WorldScientific in April. In his blog partyforumseasia.org, he highlights political developments in the region.