Source: Xinhua

The announcements of reciprocal tariffs by the United States has caused quite a stir throughout the world.

International president of the Schiller Institute, a German-based political and economic think tank and commentator on China Global Television Network, Helga Zepp-LaRouche says the recent developments on the global trading scene, courtesy of US president Donald Trump is “palpable.”

Many countries have imposed counter tariffs while some are hopeful for negotiations with the Trump administration.

Zepp-LaRouche says that Trump intends a legitimate goal for the American economy, but he seems to be surrounded by economic advisers who reflect a monetarist styled approach rather than sound economic thinking.

White House senior counsellor for Trade and Manufacturing, Peter Navarro, has calculated that the tariffs will bring about $600 billion into the U.S. budget annually.

However, Zepp-LaRouche says the US has not considered the consequences of a trade war potentially triggered by this unilateral action.

The German think tank president questioned whether the incompetent imposition of the “America first” policy would lead to the re-industrialization of the US or whether it would lead to the crash of the international financial system resulting from a chain reaction of bankruptcies.

A White House-issued fact sheet, provides the arguments for the measures stating that countries including China, Germany, Japan and South Korea have pursued policies that suppress the domestic consumption power of their own citizens to artificially boost the competitiveness of their export products.

It further states that such policies include “regressive tax systems, low or unenforced penalties for environmental degradation and policies intended to suppress worker wages relative to productivity.”

Zepp-LaRouche says that this statement lumps together very different cases.

While China has made remarkable progress for its people and is becoming the engine of development for the Global South, the situation for Germany and Europe is quite different.

The introduction of the Eurozone in 1999 was criticized heavily at the time because it integrated very differently developed economies into one currency zone, which was not an “optimal currency zone.”

While a series of reforms were implemented in the early 2000s, it suppressed domestic wages, which increased the competitiveness of the German economy at the expense of the other European countries, since they could not devalue their currencies anymore.

As a result, Germany became the “export world champion” for a while, but many factors overshadowed the subsequent developments, such as geopolitical events.

Zepp-LaRouche says hypothetically, the Trump tariffs could be a wake-up call for Germany and the rest of Europe to put their own house in order.

The German think tank president adds that the Trump administration’s intention is obviously to undo the de-industrialization which took place in the US under his predecessors, who outsourced American industrial capacities to so-called cheap labor markets.

Consequently, the US has almost no small and medium-size enterprises, and its productive capacities are largely reduced to the military.

Zepp-LaRouche notes the sudden shift from an economic model based on the shareholder value of Wall Street and its maximization of profit, to a more durable industrial strength entails the dangers of disruptions and bankruptcies, given the total US national debt of $37 trillion and a total outstanding derivative bubble of $2 quadrillion.

Zepp-LaRouche says the only solution to remedy the economic crisis in the US and the world, is a return to sound physical economy principles: investment in technological progress, and innovation in general.

She says to achieve this, they would need to revitalise the education systems of the US and European nations to serve this orientation, and incentives would have to be given to train a highly skilled labor force for this purpose.

Zepp-LaRouche says the biggest risk of Trump’s unilateral tariff move is a fractured global economy, where competing trade blocs spark a trade war—resulting in a lose-lose situation for all.

She says the alternative is global cooperation through joint investments in key sectors like infrastructure, health, and education across continents, funded by productive credit to support shared development

Zepp-LaRouche says trade imbalances could be resolved by expanding global growth and ensuring a fair division of labour based on each economy’s strengths—putting “humanity first” for a win-win outcome.

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