Economics Without The B.S.**:
[** Double entendre intended.]
Dr Vivian Balakrishnan, the Singapore Minister for Foreign Affairs delivered his Committee of Supply speech in Parliament on 3 Mar 2025. In his speech, he spoke about how Singapore should navigate a more uncertain and volatile world, characterised by rising geopolitical rivalries, protectionism, and weakened international norms that have reshaped the global landscape. [Note the speech was given one month before President Trump's "Liberation Day".]
So what are the purposes of Trump's tariffs? Do you want to waste time talking about the economics of it? It should be very apparent that the tariffs become one more tool for his transactional way of viewing business.
What's wrong with that since it seems to be working? Well, it's a pure power play. The rules of the game have been thrown out.
So it is like what the foreign minister of Singapore said, when the big powers exercise their might, the smaller players have to stay on the sidelines and wait for things to settle out. The American system of international commerce after WWII differed from previous systems whereby trade was conducted for mutual benefit and not just with the colonizing attitudes that preceded it under the British system. But this system of commerce exercised by the United States also reinforced our national security strategy that was being pursued against communist expansion, by forming alliances based on common interests in commerce. But that was the old system.
We have always conducted our commerce and national security strategies with “carrots and sticks”; “carrots” being incentives to encourage the behavior we desired, and “sticks” being the disincentives, or punishment by exercising our power. Where under the old system it relied mostly on “carrots”, Trump is more inclined to use “sticks”. Trump thinks that we have conducted our policies with too much reliance on using incentives, and this has created "free riders" as allies who would not take full responsibilities in a shared leadership position.
Trump has continually violated our old alliances. The way he exercises “America First” is a beggar thy neighbor attitude; and, that has weakened our alliances. It is weakening our alliances at a time when the world is more unstable – the Middle East, still important for crude oil; the Southeast Asia arena, which has become since the late 1990s, a hub for low cost manufacturing which is less suited for the more advanced economies in the North American bloc as well as the European Union. The Southeast Asia manufacturing hub has been integrated into the more advanced economies. But Trump thinks these smaller nations, and China, are taking advantage of us... us being the Super Power???
This is what Trump’s “America First” strategy is disrupting. It not only disrupts commerce, but also affects the way we have conducted our national security strategy. And he really hasn’t left us – or our former allies or adversaries – with any clear vision of where he is going because of his inconsistent manner of handling affairs in a transactional manner.
So last week he was threatening India. Today we find him threatening Canada with tariffs because they may recognize a Palestinian state. Tomorrow it will be somebody else.
The problem in his power play, like the foreign minister of Singapore said, is that there is another power, China. Trump in being transactional has left voids when he retreats from a former American presence in the international community. And when you leave a power void, somebody will fill it.
And this is related to the economic growth argument I make: that we have a GDP that is $30 trillion but should be $40 to $50 trillion hadwe had our normal historic growth rates, where we have been at least 30% below that over the past 25 years. That "starve the beast" mentality that contributes to our failure to have government policies that address the growing needs of our society -- that constrain investment -- has resulted in the GDP we have today. And that doesn't raise the revenues the government needs to finance our national security strategy of the past, which was an involvement all over the world; one that we financed with our good growth. And we not only lose the government revenues when we have a GDP of $30 trillion instead of $40 or $50 trillion, but we lose the extra $10 to $20 trillion of economic activity in our private sector that addresses the wants and needs our people have, not to mention the jobs that go vacant.
Dr Vivian Balakrishnan, the Singapore Minister for Foreign Affairs delivered his Committee of Supply speech in Parliament on 3 Mar 2025. In his speech, he spoke about how Singapore should navigate a more uncertain and volatile world, characterised by rising geopolitical rivalries, protectionism, and weakened international norms that have reshaped the global landscape.
So what are the purposes of Trump's tariffs? Do you want to waste time talking about the economics of it? It should be very apparent that the tariffs become one more tool for his transactional way of viewing business.
What's wrong with that since it seems to be working? Well, it's a pure power play. The rules of the game have been thrown out.
So it is like what the foreign minister of Singapore said, when the big powers exercise their might, the smaller players have to stay on the sidelines and wait for things to settle out. The American system of international commerce after WWII differed from previous systems whereby trade was conducted for mutual benefit and not just with the colonizing attitudes that preceded it under the British system. But this system of commerce exercised by the United States also reinforced our national security strategy that was being pursued against communist expansion, by forming alliances based on common interests in commerce. But that was the old system.
We have always conducted our commerce and national security strategies with “carrots and sticks”; “carrots” being incentives to encourage the behavior we desired, and “sticks” being the disincentives, or punishment by exercising our power. Where under the old system it relied mostly on “carrots”, Trump is more inclined to use “sticks”. Trump thinks that we have conducted our policies with too much reliance on using incentives, and this has created "free riders" as allies who would not take full responsibilities in a shared leadership position.
Trump has continually violated our old alliances. The way he exercises “America First” is a beggar thy neighbor attitude; and, that has weakened our alliances. It is weakening our alliances at a time when the world is more unstable – the Middle East, still important for crude oil; the Southeast Asia arena, which has become since the late 1990s, a hub for low cost manufacturing which is less suited for the more advanced economies in the North American bloc as well as the European Union. The Southeast Asia manufacturing hub has been integrated into the more advanced economies. But Trump thinks these smaller nations, and China, are taking advantage of us... us being the Super Power???
This is what Trump’s “America First” strategy is disrupting. It not only disrupts commerce, but also affects the way we have conducted our national security strategy. And he really hasn’t left us – or our former allies or adversaries – with any clear vision of where he is going because of his inconsistent manner of handling affairs in a transactional manner.
So last week he was threatening India. Today we find him threatening Canada with tariffs because they may recognize a Palestinian state. Tomorrow it will be somebody else.
The problem in his power play, like the foreign minister of Singapore said, is that there is another power, China. Trump in being transactional has left voids when he retreats from a former American presence in the international community. And when you leave a power void, somebody will fill it.
And this is related to the economic growth argument I make: that we have a GDP that is $30 trillion but should be $40 to $50 trillion hadwe had our normal historic growth rates, where we have been at least 30% below that over the past 25 years. That "starve the beast" mentality that contributes to our failure to have government policies that address the growing needs of our society -- that constrain investment -- has resulted in the GDP we have today. And that doesn't raise the revenues the government needs to finance our national security strategy of the past, which was an involvement all over the world; one that we financed with our good growth. And we not only lose the government revenues when we have a GDP of $30 trillion instead of $40 or $50 trillion, but we lose the extra $10 to $20 trillion of economic activity in our private sector that addresses the wants and needs our people have, not to mention the jobs that go vacant.
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