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Here's How Trump's Reckless 'America First' Policies Could Be Setting Up US Consumers for a Nasty Shock

October 12, 2018 in Blogs

By Marshall Auerback, Independent Media Institute

The backdrop of Trump’s expanding trade war with China hangs over us.

Glance through the business section of any major media outlet, and there is apparently good news to start the autumn: The Bureau of Labor’s September numbers showed measured unemployment hitting a multi-decade low of 3.7 percent. The U.S. secured a revised trade agreement with Canada and Mexico. And wage growth, while rising, still remains a relatively moderate 2.8 percent at an annualized rate. Inflation remains comparatively muted for now, with an annualized one-month gain of 1.4 percent. It seems like the U.S. is experiencing the proverbial “Goldilocks” economy. What could possibly go wrong?

For one thing, there remains the backdrop of America’s expanding trade war with Beijing. On the face of it, the successful conclusion of the new and improved NAFTA 2.0 (henceforth rechristened as the United States-Mexico-Canada Agreement, or USMCA for short) appears to have halted the political tide toward protectionism. Yet paradoxically, it might actually do the opposite: USMCA is designed to give greater weight to regional trade relationships at the expense of global ones, especially the colossal supply chain that has emanated from China. As trade becomes increasingly regionalized, as global supply chains are disrupted, that generally raises the cost of everything, for everyone.

Why is that? Because since the fall of the Soviet Union (and the corresponding end of the Cold War), the expansion of globalization has largely imparted a deflationary bias to the global economy via “synthetic immigration.” If that term is foreign to you, here’s what it means: a mispriced dollar/yuan exchange rate made the price of labor in China so low for U.S. corporations that the price of American labor looked like a luxury item, and they moved their manufacturing operations to China. China knowingly undervalued its currency to get this process rolling, and over time, it produced a big economic contraction in the U.S. and world economy, the extent of which is literally papered over or hidden by a huge number of bubbles in the world financial markets. Advances in capital mobility, globalization, …read more


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