I already wrote in the news mega that the situation is completely unpredictable lol.

It really depends on how seriously you take Trump’s unrealistic words, and whether the bourgeois ruling class has plans of their own with Trump’s policies.

Since we can’t read their minds, we can only entertain the question here with some educated guesses:

First, we need to ask: what is the principal contradiction facing the US empire today?

It is the irreconcilable opposition between industrial and finance capital. Wall Street needs dollar hegemony to rule the world, while the dollar hegemony also led to the long term deindustrialization of the US itself, the stagnation and loss of real wage increase, the transformation of proletarian working class into indebted consumers with increasing burden of mortgage, healthcare and consumer debts that are unlikely to be repaid without wage increase.

This inevitably led to the rise of the grassroots Bernie Sanders movement, and in parallel, Trump’s MAGA movement, that sought to challenge the neoliberal status quo represented by the establishment factions of their respective parties.

So, to reduce the friction with the working class, the US cannot continue to run a persistent trade deficit, but fixing this with re-industrialization would also oppose the interests of the Wall Street finance capital and challenge the global hegemony of the dollar itself.

How can such a contradiction be resolved? Well, resolved is maybe unlikely at a fundamental level, but there are ways to delay and even shift the contradiction elsewhere, and that pertains to how the US chooses to export its dollars overseas.

Since the end of Bretton Woods in 1971, the US has been running a permanent trade deficit to export its dollars to other countries. How do you retain dollar hegemony while reducing trade deficit? You would have to shift the dollar export from trade deficit into foreign direct investments - this allows the dollar to continue to be exported, while reducing trade deficit will allow some limited form of re-industrialization - at least adequate to keep the working class from erupting in mass anger.

But many countries have capital controls precisely to prevent foreign capital from flooding their countries, with some countries like China and India having long-term capital control in place.

Back in 2018, Trump started the unexpected trade war with China by sanctioning Chinese telecommunication companies and with tariffs. But nobody maybe other than Trump believes that imposing such tariffs can lead to the re-industrialization of America.

Instead, it was likely to probe China’s red line, see how much they would tolerate, and how they would react under such restrictions.

Enter Biden 2021-2024: a few things changed the global situation dramatically apart from Covid.

First, the Ukraine war has decimated European economy growth, such that they can take up the role a major consumer in the event of a trade war with China.

Second, the inflation in the US led to the Fed hiking rates (fastest since Volcker shock) that rapidly drew international capital away from the rest of the world back to the US. As a result, countries in the Global South began to run into dollar liquidity crisis and rising interest payments.

Third, the huge volume of US treasuries began to mature starting in 2023, pumping out nearly $1 trillion dollars in interest payment alone a year - most of this fresh money creation went into the stocks and bonds, which is why you see S&P500 doubling in spite of an inflationary environment. Now, these money needs to get somewhere, and foreign sector would be the next target.

All these three conditions have created an opening for countries to open up their capital controls in order to receive dollars to save their economy. In fact, China has been doing so since the September 24 policy following the Fed lowering its interest rate for the first time in two years.

Finally, Trump’s imposition of tariffs on the entire world can only lead to a plummeting of US consumption due to an anticipation of inflation, and threatens to wipe out the export industries in the Global South (Europe and Japan no longer have the capacity to consume, while China still wants to run a huge trade surplus and is in a consumption slump itself so unlikely to absorb the loss of demands from US consumers).

The end result? The US goes into recession (if Trump/Musk does the budget cuts), IMF bailouts and privatization of the assets in the Global South whose economies could not sustain such an economic shock, and as such Wall Street not only gets to export dollars to the rest of the world, at the same time the US can also reduce its trade deficits. This will complete the transition of exporting dollar capital from running permanent trade deficit into foreign direct investment becoming a major channel of how dollar flows to the rest of the world.

Is this a permanently viable strategy? Unlikely, as it also comes with its own contradictions, but finance capital, like a parasite, simply needs to jump from a dying host to a new host to delay its own demise.