Before World War II, the Maginot Line was a source of pride for the French. Until German panzers maneuvered around the trenches in a matter of hours. In Kissinger’s own words, only someone who understands the spirit of the times can resist a culture that likes to go around its opponents: like Trump.
The world economy currently has the image of an army forced to fight on two fronts:
1- China shock: Deflation spread by a country that cannot melt its huge excess capacity on its own.
2- Trump shock: Supply chains forced to reshape by tariffs imposed by a country that cannot close its huge trade deficit on its own.
China, with its weak domestic consumption and population that cannot get rich, has become a dragon that spews its huge capacity to the world. Double-digit growth rates are now a thing of the past that remained at the beginning of the century. After the pandemic, China is content to grow around 5 percent. Due to excess capacity, producer prices (PPI) have been in a deflation spiral for more than two years.
The antidote to such potential is actually self-absorption. China needs to be able to consume what it produces. In the early 2000s, per capita income, which was at three-digit levels, rose to 12 thousand US dollars in 2021. The target during the European Union membership process was to reach over 20 thousand dollars, and the increasing trend continues. The wealth of developed countries has reached 60 thousand dollars with a sharp upward trend. However, China has been stuck at 12 thousand dollars with the pandemic. In the saturated market USA, we are talking about an average increase of 4.7 percent since the 90s in a population of 340 million. The current data is 3.1 percent again as of February. However, China's retail market is skidding with its billion-strong population. Sales are weak in low single digits. The current data is 3.7 percent. The non-existent private consumption results in insufficient domestic demand and cannot find the power to move prices. Consumer prices (CPI) are also in deflation!
China is trying to ease monetary conditions as much as it can to keep the economy afloat. The 10-year government bond yield is at 1.6 percent. Chinese interest rates, which have sunk to historical lows, define the global conjuncture as ‘recessionist’ and ‘deflationist’. Such a capacity that it is a dragon that not only spews goods but also deflation into the world in flames. Switzerland has lowered its policy rate to zero by 25 basis points. Perhaps negative interest rates will be on the agenda again. The European Central Bank is on alert against the deflation fire spreading from China.
At this very point, Trump is trying to make the sleeping American eagle fly to the top again. He cut off free support to institutions and structures that cannot keep up with the times. Trump is taking a clear stance against those who try to earn without producing. Panic has begun in Geneva with the cutting of USAID; perhaps a late panic. The world no longer revolves around the dry food indexes developed by FAO for American soft power.
The concept of ‘Third World Country’ has been replaced by the ‘Global South’. America is losing its ‘World’s Supermarket’ feature, offering all kinds of food in its shelves; this year, the agricultural foreign trade deficit is expected to reach 42 billion dollars. Just as the German economy began to spend consecutive years in recession for the first time after World War II, US agriculture has started to have foreign deficits for the first time in consecutive years. It is becoming clear that the artificial intelligence of ‘Silicon Valley’ has not yet reached the intelligence level that would satisfy real intelligence.
The average age of farmers in the US after World War II was 48. Today, the 46-year-old Brazilian farmer is coming against the aging 58-year-old American farmer with the power of ‘Generation Z’; a generation that is naturally environmentally sensitive, spontaneously uses high technology and drones. America has long lost its leadership to Brazil in key products such as soy, cotton and chicken. In the ‘Global South’ line, in the ‘Road and Belt’ project, the main route for Brazilian products is of course China. In heavy industry and basic metal branches, the US is looking for its old production power. Although some circles interpret the industrial past as a nostalgic longing, Trump is wary of making the US’s own capacity dependent on foreign countries for no reason. Trump’s ‘again’ approach finds its counterpart in the vast plains of the Midwest and the productive industrial cities of the North. The election won in 2024 after 2016 shows that some social dynamics bear traces beyond nostalgic longings and retro lifestyle fashion.
Trump is trying to revive the American people who love racing with his call for ‘great again’. He believes that the way to do this is through more production. He wants to produce more and sell more goods to the world again. He always raises his hand high with his unique bargaining style. Trump is after turning the world into a free market for US goods. The automobile is a good example of Trump’s argument. The freedom provided by the EU for US cars is not compatible with the principle of reciprocity. Trump says that if Europe sells cars to us, we should be able to sell to it as well. He believes that the playing field is not level, it is tilted against the US and has become rigged. In order for the field to be leveled, customs duties need to be equalized.
When Trump raised his own wall, Vietnam quickly backed down and took the lead in lifting the duties. Then, many country delegations, especially Thailand and Japan, hit the road for bargaining. Countries lined up at the White House. Indeed, this interaction resulted in Trump’s decision to postpone. Trump is not trying to close down the US. It aims to turn the world into a free trade zone overflowing with US goods. It wants to produce more and sell more.
In another world, the Great Wall of China was a defense of physical power. Its stability had a leverage effect. A culture that has been accustomed to getting around its enemies by relying on the wall for thousands of years is trying to continue its tradition with the ‘Road and Belt’ project today. In today’s abstract world of commodities, the tax wall that Trump has built is ironically a candidate to tear down all walls. The Great Wall of China is fixed to a single geographical location, while Trump’s taxes are flexible barriers that are being pulled around each country one by one. He is reshaping supply chains and trade routes. He is trying to surround China from behind. It is not difficult to predict that taxes will increase and the global economy will slow down in a short time. Restructuring requires uncertainties and difficult choices. Then, it is understood that with the return of US production, more American goods will be spilled onto world markets. Hard times are coming for China. The real test, the real race is starting now. An understanding that is thousands of years old is being put to the test in modern times.
