Trade Wars and Consequences

The Trump administration is forfeiting a great US asset. The US has long been at the center of world trade, and the US dollar has become the currency-of-currencies, the numeraire. That fact has worked in our national favor in countless ways.

Now, some of my readers might say that it is "about time the US lose this privileged position." But of course the Trumpets won't say that. They're the "America First" administration after all. Yet their actions will remove American firstness in one very important respect.

How? Well, one object of Chinese policy for a long time has been to rebuild the famed "Silk Road," the trade route leading from China through the Middle East, to Ottoman lands and northeastern Africa. Marco Polo tapped into it when he wasn't too busy inventing swimming pool games.

China wants to revive that route, and wants it emphatically to include all of Europe this time, not just for an occasional traveler, and ideally it would want its own currency to be the defining one among the nations of the route. A new numeraire.

The US government is now advancing that cause by generating simultaneous trade wars with both China AND the EU. This is very likely to improve their trade relations with each other. And with the nations in between them. The whole vast stretch of the globe known as Eurasia, with the possible exception of Russia and the other former Soviet republics, could in principle become a single trade union. (Why wouldn't it include the former USSR? Because the Silk Road Nations are all much more dubious of Putin and his allies than the POTUS now seems to be.)

In this scenario, it isn't just Russia but the US which could find itself very much on the out. The biggest fish in the smaller pond of the Americas, but very much cut down to size.

Further, if Trump has eight years in office than the ninth year may be rather late for anyone seeking to reverse this "Silk Road first" policy.

Just thinking aloud here folks.

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