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Trump's Steel Tariffs An Economic Preparation for "Real" War?

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Trump's steel tariffs have been dominating the headlines, much of the coverage negative, its criticisms focused not only on its potential damage to the economy but at Trump's alleged "incompetence" as an economic leader.

Trump has been called a financial illiterate; a person who not only lacks an understanding of economic history (even recent history as in the case of W. Bush's and Obama's negative tariff consequences), but of simple economic principles.

In short, it appears that most of the world views his tariffs as nothing more than an arrogant, naive, and insane gambit that will do more harm than good.

And from a free-market perspective, there might be an argument there.

BUT...what if we look at it from an alternative viewpoint?

A viewpoint in which Trump does have a solid understanding of history.

A viewpoint in which economic actions serve as a prelude to a much "grander" strategy: specifically, the opening stages of a military showdown.

Not trade war; "real" war.

Historically and strategically, this would make perfect sense.

The trade deficit IS a national security matter...not because of the imbalance of trade itself, but because such an imbalance--particularly in the steel industry--would potentially undermine our military capacity.

As Trump himself had tweeted, "IF YOU DON'T HAVE STEEL, YOU DON'T HAVE A COUNTRY!"

Sure, without steel, you have no infrastructure; that's a given. But importantly, without steel, you have no war machine.

From this angle, and in light of his move to jump-start America's steel production, Trump's grasp of history is evident and sound.

He understands that during the Korean War, President Harry Truman did something similar, maintaining US steel production by seizing the industry.

Truman understood that during the previous war--WWII--despite America's domination of global steel, the US still needed citizens to donate their steel as scrap to support the war effort.

Trump is aware of this history.

In a world where geopolitical uncertainties have to be viewed and planned for from a long-term perspective, Trump's tariffs to bolster US steel and aluminum production is a smart one; a bitter pill that may hurt us in the short-term but strengthen the nation over time.

Like Ronald Reagan, Trump believes in deterrence. And having a strong economy reinforced by a formidable military is key to such deterrence.

If you doubt this interpretation of Trump's tariff actions, just look no further than his trade advisor, Peter Navarro, an economist, former professor of economics at public policy at UC Irvine, and author of The Coming China Wars (2006) and Death by China (2011).

In the latter, Navarro warns, "China's perverse form of capitalism combines illegal mercantilist and protectionist weapons to pick off American industries, job by job. China's emboldened military is racing towards head-on confrontation with the U.S."

As Navarro argues in The Coming China Wars, China is on a ruthless path toward global dominance; an ambition whose endgame is well within China's powers.

It's worth noting that China's steel production accounts for more than half of the world's steel.

And if the steel is what's needed to build and maintain military might, having another nation, let alone a rival country, produce the much-needed steel puts the importing nation in an exceedingly vulnerable position.

Unless the US begins countering foreign steel subsidies, particularly from China, its steel industry will get progressively weaker, possibly to a point where it can no longer survive.

As for claims that the US is putting itself first before the WTO, critics should take note that issues of national security, those deemed so by the US Commerce Department and the Department of Defence, are legitimate grounds under WTO rules for levying tariffs and other import restrictions.

And those who criticize the president for his tariff actions may be missing the point; the big picture; the "grand strategy" to revitalize and maintain America's well-being for the long term.

From this light, Trump is our best hope to "Make America Great Again."

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All articles are provided as a third party analysis and do not necessarily reflect the explicit views of GSI Exchange and should not be construed as financial advice.

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