Trump's ultimate ambition

Author: Wan Lianshan

At 2 AM, the US officials announced an increase in tariffs on China to 104%, effective immediately.

104%, it is basically a hard decoupling, and the pressure faced in the short term is extremely enormous.

You can refer to the situation during the mask ban.

In the United States, prices are skyrocketing, and the government is forced to use helicopters to directly distribute money to the public...

As the news broke, the originally surging US stock market immediately turned to a sharp decline, and US Treasuries also followed with significant volatility, with the 30-year Treasury yield rising by 10 basis points.

Who is reducing their holdings? It's self-evident.

The following situation also seems to be grim.

If it were the international environment of ten years ago, there might still be room for maneuver.

But in recent years, countries around the world have clearly shifted to the right, with each newly elected government being more hardline than the last...

On our side, for example, it is clear that there is less and less official condemnation and more and more actual confrontation.

If nothing unexpected happens, we will soon see that, aside from a few compromises, most major countries are rushing to impose retaliatory tariffs and strengthen trade barriers.

There's no way around it; if everyone else joins and you don't, you'll miss out.

This also means that the process of globalization, which has lasted less than 40 years, may have reached the end of its lifespan.

Of course, it can also be viewed from another perspective.

The free trade of globalization has been sustained for decades and throughout the lives of nearly two generations, leading many people to become accustomed to this order and subconsciously feel that this is the norm.

However, when viewed over a longer time scale, free trade is actually quite rare.

Protectionism is the norm.

How Great?

Many people compare Trump to figures in Chinese history.

Some people think that he is like Chongzhen, tossing and turning has the opposite effect; Some people feel like Liu Bang, a scoundrel but with many supporters......

But a series of things are happening now, but people have to think of Wang Mang.

Trump said that one of the people he admires the most is John Quincy Adams, the sixth president of the United States.

What he is doing now seems to be following in the footsteps of this ancient figure who "made America great"...

The actions are extremely unpredictable, seeming mad and ahead of their time, yet they are part of an extreme retro movement—attempting to pull America back to before the 20th century, to the era that he believes was truly great for America.

In that era, America experienced rapid advances in industrial and economic strength, surpassing the United Kingdom in a very short time; its military power was equally robust, expanding its territory by an average of 69,000 square kilometers per year, second only to the Mongol Empire in human history, with even Russia bowing down.

To some extent, this is similar to Khomeini abandoning secularization and attempting to revive the Islamic world through medieval religious law in Iran.

But as everyone knows, Khomeini failed, and Iran became increasingly impoverished under the hands of his disciples.

And now, mainstream public opinion around the world, including a large portion of people in the United States, is almost entirely saying that Trump is an unreasonable madman.

It has almost been defined as a loser.

There's no need to say derogatory and mocking words anymore.

Instead of an endless war of words, look at it from a broader perspective.

……

Looking back at the history of tariffs in the United States, there are three peaks.

The years 1828, 1930, and the upcoming implementation of the "reciprocal tariff" policy in 2025.

The intervals between each other are probably about 100 years.

This is a very strange cycle, but it objectively exists.

Let's try to start from the very beginning.

According to the economic history data from the Maddison Project Database, see the figure below. As early as 1720, the per capita output of the 13 colonies surpassed that of Germany and France, second only to the British mainland.

In terms of wealth, it can be said to be the world's second most developed economy.

As an important dumping ground for the motherland, local tariffs were consistently high throughout the colonial period, but this tax was collected by the British.

For example, after the Seven Years' War, although Britain gained world dominance, it was also severely weakened and urgently needed the colonies to provide support.

Therefore, the Tea Act, the Donald Act, the Stamp Act, etc. were enacted, and colonial customs were established to impose entrance taxes on goods entering North America.

What do you mean? Not only do you have to buy my goods, but I also want to indirectly raise the price through tariffs.

In December 1773, Boston's "Sons of Liberty" could no longer stand the exploitation and dumped 342 boxes of East India Company tea into the sea, brewing the "Boston Tea Party".

Resistance surged and ultimately ignited the War of Independence.

After independence, the British and those damned tariffs left, and everyone welcomed free trade.

But looking at the chart below, the per capita output in the United States has almost stagnated for more than twenty years since then, even worse than before the founding.

At this moment, a divergence has occurred.

Before the "march towards greatness" in the United States, the country was roughly divided into two factions.

The Northern industrial manufacturing economy represented by Alexander Hamilton and the Southern plantation economy based on slavery represented by Thomas Jefferson.

The former believes that the United States has a weak industrial sector and must impose heavy taxes on imported goods to protect domestic manufacturing.

But obviously, if you add import taxes, other countries will definitely retaliate by imposing reciprocal tariffs.

This consequence is simply not a concern for factory owners.

Because at that time, there was basically no market for industrial products in the United States overseas, so what if the tax was raised? Instead of worrying about these, it is better to support the local manufacturing industry and eat the domestic market.

At that time, there were only about 10 textile factories in the whole of the United States.

In 1789, the first tariff bill was passed, imposing tariffs on 81 goods at an average rate of 8.5% to counter British dumping.

As a result, by 1810, the United States had prevented the growth of factories to 240.

Obviously, the effect of tariffs on supporting local industries is very significant.

But for southern farmers, it's not very friendly.

At that time, the main agricultural products in the United States were cotton and tobacco, industries that had been sustained for hundreds of years. The local industrial capacity could hardly absorb it, and it had always been export-oriented.

By raising tariffs, not only do their export profits decrease significantly, but the cost of purchasing production tools also increases significantly.

Blood loss.

The War of 1812-1815 made American politicians realize the importance of industry, leading to the introduction of the Tariff Act of 1816, which raised the average tariff to 25%, with a tax rate of up to 33% on textiles.

The UK urgently needs to increase retaliatory tariffs, causing US cotton exports to drop from 22 million dollars in 1820 to 18 million dollars in 1826.

In 1828, John Quincy Adams, the sixth President of the United States, proposed the "Tariff of Abominations" bill again, raising the average tax rate to 45%.

Objectively speaking, the development of industry is a progress of the times.

However, as the cost bearers, the farmers obviously do not agree with this statement, and the southerners angrily accuse the government of "sacrificing agricultural interests to subsidize industry."

What is more critical?

As the industry in the north grew, so did the demand for labor, so they tried to make the vast number of black slaves become workers.

This is tantamount to digging up the ancestral graves of the farmers.

I was already overwhelmed by high tariffs, and now I want to abolish slavery and increase the cost of employment!?

To ease the tensions, the federal government had to lower tariffs three times in 1845, 1855, and 1860.

But in 1861, with the promulgation of the Morrill Tariff Act and the rise of Lincoln, who insisted on a high tariff policy and the abolition of slavery, the contradictions between the North and South could no longer be eased, leading to the outbreak of the Civil War.

The northerners unified the country and the discourse power, successfully turning the United States into the country with the highest tariff barriers in the world, while the domestic industry accumulated at an unprecedented speed.

By 1894, the total industrial output of the United States officially surpassed that of the United Kingdom, rising to 30% of the global share and becoming the new world factory.

This position was maintained for as long as 116 years, until 2011, when it was surpassed by China.

The above is a somewhat one-sided and brief account of the journey of the United States from its infancy to "greatness" from the perspective of tariffs, achieving the goal of becoming an industrial power.

And this is naturally the ultimate goal of Trump's "Make America Great Again."

But can the methods from two centuries ago achieve similar effects today?

Realistic Challenges

Trump's original intention in launching the tariff war was to emulate the sages such as Andrew Jackson, John Quincy Adams, and Abraham Lincoln.

However, in public opinion, it is largely regarded as a replica of Hoover, who triggered the Great Depression of the 1930s.

To be honest, there are indeed quite a few similarities between Hoover and Trump.

But the king must have felt that he was wronged.

During the Hoover era in the United States, industrial output accounted for 40% of the global total, making it the world's largest trade surplus country, with severe overcapacity.

In the 21st century, the United States is the world's largest deficit country.

The underlying logic of tariffs on both is completely different.

……

Time returns to the present.

Trump wants to make America great again, but it is certainly not possible to rely solely on tariffs.

Imposing tariffs is simple; the difficult part is having actual goods to supply the domestic and even overseas markets.

In particular, it took the United States over a hundred years and the efforts of several generations to complete its industrialization and become the world’s factory; now, the United States, which has effectively undergone de-industrialization, faces at least four direct challenges in its attempt to re-industrialize and even rebuild the world factory:

1. Labor Force

As of 2024, the total working population in the United States is 167 million, and the actual number of employed people is much smaller than that.

80% of the workforce is engaged in the service industry, while the number of employees in the secondary industry has consistently remained around ten million.

In comparison, the number of employed people in China's secondary industry reaches 210 million...

In the absence of a huge leap in productivity, it will be very difficult for the United States to rebuild the world's factories with the current size of its workforce.

2. Industry Chain

Although the United States has mastered most of the world's cutting-edge technology, it has lost a significant number of basic industrial chains due to deindustrialization over the past half century, and practical technology remains a shortcoming.

666 industrial subcategories and 41 industrial categories, with less than 5% being independently autonomous.

Taking industrial raw materials as an example. The United States does not lack minerals, but it lacks processing industries; while China accounts for over 40% of the global industrial raw materials market share.

Once the manufacturing industry is redeveloped and imports of Chinese goods are restricted, how can this dilemma be resolved?

Although it is possible to support the processing industry in other markets...... Not to mention whether it can be built or not, the cost of time and money is unimaginable.

**3.**Energy

Or to be more specific, how is the power supply resolved?

In 2023, the total electricity generation in the United States was approximately 4.3 trillion kilowatt-hours, with industrial electricity consumption around 1.01 trillion kilowatt-hours, accounting for about 23.6%.

Compared to other countries, 1 trillion kilowatt-hours of industrial electricity seems enormous.

However, for the former world factory, the United States, it actually remains at the level of the 1990s, clearly reflecting the phenomenon of deindustrialization in the past thirty years.

In comparison, China's total power generation in 2023 is approximately 9,418.1 billion kilowatt-hours, with industrial electricity consumption at 6,384.7 billion kilowatt-hours, accounting for about 67.8%.

If we take China's electricity consumption structure as the standard for the "world's factory", then the total power generation in the United States is approximately 3.29 ÷ 32.2% ≈ 10.2 trillion kilowatt-hours.

Even lowering the standards a bit means that electricity production must double.

What is needed for power generation? The raw materials can be purchased directly, provided that there is a power plant.

How to build a power plant? First, you need money, and second, you need people.

Looking at the figure below, the current value scale of the American power system...

To double the power generation capacity, not only will it require trillions of dollars in funding, but also a large amount of manpower. More importantly, this cannot be achieved in just a few years.

3.Logistics

Land transportation.

The railway, built during the former industrial era and stretching for 400,000 kilometers, is not completely abandoned, but it is extremely old.

If you want to transport goods across the North American continent by land, the first thing to do is to repair the railways and highways.

In 2021, Biden initiated a $1 trillion infrastructure investment plan, of which less than 20% was allocated to ports, railways, and highways, which can be said to be a drop in the bucket.

In this case, the importance of sea routes is even more important.

There has been a lot of discussion on this topic recently, the most well-known is BlackRock's acquisition of the Panama port business.

The main function of the Panama Canal is to connect the East and West coasts of the United States. It was once an important tool for the U.S. to maintain its position as the world's factory, and its role in revitalizing manufacturing is equally crucial today.

But it's still the same principle.

The premise for ports to function is having enough cargo to transport; and having sufficient cargo requires that the domestic ports have adequate capacity.

The problem is that currently none of the top ten ports in the world are in the United States.

The largest port, New York Port, has a throughput of as much as 600 million tons, but it is still significantly distant compared to a true mega-port.

In summary, it still requires money, people, and trade to rebuild the prosperity of the port.

Again, this is not something that can be achieved anytime soon.

The above list is not exhaustive.

But just looking at these, the cost that Trump needs to spend to promote the return of manufacturing, achieve greatness again, and make America the world's factory once more is simply unimaginable.

The "Great Era" lasted for more than 100 years, and it was the efforts of several generations that created the "greatness".

It seems unlikely that Trump will achieve "greatness" in just a few short years of his term.

Unless a decisive variable can emerge.

Epilogue

Strictly speaking, there have only been two true world factories in human history, originating from two energy revolutions.

In the first Britain, the steam engine freed factories from dependence on human and animal power.

From 1760 to 1860, the productivity of British workers increased by 20 times, contributing half of the world's industrial production with only 2% of the population.

Second, in the United States, tariff protection certainly plays a role, but the more important driver is the use of electricity.

Edison was the first to apply self-excited generators to lighting and invented the incandescent light bulb, extending industrial production into the night for human society; Tesla invented the alternating current generator, which has a large power output and significantly reduces the cost of electricity generation, providing huge energy for industry.

A multitude of new technologies emerged like bamboo shoots after a rain, which truly made the United States the core country of the Second Industrial Revolution.

……

Both are the natural result of leading the energy revolution and greatly improving production efficiency.

The rise of the third "world factory," Dongda, primarily relies on a large pool of high-quality labor, and has not yet achieved a fundamental breakthrough in production efficiency in most fields, which is fundamentally different from the first two.

What Trump believes in as "Make America Great Again" is to restore the status of the once second-generation world factory, or is it merely satisfied with the partial return of industries, or even the establishment of a third-generation world factory?

This may be the most critical variable in the current era.

If it is the first two, the problems faced are as mentioned in the second part of this article, with the main direction being to restore the previous productivity. The difficulties mainly revolve around several aspects: money, energy, manpower, and time.

If it is the latter, it means making a huge breakthrough in energy or production efficiency, fundamentally rewriting the industrial logic that has been maintained for more than half a century, with production efficiency and wealth creation experiencing a tenfold or even dozens of times evolution...

From easy to difficult, there are at least three possibilities:

1. Following the Tesla model, carry out massive layoffs to maximize the efficiency of existing resources.

This is already being done, but there is a lot of resistance. The key player Musk announced that he will resign from his DOGE position at the end of May.

2. The most fundamental things cannot be changed, but we can still carry out a transformation of production relations, just like the Third Technological Revolution—what we commonly refer to as Industry 4.0.

Although a leap in productivity cannot be achieved, it can still significantly reduce production costs while lowering dependence on human labor, addressing the most urgent labor and funding issues in America's reindustrialization.

3. Energy revolution, the most reliable option currently is controllable nuclear fusion, but practicality is still a long way off.

Corresponding to three results:

The manufacturing industry is partially returning and resolving social conflicts, but has not been able to restore its position as the world’s factory.

Restore the glory of the once second world factory;

The United States continues to lead the new era, becoming the third-generation world factory.

Of course, given the current situation, even the easiest first option is being implemented with such difficulty, the possibility of the fourth option might be even greater:

None of the above three will work.