The Art of Trade Wars: Trump's Tariff Strategy

Privileged Discussions is now Global Trade Deciphered, a sharper reflection of our focus on global trade and business. Same expert insights, new name. 

Episode Description

In this episode, Justin Hayden Miller, a Global Trade & Customs lawyer and consultant, using clips of Margaret Thatcher, analyses latest developments of President Trump’s trade and tariff policies.

The episode concludes considering:

• Risks of Rule-Changing: Analyzing the potential consequences of the U.S. reshaping global trade rules, which could inadvertently advantage competitors like China.
• Comparisons with Darwinism: The theory of Survival of the Fittest, with modern day approaches to trade, drawing parallels with current events.

It considers:

• U.S. Tariff Policies: 2025 U.S. Trade Policy. Exploring President Trump's perspective on tariffs as a tool for economic dominance, with references to a pre-World War II "golden age" of U.S. trade funded by tariffs rather than income tax.
• Margaret Thatcher’s Legacy: Featuring archival clips of Thatcher defending her economic policies, Justin draws connections between her views on wealth creation and modern trade strategies.
• Soft Power vs. Hard Power: A discussion on the shift from diplomatic influence to economic coercion, with references to Joseph Nye’s concept of soft power and its relevance to U.S. global positioning.
• Economic Ideology: Debating the merits of free trade versus protectionism, with references to Adam Smith and the ideological underpinnings of current U.S. trade strategies.

Thatcher clips © : By permission: UK Parliamentary Recording Unit, All rights reserved

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Chapters

• 0:00 Introductory remarks
• 3:18 Trump's view on art implications on trade policies
• 7:45 Trump 2.0
• 15:44 Adam Smith & Free Trade
• 18:24 Is Trump catalysing new economic thinking?
• 21:45 Darwin and Trump's Trade Policies
• 25:32 Thatcher's notion of Wealth
• 37:37 The Cause of the Trade War: Comparative Wealth
• 39:28 Caution Required & Risks of Rule-Changing

Transcript

Justin Hayden Miller: 0:00

Now, a number of you have already contacted me to say how disappointed you were that, with all my spiel about privileged guests and everything being on the show, that Donald Trump himself didn't make an appearance on my last episode, and I'm sorry to disappoint you further, but he won't personally be on today's show either. But fear not, as we'll be hearing in this episode from no other than Margaret Thatcher. Welcome to Privileged Discussions offering fresh perspectives on current affairs shaping global trade. I'm Justin Hayden-Miller, global trade lawyer and partner at a leading European law firm decoding the latest global trends. The British Prime Minister, harold Wilson, famously said that a week is a long time in politics, but he obviously wasn't around at the time that President Donald Trump was inaugurated for a second term. If he had, I'm sure he would have said that a couple of hours is a long time in politics, or even about 20 minutes. When the Colombian President, gustavo Petro, in January 2025, turned away US deportation flights and the US applied major tariffs on Colombian response. On Colombian response. Only an hour or so later, colombia made a 180 degree U-turn to allow deportation flights to land there. After all, president Trump was going to impose 25% tariffs on both Mexico and Canada, but these have been suspended for 30 days as well, following 11th hour negotiations and concessions. If tariffs are simply a US negotiating tactic, then they're looking relatively successful for the moment.

Justin Hayden Miller: 1:56

Ladies and gentlemen, this is your captain speaking. We're cruising at 15,000 earth miles per hour. We apologise for the slight delay of 30 days and hope that you are comfortable. The weather on Mars is currently fine, with a current local temperature of 63 degrees Celsius, that's 145 degrees Fahrenheit. Our instruments, however, are showing that there may be some economic turbulence ahead. Simply as a precautionary measure, we ask you to secure any loose stocks and bonds in the overhead compartments, return to your seats and quickly fasten your seatbelts. Thank you. Now I have some interesting theories that I want to discuss with you all about this. So no joke.

Justin Hayden Miller: 2:50

Let's start this episode by briefly considering whether Donald Trump's opinions on art could have any bearing on his international trade policy. Hear me out, hear me out. You see, donald Trump does collect art. His Florida mansion at Mar-a-Lago, on Palm Beach in Florida, houses numerous paintings, including works by Orville Bullman and Charles Buscoville, and Trump has reportedly even acquired a six-foot-tall portrait of himself. But only this January, he signed a presidential order titled Promoting Beautiful Federal Architecture In a similar Trump executive order in 2020, the document that he signed stated stated it must provide pride, honour, wealth and growth. It appears to me that he's not just talking about art. The notion that art mirrors life stems from Plato, but when I read Trump's executive orders on art, the qualities of good art seem to mirror a successful trade policy, pride to be American, honour, keeping his campaign promises and on tariffs, wealth, an international balance of trade credits and growth in the double digits.

Justin Hayden Miller: 4:24

Trump's opinions on beauty are far from confined to architecture because, in a Chicago interview not long before the presidential elections, trump said, quote to me, the most beautiful word in the dictionary is tariff. It's my favourite word. It needs a public relations firm. And he said in a different address, quote the word tariff, properly used, is a beautiful word, one of the most, if the most, beautiful words I've ever heard. It's music to my ears. A lot of bad people didn't like that word, but now they are finding out that I was right and we will take in hundreds of billions of dollars into our treasury and use that money to benefit the American citizens, and it will not cause inflation. By the way, lots of people say that his administration represents 2.0. But I think there could have been an update and we might already be looking at Trump 2.1, or even update Trump 2.2. We're no longer in the 19th century, admitted, and if the US is to pick fights with the whole world threatening and imposing tariffs on, then I see it only ending badly. The US was a master at soft power, and soft power the term soft power was coined by Joseph Nye, a political scientist, to describe the ability of a country to influence using cultural, ideological, diplomatic means, rather than simply military force or economic coercion tariffs, which is referred to as hard power. So latest policies by Trump, etc. Can be considered hard rather than soft in this respect, damaging the US brand. President Trump to date is applying a business-is-business approach where an historic alliance with the US is not a get-out-of-jail card.

Justin Hayden Miller: 6:55

The modern notions of free trade got underway in 1776 when Adam Smith published his work, an Inquiry into the Nature and Causes of the Wealth of Nations, and pretty much everyone takes his economic theories and the theories of famous economists who fell in his footsteps, such as Ricardo, etc. And they take their theories almost entirely for granted. These days they're considered the holy grail of how nations should conduct themselves to maximise their wealth. But is this strictly true? Because some of Donald Trump's policies certainly go against some of the common thinking that has been considered a given for at least a century or more, or, if not exactly putting his economic theories into question, at least potentially testing their boundaries and limits? Smith is associated with the notion of the invisible hand, this idea that free markets free from government interference can, and even should, regulate themselves and allocate resources efficiently without the need for heavy government intervention, tariffs included. It seems to me that the most important economic moments in history equate with economic revolution. It's no coincidence that.

Justin Hayden Miller: 8:20

Adam Smith's thinking took prominence at the time of the Industrial Revolution, and here we note our first comparison with today, because we are undergoing a huge revolutionary period with artificial intelligence. At the start of Trump's second presidency, and in the same way as free trade and new economic thinking took hold at the time, the AI revolution is spurring, in my opinion, yet another new brand of economic thinking, yet to be properly defined, of which Trump's administration may be a part. Why is he suggesting using his right hand to sign executive orders imposing tariffs, rather than just allowing the economy's invisible hand to sort it all out? Well, adam Smith thought that free trade overall benefits countries, but not necessarily on an individual, case-by-case basis or an industry-by-industry basis. There may be individual specific cases or exceptions where perfect free trade might not necessarily be seen as beneficial.

Justin Hayden Miller: 9:35

Is the current US trade policy, improving trade theory, for example, in specific cases where free trade does not give rise to overall optimal results, such as where Chinese distortions of competition are perceived to exist? Are we potentially entering a new era of post-modernist economics where current events force economists to consider a reset or new set of theories to tackle a post-globalization era, which, donald Trump, is certainly a catalyst? Science, after all, frequently creates new theories. Let me put it another way and talk about Charles Darwin and the survival of the fittest another way and talk about Charles Darwin and the survival of the fittest. Darwin is known for the biological concept of fitness, defining reproductive success. In Darwinian theory, the better designed examples of a species, most adapted to their immediate local environment that's what he says are most likely to survive and to pass on their DNA. Generally speaking, therefore, darwin's theories presuppose that the most adapted species and specimens of a species survive. Nature sorts it all out a bit like the invisible hand, but, as for Adam Smith, there may be individual cases and examples where a very adapted species might not survive, for example, a fire on a remote island. We do not necessarily apply this law or policy ourselves. When a rare species is going to become extinct. We don't say that Darwinian theory dictates that, as a whole, the survival of the fittest species survives. So let's celebrate that some poor species is going to become extinct. We owe it to nature to preserve the species if we can and to avoid the invisible hand of nature wiping out cute, fluffy creatures. A case-by-case approach. We want the best of both worlds. We want our cake and to eat it.

Justin Hayden Miller: 11:54

Darwin is attributed to have said it is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change. Consequently, one might conclude that, whilst Donald Trump may be the strongest, being the president of the most powerful nation on earth by a wide margin, that what in fact matters is not strength but being the niftiest nation on earth. Except, however, darwin never, apparently ever said or wrote those words at all. It may well be implicit from his writings that he suggested that being the most adaptable species is more important than strength, but Darwin never said or wrote it. Will Trump show that being the strongest nation is the most important attribute in order, where necessary, to force through US interests?

Justin Hayden Miller: 12:50

But when Adam Smith talks about the wealth of nations and we're talking about how to maximise wealth for countries and whether tariffs maximise wealth, as Trump seems to be implying. We need to know what actually means wealth Now. I find this very interesting. This was something that was discussed during Margaret Thatcher's very last parliamentary debate in 1990. She was being questioned on an economic record in office when Simon Hughes MP, the UK Liberal Member of Parliament, posed Margaret Thatcher the following question I give way to the honourable gentleman.

Simon Hughes MP: 13:29

There is no doubt that the Prime Minister has, in many ways, achieved substantial success. There is one statistic that I understand is not, however, challengeable and that is, that over her 11 years the gap between the richest 10% and the poorest 10% in this country has widened substantially. How can she say at the end of her chapter of British politics that she can justify many people in a constituency such as mine being relatively much poorer off, much less well-housed?

Simon Hughes MP: 14:06

and much less well provided than it was in 1979. Surely she accepts that is not a record that she or any Prime Minister can be proud of.

Margaret Thatcher PM: 14:18

Mr Speaker, all levels of income are better off than they were in 1979. But what the Honourable Member is saying is that he would rather the poor were poorer, provided the rich were less rich. That way, you will never create the wealth for better social services as we have. And what a policy. Yes, he would rather have the poor poorer, provided the rich were less rich. That is a liberal policy. Yes, it came out. He didn't intend it to, but he did.

Justin Hayden Miller: 14:54

That is the liberal policy Thatcher says, and I'm pretty sure that President Trump would not disagree with the Iron Lady on this. I understand he's not too keen on liberals either, although I think it's meant in a different sense and the word is used differently in the United States either, although I think it's meant in a different sense and the word is used differently in the United States. Or rather, trump may well be prepared for everyone to be poorer, provided that the US maintains its advance, its gap with China. But you see, thatcher sees wealth here in absolute terms and not comparatively. The fact that the wealth of the poor in absolute terms increased even where it was by a small amount during her terms of office, justifies increases in wealth of the rich by a far greater margin. General tariffs are believed to potentially increase prices across the board Overall for everyone.

Justin Hayden Miller: 15:51

Wealth isn't the amount of money that you have in your pocket. It's what you can buy with that money. And if countries other than the US are all constantly comparatively poorer than the US, then it's likely that they are less able to purchase US goods. Thatcher in that clip, is arguing that if everyone's income increases in real terms, it is not relevant that the wealth of the rich increases by a greater amount than the poor. And how far do you take it If wealth in real terms for the top fifth of the population doubles and the wealth of the remaining 80% of the population simply increases by 10 cents in the year? Sure, they're better off, but are they? What has this all got to do with tariffs? If the US is comparatively constantly much richer than all the other countries, it might mean that they may not be sufficient world demand to sustain that growth. Here's Thatcher again making her point even better, replying a few moments later to Jim Sillers, the deputy leader of the Scottish National Party.

Jim Sillars MP: 17:04

But can I take the Prime Minister back? Take the Prime Minister back to the question of the poor getting poorer. Doesn't she realise even at this point, which is five minutes after midnight for her? Because there was a transfer of resources from the poor to the wealthy. That's why the poll tax was unacceptable and it's because of the poll tax she has fallen.

Margaret Thatcher PM: 17:36

And I think that the Honourable gentleman knows that I have the same contempt for the right nail on the head when I pointed out that the logic of those policies are they'd rather have the poor poorer. Once they start to talk about the gap, they'd rather the gap was that Down here, that Not that, but that so long as the gap is smaller, so long as the gap is smaller, they'd rather have the poor poorer. You do not create wealth and opportunity that way. You do not create a property-owning democracy that way.

Justin Hayden Miller: 18:30

Whatever you think about Thatcher, she was an excellent speaker. When she's talking about the gap, she's saying that socialists would prefer that the gap was smaller, with everyone earning less money, rather than the gap being wider with everyone earning more money. One does not create wealth and opportunity that way, she says. But you see, I believe that wealth in absolute terms, when comparing different countries, is based on relative comparisons. Thatcher may have been right when comparing two individuals, but the way of looking at things doesn't necessarily work when comparing one country the US with the rest of the world. You want to do better than the other countries, but not so well that you destroy your own markets and future customers. I do believe that Trump does understand and appreciate people's perceptions of wealth, if only because he acknowledged in his election campaigns that many Americans did not at least feel better off during the Biden presidency years.

Justin Hayden Miller: 19:39

In the noughties 2000s, I had a Peugeot. It had become an old, outdated car for the time, manufactured in 1985, but it was an SR model, intended to be one of the the more luxurious top-of-the-comfort-range models for the time. Along with the GR, the SR used the 80PS, 59kw, tuned single-carb XU5. Equipment levels are standard, included Wait for it. Central locking, internally adjustable headlights, a map reading light, electric windows, but just in the front, windsor Velour seat trim and fibre optic dashboard dials. But in the mid-2000s it was considered out of date and old-fashioned. When I was in this old car, I wasn't in the mid 2000s Now, I was in 1985, at least in my mind.

Justin Hayden Miller: 20:39

And being in that 1985 mindset in 2005, I wasn't in an old, outdated car, feeling almost embarrassed. No, I was in a luxury car for the time, feeling great about myself. You see, by shifting your mindset, simply, only 15 years meant the difference between feeling entirely poor and pretty rich. It shifts time and this is the pleasure. Perception can in certain cases, be more important, or at least more pleasurable, than reality. Who was the richer? A member of the high nobility 200 years ago or a member of the middle classes today who has the comforts that no king, even 100 years ago, could imagine? Because the absolute wealth of a particular country, whether the US or any other, is based on comparisons to the wealth of other nations. The wealth of other nations in comparison to it can ultimately determine its wealth spending power. This isn't some philosophical theory. No, the comparative difference between the US and other major economies is becoming the key determinant in this potential trade tariff debacle trade war and was noted by Nixon in the 70s and his foresight of increasing Chinese dominance and the potential consequences. Listen to me the comparative difference between the US and other major economies is becoming the key determinant in this trade tariff debacle war.

Justin Hayden Miller: 22:16

Recent estimates have suggested that China's GDP could surpass that of the US sometime in the 2030s at this rate, and it is commonly accepted by many that conflicts occur when a superpower's dominant position is threatened, which is surely the case for the US, at the moment at least, opposite China. The power transition theory developed by Organsky War is most likely to occur when a rising power threatens to surpass a currently dominant power. So the fact that China could be overtaking the US increases the risk of major war. The theory goes that a dominant power may feel threatened by the rising power of another superpower and may therefore decide towards conflict in a desperate attempt to maintain its position. But the significant shifts in global power dynamics with fears that China the Chinese could one day catch up the US economy, gives rise to uncertainty and economic power play, which is what we're seeing today. It's that simple.

Justin Hayden Miller: 23:23

Now let's talk about some reservations about Trump's policies To spool the conclusion. I think the jury is still out if tariffs aren't applied excessively, etc. But the first issue is that, putting aside whether Trump's proposed tariffs and his policies are actually legal or not, well, they don't appear to lightly tweak the system at all. This does not look like gently altering the system to take advantage of minority exceptions. Rather, it's sending shockwaves as a wake-up call, an expression that Trump used himself, by the way, relating to AI.

Justin Hayden Miller: 24:00

It's a wake-up call to competitor countries. Not a problem necessarily in itself, provided it doesn't have the effect of destabilising the global financial and economic system or damaging the US as a brand and alienating its allies. The second danger is the slippery slope, because imposing material tariffs in respect of a particular industry could give rise to other industries saying, hey, that's not fair, we want higher tariffs to protect our sector as well, or else it's not a level playing field which could start a vicious spiral. And this is what happened in June 1930 with the US Smoot-Hawley Tariff Act. It aimed to increase US tariffs on agricultural imports, and other industries said, hey, we want to cut in. And eventually it was just too too wide. Everyone wanted a piece of the cake. Over 20,000 imported goods were tariffed and it ended up in a disaster. It's considered to have exacerbated and catalyzed the Great Recession, so it's not necessarily a good example to follow.

Justin Hayden Miller: 25:06

Now Trump seems to be suggesting that US tariffs will increase the overall wealth of the United States, promoting US businesses and promoting businesses to invest in the US. Well, let's see. And the third greatest concern, in fact, is that the US becomes a victim of its own success, and I think this is probably one of the most important one, I greatly fear. The US economy is outpacing so quickly so many other nations' economies. The global economy essentially becomes the US economy, people outside the US not having the means to purchase US goods that Trump is so keen to export from the US.

Justin Hayden Miller: 25:47

You want to export, then you need buyers with wealth in other countries to buy your exported goods and the final risk is the other side of the coin, that the US, fearing that it will ultimately lose its dominance to China under current world trade rules and practices, may be using its current dominance to simply change all those rules New rules by imposing tariffs to daze the opposition and, if changed significantly enough, this could lead to the current game that the US is clearly winning being a whole new game altogether, a brand new game in order to retain its current dominance. That the US may not be so experienced at. Could creating a whole new economic system and game and principles by playing tri-riffs etc. With new tactics and consequences, allow competitors such as China to take advantage of the new set of rules and to get an upper hand? It could be a risky strategy, but whatever the outcome, it appears that the US is all in from beginning to end.

Justin Hayden Miller: 26:56

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Justin Hayden Miller: 27:14

This will help others find it. And if I didn't mention a legal caveat then I wouldn't be worth tuppence as a lawyer. So here goes. The content of this podcast is intended only to provide an information resource of interest and does not constitute legal, tax, business or financial advice of any kind. Should you require advice, then you should engage an appropriately qualified person to provide you specific advisory services in the field.

Justin Hayden Miller: 27:37

The views, thoughts and opinions expressed in this podcast are my own and do not necessarily represent the views, thoughts or opinions of any law firm, nor that of any third party, other person, company or organisation. Stay tuned for the next episode. Thank you.