Trump's cowboy capitalism and 'anti-Nixon Shock'

Express Tribune

04-05-2025

Imagine a cowboy on a turnpike, six-shooter in one hand, a foreclosure notice in the other, galloping toward Beijing on a horse he can't afford to feed — that's the spirit of US President Donald Trump's new trade plan.
Now picture a man in a red hat, standing at the border, waving a pistol made of tax forms, shouting: 'This is how we beat China!' before slapping a 60 per cent tariff on a blender made in Ohio. This is Trump's performance art of policy – and the audience? Poor American households.
Scholars call it 'transgressive enjoyment'. Supporters call it 'finally a president who tells it like it is'. Economists call it 'Jesus Christ, not again'.
This is the logic of lighting your kitchen on fire so the neighbours stop stealing your recipes.
The longest 100 days have been a postmodern opera of economic sadomasochism, where the tariff plan is less about trade and more about libidinal economics – the national thrill of self-sabotage masquerading as rebellion.
As Freudians might note, there is 'jouissance' – a French term for a libidinal 'enjoyment' that goes beyond rational benefit – in this pain. Americans are told to suffer proudly, to pay more for less, and to feel clean about it.
What Trumpism offers is a high — a collective orgasm of grievance, decked out in red hats and shattered supply chains. It has morphed into a national revenge fantasy: you may be broke, but at least the other guy's eating dirt too. It's revenge for the very theft of enjoyment.
In Trump's America, schadenfreude costs less than a carton of eggs, and eggs are $7 a dozen.
On the world stage, Trump is acting like a man holding a smoke bomb and demanding respect. Allies have responded to his tariff threats by building coalitions, excluding Washington.
The WTO? Irrelevant. NATO? Suspicious. Canada? Suspiciously polite. Trump's diplomacy is now a blend of 1980s action movies and apocalyptic sermons. "They laughed at me in Davos. Who's laughing now?" (Spoiler: everyone.)
Meanwhile, China can't help but chuckle: Trump's tariffs are capitalism devouring its own tail, greasing the wheels of Beijing's industrial juggernaut.
'Biting tarifflation'
The performance is loud and unruly, but economists warn it's taking a serious toll.
A recent Yale Budget Lab study shows the average US tariff rate has surged to 22.5 per cent, the highest since 1909. That alone could raise overall consumer prices by about 2.3 per cent, translating into roughly $3,800 in added costs per household this year. The burden falls hardest on low-income families.
At the same time, GDP growth is projected to shrink by 0.5 to 0.9 percentage points in 2025, with long-term output down about 0.6 per cent, a hit amounting to tens of billions in lost economic activity.
In essence, Trump's cowboy-style tariff crusade is inflicting real pain at home, even as it boasts big returns on paper.
The administration expects to raise around $3.1 trillion in tariff revenue over the next decade, but even that figure is undercut by an estimated $582 billion in losses from slower growth.
The damage is widespread. Bottom-decile incomes are expected to drop by 2.3 per cent, compared to 0.9 per cent for the wealthiest. Sectors like apparel, autos and groceries are already feeling the pinch, with prices up 17 per cent, 8.4 per cent and 2.8 per cent respectively.
Financial markets have reacted sharply: Treasury yields posted their biggest weekly spike since 2001, gold prices broke records, and consumer confidence nosedived, with inflation fears reaching levels not seen since 1981.
Despite the bravado, the math is sobering. By branding the tariffs a national security emergency, Trump has slapped de facto tariffs on hundreds of billions in imports, from steel to semiconductors. He declares victory from the podium, but behind the scenes, analysts are quietly counting the cost.
In sum, economists warn tarifflation is biting. The tough cowboy may call it 'protecting jobs,' but workers are feeling the pinch at the pump, in the grocery aisle and on their paychecks.
Global frontier
Meanwhile, Trump's tariff turnpike fight has spun the world economy into a diplomatic dance. Friend and foe alike are scrambling for cover or counterpunch.
Canada, America's most loyal neighbour, swiftly slapped back. In early March, Canada unveiled 25 per cent retaliatory tariffs on $30 billion of US imports, with plans to expand them to a whopping $155 billion if the US keeps its levies.
Ottawa's finance minister warned darkly that Trump's actions will make 'Americans pay more at grocery stores and gas pumps, and potentially lose thousands of jobs'.
Among the first affected: orange juice, peanut butter, wine, clothing, even electric vehicles and meats in phase two.
The message is clear: Canada will not absorb these costs quietly, and its economy is preparing to buckle if necessary.
At the same time, Brussels is mustering a response. EU leaders agreed to propose a $28 billion package of counter tariffs on US goods.
This would target everything from agricultural imports (meat, grains) to consumer items (bicycles, bourbon, vacuum cleaners, even chewing gum and dental floss), essentially matching steel and aluminium by taxing traditionally red state goods.
The calculus is grim: Trump's tariffs already cover 70 per cent of EU exports to the US (about €532 billion in 2024 trade). In effect, Europe has joined Canada and China in a NATO of tariff retaliation.
Policymakers worry that a full-blown trade war will eventually hike prices for all their citizens and trim euro area GDP. For now, unity prevails: an EU official says the bloc will 'strike back' against 'bullying' and protect its industries.
The true superpower opponent, China, has gone on the offensive. Within days of Trump's tariff proclamation, Beijing raised tariffs on US imports up to 125 per cent.
The Chinese foreign ministry publicly vowed to 'oppose US bullying,' and stock markets shook: commodities fell (oil slid ~7 per cent), bond yields spiked, and investors dumped the dollar. In short, China no longer plays patty cake. Its response makes US exports effectively impossible.
Even close allies like Japan are caught in the crossfire. Trump has already warned Japan with a 24 per cent tariff on its exports (most of it on hold while he negotiates) plus a 25 per cent car levy.
Prime Minister Ishiba is under pressure: grant US demands on rice, autos and let American beef flood in, and face a domestic revolt before next summer's election.
Other US partners – the UK, South Korea and Mexico – nervously await their turn, watching Trump demand deals on trade and even currency with his occasional insults. The overarching effect is unsettling, as every country must now decide whether to bargain or escalate.
In short, Trump's 'turnpike tollbooth' has triggered a global rodeo. Allies have no choice but to play along – Canada raising tariffs, the EU targeting goods, Japan eyeing concessions – while China has refused to yield.
The 'burden of dollar supremacy'
While Trump claims to be levelling the playing field, a deeper economic strategy may be at play, a plan to reshape the global monetary order.
Perhaps no one has framed Trump's strategy more clearly than Marxist economist Yanis Varoufakis.
Writing in mid-February 2025, he argued that Trump's 'tariff fixation is part of a global economic plan".
In Varoufakis's analysis, the president has sophisticatedly realised that the key to US 'manufacturing decline' lies not in skill but in dollar supremacy.
He explains that Trump believes foreign central banks are 'hoarding dollars' and not allowing the greenback to weaken naturally, thus undermining US exports and jobs.
Varoufakis opines that Trump genuinely believes America has been 'dealt a bad deal' by the global dollar regime. He argues that Trump sees the dollar's 'exorbitant privilege' as an 'exorbitant burden' on US workers.
The remedy, in Trump's mind, is simple toll-taking: tit-for-tat tariffs to rebalance trade. 'Reduce the value of the dollar… to make American exports more competitive,' Trump himself boasted, while still 'maintaining the hegemony of the dollar".
By that logic, he's a cowboy demanding others stop 'free-riding' off Uncle Sam's bucks.
Trump's tariff deluge, Varoufakis contends, is Phase One of a master plan: to economically bully trading partners into weakening their currencies. The tariffs 'shock' markets so that foreign central banks cut rates and let the yuan, euro and yen 'soften relative to the dollar'.
In effect, the very tariff targets end up paying for them by selling dollars and propping up the US currency. American consumers, Varoufakis points out, thereby avoid most of the import price hikes, while US producers get cheaper exports.
Meanwhile, those collected duties fill the US Treasury – potentially $2.1 trillion over the next decade, according to the Tax Foundation, which Trump can spend largely at will.
Varoufakis explains that by raising duties, Trump hopes to 'pressure friends and foes to unload their dollar holdings and buy more long-dated bonds.' In plain terms: he wants foreign central banks and investors to swap their greenbacks into US debt rather than euros or yuan.
'Anti-Nixon shock'
According to the economist, Trump is channelling an 'anti-Nixon shock': devalue the dollar to revive manufacturing, yet cement US financial hegemony. As Trump himself bragged, the aim is to 'reduce the value of the dollar… to make American exports more competitive,' while still 'maintaining the hegemony of the dollar.'
Trump's crypto fixation plays into this.
Varoufakis recounts the bizarre notion that the US might strong-arm countries like Japan to dump dollars into Bitcoin or stablecoins. Japan's banks hold over $1 trillion in US reserves. Trump fantasises that by endorsing cryptocurrencies, he could make Tokyo trade some of that hoard for digital assets he controls.
The recent executive order to hoard Bitcoin 'never to be sold' looks less like random crypto-caprice and more like a bargaining chip: a way to nudge allies into buying dollars (and Bitcoin) to keep the system afloat.
In Phase Two, Trump would parlay this pressure into grand bargains: China and Japan would be forced to sell US treasury bonds or buy dollars outright; Europe would swap or write down some of its debt, allow factories to relocate to America, and buy more US arms.
Varoufakis's assessment is dry but ominous. Tariffs are not an end in themselves but a means to 'recast the global economic order in America's long-term interest'.
They're designed to coerce oil-rich sheikhs, Asian banks and European treasuries into underwriting US debt – or face punishing trade costs. Trump's cowboy act is not just nationalism. It is state-sponsored financial warfare, complete with digital gold.
As Varoufakis puts it, Trump is plotting an 'anti-Nixon shock' that employs both old-school tariffs and new-age crypto to 'keep the dollar at the centre' of the global system.
Varoufakis even predicts a world split into two blocs: one under the US 'security umbrella' but paying dearly (through currency appreciation and mandatory purchases), the other aligned with China/Russia but cut off from US markets except through ongoing tariffs.
Disturbing as it sounds, Varoufakis warns one cannot dismiss the plan as mere nonsense – he calls it 'solid… albeit inherently risky".
At the very least, Trump's team believes they're leveraging America's 'exorbitant privilege' to force others to bear the burden of global finance. The stakes, Varoufakis warns, are nothing less than the stability of the post-war monetary order.
Trade wars as class wars?
In their 2020 book Trade Wars Are Class Wars, Michael Pettis and Matthew Klein argue that trade conflicts reflect domestic inequality. Deficits, they contend, stem not from foreign trickery but from rich countries over-saving and poor households under-consuming.
'Trade disputes… are often the unexpected result of domestic political choices to serve the interests of the rich at the expense of workers,' Klein and Pettis write.
By this logic, today's trade war is a class war: decades of bailouts for corporations and property holders have suppressed worker demand, generating global imbalances. Tariffs become a Hobsonian 'false economy of distribution' — the rich's answer to workers' inability to buy.
Where does Trump's cowboy logic fit in? He postures as a frontier hero, accusing foreigners of 'stealing' jobs and promising protection for the little guy.
However, Klein's diagnosis complicates the tale. In reality, the tariffs fall hardest on US consumers and workers, those already shortchanged. As the Yale model shows, poorer households lose more (about 4 per cent for the second decile) than the rich (roughly 1.6 per cent for the top 10 per cent).
Trump, then, has inverted the class narrative: rather than taxing elites and boosting demand, he blames foreigners for inequality while his policies further burden the middle and poor.
Meanwhile, as Americans pay more for less, they are told, once again, that freedom is not free. It costs $3,800. But it comes with a free cowboy hat. Made in China. For now.