Michael Hudson: Trump’s Economic War Against Europe, Korea and Japan

Yves here. Michael Hudson provides a thoughtful discussion of the status of various Trump efforts to assert dominance are going with Europe, Korea, and Japan. However, I have to engage in my regular practice of quibbling about a few points.

One is the state of play with India. Despite Trump betraying India by imposing secondary tariffs for its Russian oil buys, India is not yet taking steps consistent with a divorce. For instance, India depicted reports that it had paused American arms buys as “false and fabricated“.

Hudson also depicts the immigration raid on the Hyuandai plant as exposing South Korean investors in the US as hostages, that they can’t abandon the plants they are setting up and operating. While in one sense this is true, on another level, this attributes too much design to what Trump is up to. Trump has no concern as to whether his various initiatives are working at cross purposes. He has an almost desperate need to be seen as the driver of events, as a colossus bestride the world. Immigration raids are huge headline-getters. A MAGA influencer got the attention of ICE with allegations of South Koreans brought in under business visa illegally doing construction work and even dead bodies being buried illegally. Keep in mind that Trump had been increasing the drama around his ICE actions, witness his planned Chicago blitz, even though immigration has gone from a big driver of his support to now being a negative.

So while Trump is in the childish business of trying to score points repeatedly with foreign countries, to the degree that repeatedly retrading deals is a routine occurrence, it’s not a strategy as much as a misguided belief in the value of dominance for its own sake.

By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City, and a research associate at the Levy Economics Institute of Bard College. His latest book is The Destiny of Civilization

Most discussion of the past week’s SCO and BRICS meetings understandably have focused on the rising strength of their multilateral alternative to America’s attempt to impose its unipolar world control under its own rules calling for other countries’ subordination to U.S. demands to concentrate all the gains from trade and international investment in its own hands. China, Russia and India have established their ability to create an alternative to this control.

But that has by no means diminished the basic U.S. ideal of control. It simply has led U.S. strategists to be realistic enough to narrow the scope of this control to focus on subjecting its own allies in Europe, Korea, Japan and Australia.

Trump’s over-reaching attempt to control India’s economy quickly drove that nation out of the orbit of U.S. diplomatic dominance. (There is still substantial neoliberal support for India to join in the Atlanticist dream.) The question now is whether such demands will have a similar effect on driving other allies out of this U.S. orbit.

And the subsidiary question is whether U.S. success in enforcing this control will have the effect of economically weakening its European, East Asian and English-speaking allies to the point where their ability to remain viable contributors is fatally crippled and will lead to a nationalist reaction to de-dollarize their own economies

The most obvious basket case is Europe, especially the most pro-U.S. members Germany, France and Britain whose public opinion polls show their populations strongly rejecting their current pro-U.S. puppet leaders.

The most immediate breaking point is the EU’s open-ended submission to U.S. demands considerably beyond what was expected in the abject surrender by EU policy head van der Lehen to Trump’s tariff threats. She had explained her surrender as being worth it for Europe because at least it provided an environment of certainty. But there can be no uncertainty where Trump’s diplomacy is concerned.

He has pulled a fast trick out of his hat by sharply raising tariffs above the promised 15% base, by dissolving that promise into his broader 50% tariff rates on imported steel and aluminum. These tariffs were to promote U.S. employment (and hence labor union support) in these two basic materials inputs despite raising costs for all U.S. manufacturers using these metals in their own products. That in itself was a crazy reversal of the basic principle of tariff policy: import low-priced raw materials to provide a cost subsidy for the high value-added products of industry. Trump put narrow political symbolism over national self-interest.

What nobody anticipated was that the Commerce Department would apply these 50% steel and aluminum tariffs to European and other foreign industrial imports of motors, tools and agricultural and construction equipment. The Wall Street Journal quotes the head of Germany’s Mechanical Engineering Industry Association (VDMA), Bertram Kawlath, as warning that machinery accounts for some 30% of Germany’s exports to the United States, creating so serious an “existential crisis” for its industrialists that European Parliament may not approve Trump’s July tariff dictates.

A company producing agricultural harvesting machinery, the Krone Group, laid off a hundred employees and is reported to be redirecting its exports already being shipped to the United States. The German affiliate of the John Deere has been similarly affected, as 20% of its exports are reported as being sold in the United States. The Germans are said to be insisting on the same 15% U.S. tariff limit that Trump extended to pharmaceuticals, semiconductors and lumber imports.

The effect has been to promote nationalist parties gaining support to replace the pro-U.S. Atlanticist parties committed to participating in America’s war against Russia and China, and even picking up the costs of fighting in Ukraine, the Baltic Sea and other areas bordering on Russia as well as extending “Atlantic” protection to mischief making in the China Sea.

U.S. foreign policy has also imposed strains on Korea and Japan. Having demanded that Korea’s automobile company Hyundai shift production to the United States by investing in a $30 billion factory in Georgia, the immigration service descended on the plant under construction and deported some 475 employes (of whom 300 were reported to be Korean) who had been hired to provide the specialized labor.

Hyundai explained that the workers were highly trained and under the direction of contractors that the company had used in Korea in order to complete the construction speedily and indeed to avoid the problem of having to deal with the lack of vocational education in the United States to supply such labor – not to mention the price differential from using Korean labor familiar with work on such projects. An official at the Korea International Trade Association accused U.S. policy of imposing an “impossible position” by sending such labor back to Korea by denying it the kind of working-visa arrangement that was granted to Australia. For many years Korea had sought to get equal treatment with such white immigrants and with Singapore, but was consistently turned down, although the immigration was permitted informally – until September 5, in what turned out to be a long-planned attack by armed ICE troops arresting the immigrants in other manacles.

Hyundai and other foreign firms have discovered that investments they make in the United States provides America First administrations to use them as hostages, setting and changing the terms of their investment at will, knowing that the foreign investors are hardly prepared to simply walk away and lose their costly investments.

But countries are being browbeat to make such investments as part of the financial shakedown policy that Trump has adopted: To avoid having U.S. tariffs raised against Korea’s automotive imports from 15% to 25%, Korea had to spend tens of billions of dollars to shift production to the United States. The threat was to crash Korean export income (and hence employment and earnings) if it did not surrender to Trump’s terms – with no military conflict being necessary to impose this trade-peace treaty.

Trump used a similar bait-and-switch shakedown policy against Japan, threatening to create commercial chaos in its economy by imposing steep tariffs on its trade with the United States if it did not pay $550 billion in protection money for Trump to invest in projects of his own choice, keeping 90% of the profits for himself after Japan was reimbursed for its capital advance. The Japanese version of the original agreement indicated that the profits would be split 50/50, but the U.S. drafted a final version saying that that split would only govern the initial reimbursement of investment by Japan, not the profits.

Such was Japan’s desperation – and abject surrender to U.S. demands, German-style – that it accepted Trump’s tariff deal of “only” charging Japanese esports 15% instead of 25% – the same deal that he had made with Korea. Japan was given only 45 days to pay up. The resulting slush fund was a political godsend to Trump, who is now able to use it as bait for his leading campaign contributors and supporters, while using the more than half a trillion dollars to help finance his budget’s tax giveaway to the wealthiest Americans.

Trump also demanded a kickback on Japanese investment in U.S. steel production by Nippon Steel’s $15 billion purchase of U.S. Steel. The U.S. Government received a free golden share of the company’s stock to ensure U.S. control over the company’s operations

In the wake of the recent SCO and BRICS meetings, it seems u unlikely that countries not already closely allied with U.S. control would make any such deals as Germany, Korea and Japan have done so far in 2025. These deals serve as object lessons highlighting the contrast between the U.S.-allied West and the rest of the world.

Alaister Crooke on Monday, September 8, described how “The default psychological mode of the West will be defensively antagonistic. … To acknowledge China, Russia or India as having ‘detached’ from the ‘Rules-based Order’ and constructed a separated non-western sphere clearly implies accepting the end of western global hegemony. And it means accepting too, that the hegemonic era as a whole is over. The U.S. and European ruling strata are categorically not in the mood for this.”

It obviously is not over for America’s relationship with its NATO and other new Cold War allies. But it is limited to them, and Trump is seeking to extend the U.S. sphere of control to the Western Hemisphere as a whole – not only Latin America and Canada, but Greenland as well. The effort needed to lock in their dependency and withstand what one would expect to be nationalistic reactions against such subservience seems to have led U.S. policy to turn away from the conflict with its declared enemies Russia, China and Iran at least for the time being.

The great question is whether these abused allies will at some point seek to choose a different set of alliances.