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.
Given Trump loose-loose proposals described here, these countries, even the most Atlanticists among them, should be considering diversification or diversion from US interests. Trump is instead asking for the contrary: the “allies” should apply secondary sanctions on China and India. The allies are being put in a corner. No exit to US dominance. As I see things going, the Atlanticists overseas might be dreaming of a political change in the US to a Biden-like era so they are bowing to Trump in the belief that things will go back to the good old days of “normal” relationships with the hegemon. You follow the MSM in Europe and you see it: Trump is evil so let’s push for a political reversal in the US. This is just a dream. The Atlanticists should think twice because such reversal might not exactly be in the cards. The US is in a political juncture which increasingly looks driven to an irreversible sea change from the last decades. They might find some solace if in mid-term elections Trump looses steam politically but this might be just a mirage. Trump is playing geostrategic poker and high are the stakes.
That is some real hopium they’re smoking in Europe. Even if a political reversal were in the cards, do they think things are going to be better for them? It was “friendly” Joe Biden who pushed them into an unnecessary war with Russia, blew up their pipeline, and then forced them into buying far more expensive US LNG. Putin was correct when he noted years ago that US presidents change, but US foreign policy stays the same.
One would definitely qualify to be a Eurotard political leader would one be so stupid wishing for a Biden-like era. He was the one that blew up Nordstream = the deathblow to the EU.
Conclusion: this has very little to do with Trump, but very much with the oligarchs running things in the US. Trump may have accelerate and possibly radicalized the trajectory.
What Trump is creating is Shakedown America and is shortsighted in the extreme. In the past the US would seek strong allies like NATO, South Korea, Japan and others so that they represented a formidable force to take on. That is no longer true and Trump is actively seeking to weaken the allies so that they are no longer anything more than vassals. But in contrast to how the USSR sent resources to her vassals to bolster them, Trump is trying to create a sort of wealth pump so that the US’s allies must ship their wealth to them. There are already clear strategic aims here in that he – and the uniparty – is determined that no country be ever able to rise to challenge the US hence the destruction of the EU the past few years and the attempted assault on rising India. The second is an attempt to de-industrialize the rest of the wold and there have already been demands that countries re-locate their industries to the US. In addition, demands are made on financial resources so that they are sent to the US and cannot be invested by those countries in their own development. All I can say that it is a helluva way to run a railway and you had better believe that the US becomes more isolated over time, not that people like Trump will care. It should all make an interesting chapter in the future book “The Rise and Fall of America”.
Yes. Imo ussr collapsed more bc of support for satellites than military spending, Cuba alone sucked up 4.5b/year. Granted, their economy was inefficient.
Sucking resources from our Allie’s might strengthen us, but weakens the west overall.
Hard to say how long Japan/s Korea put up with this, on the one hand they’re right next to their big trading partner, China, on the other they’re occupied by us troops.
Seems an incentive for China/n Korea to guarantee peace between the koreas in exchange for evicting us troops. And I assume s Koreans are thoroughly pissed with the deliberate humiliation.
Seems UK, Aus and NZ are being slowly cooked, to be eaten later …
Sous-vide for a tender, juicy and flavour-bursting experience.
U.S. Cold Warriors have failed to control Russia, China, Iran and the SCO and prevent their obtaining their economic independence. They are moving toward socialism
The problem is to prevent Europe (Germany), Japan and Korea from becoming an industrial rival and hence threat as well.
The solution by the U.S. Deep State is to turn them into neo-colonial dependencies.
It can’t de-industrialize the SCO leaders. But it can force Europe, Japan, Korea and other dependencies (such as Taiwan) to relocate their industry to the United States.
The dream is to reverse America’s de-industrialization – while de-industrializing its allies as rivals, turning them into subsidizers of a shrunken unipolar West.
Turkey is a wild card still up for grabs. Likewise the entire Near East.
And Yves is right: U.S. strategists still hope to put India back in play, and dream of destabilizing Russia’s economy to bring about regime change.
Is it all a dream?
The question of dreams about India is a difficult one. India has a trade deficit with both Russia and China but this is partly compensated with a surplus with Europe and the US (See here). So, India is calling in BRICS for more equilibrated exchanges. But if India is seeing how US allies are being treated, well…
Are they moving toward socialism? Or will their systems morph into something else again before that ever occurs? Similar to what continually happens with capitalism.
Presumably “But there can be no uncertainty where Trump’s diplomacy is concerned.” should read “no certainty“.
Japan has been in decline since the Plaza accords, a capitulation which contributed to them going from 17% of global GDP to 3%.
An example of their decline is seen from fiction. In the Alien universe, the big bad corporation is called Weyland -Yutani. Because that’s how people then envisioned the future, with the WASPs and Japanese controlling the world. But that feels so quaint now.
I do think it’s sad that the ancient cultures of Japan and Europe will be liquidated.
*Sigh* I have to debunk this on a regular basis. Sadly this sort of nonsense is regularly promoted by Jeffrey Sachs, whose knowledge of Japan seems to consist of a visit or two in the 1980s with the likes of IIRC Ezra Vogel. The fact that Sachs thought that meeting with a few top-level people in Japan conferred insight is a big tell of cluelessness. Decisions in big organizations Japan are made at the mid-ranks (early-mid 40 staffers) and passed ceremonially up the chain. Only owner-controlled companies operate on Westernish model, of an single decider at the top. And I’ve had billionaire clients where the “owner” was hostage to the input of his older brother-in-law (five in this case).
I was working with and then for Sumitomo Bank, then second largest bank of the world and the lead member of the Sumitomo keiretsu. I was the first Westerner hired into the Japanese hierarchy. There were plenty of other gaijin but they were all on “local staff” tracks.
If you look at data, the Plaza Accords led only to a blip in growth for about a half year and it returned to trend. Sumitomo domestic bank branches (which handled corporate business too) were under relentless pressure to meet production targets. I heard no bitching and moaning about a slowdown making the goals not attainable.
The Plaza Accord was expected to lower Japanese exports to the US, which it did, and boost US exorts to Japan, which it did not. Japanese customers are fastidious about quality and would not buy US wares even at a lower price point.
What wrecked Japan was not the Plaza Accords, but something else that happened around then, the extremely rapid deregulation of Japanese banks due to US pressure, to make the Tokyo market safe for Goldman. Even those the Japanese were impressively smart, their banks were primitive. Sumitomo like the other big banks was a huge retail bank and corporate lender, with no significant trading operations save foreign exchange and its Treasury (which it did not run as a profit center). It didn’t even have an asset liability management function (if you are a banker, you will recoil at reading that). I managed the study that told them how to organize one.
Deregulating a banks like that was like telling a drayage company that it was really in the transportation business and giving it a 747 to fly. A crash was inevitable.
The Japanese immediately started doing swaps and derivatives like Japanese warrants, as well as lending 100% against wildly inflated Japanese corporate real estate that never never traded (as in there was no “market”).
The Japanese were already way way way into having a ginormous real estate bubble and an impressively large stock market one too. It was the unwind of these monster bubbles that tanked Japan, and they were domestic products then super-charged in their late phases by the deregulation
Great rebuttal, thank you for the effort.
Do you think that there are credible prospects for Japan to recover?
Thanks for being a good sport. What you wrote was orthodoxy which sadly is rarely examined.
I lost money betting Japan would recover in the 1990s. I have not been there in many many years but by all accounts, Japan is still very cohesive and managing its decline well. It is small geographically (most of the country is not arable) and not well endowed with natural resources. It had major demographic problems even though its elderly population is on average very healthy and many work.
I am not imaginative enough to see how Japan grows much. But we are going into a time of intensifying competition for resources. If Japan can somehow secure what it needs, it could probably hunker down much better than most advanced economies.
Thank you.
Do you think either Japan or s Korea can escape the us orbit? Could either kick out us troops?
Resources… 9 billion wanting a comfortable standard of living, probably most land-based high grade ores have been produced. Us had pretty good endowment, oz too, but rest of the west not so much. Maybe giving up on Russia’s is driving defensive switch to lock down the americas.
From my vantage point (LTR in Japan), it seems very unlikely that the Japanese govt could or would try to push out US troops anytime soon. And even if a majority of politicians were to begin lobbying for this, would the US actually leave or would one of the loudest voices in the Diet suddenly get the Charlie Kirk treatment?
Thanks for this wonderful and succinct explanation! I sort of knew the outline, but I’d have confused myself badly if I had describe what was going on–ie I didn’t really know the facts.
Yves, thanks for the wonderful story about your experience in Japan.
What is you take on Richard Werner narrative about the Land of Rising Sun? I found the documentary “Princes of the Yen” (available freely on youtube) fascinating, the book in the English version is pretty much impossible to find, Werner claim there was a lot of political pressure on him to not publish it.
Werner pretty much agrees with you, Japan banking system was primitive yes but very effective at least during the early boom decades. He claims that the crash was pretty much engineered from within to force a change in the system. I visited Japan only once as tourist. To an automotive buff like me, the decline of Japan was evident in the early 2000 when its car industry stopped being as innovative as the previous years and their failure to meaningfully capture the high margin luxury segment. In the early 1990s the German holy trinity truly feared Lexus & Co, by the mid 2000 it was clear they were not going that far and they were not regarded as peer in image by the public. Japanese luxury cars are even now considered a value proposition and rely on their reputation for reliability rather than panache (they still have to offer lower prices compared to Mercedes, BMW, Porsche and Audi models) and the German premium brands pulled ahead in innovation.
I think two things need to occur. The first will be the impact of tariffs on the exporting markets; the second, the public realisation that unemployment is rising in the exporting countries, austerity is sapping the incomes and that their political leaders are clueless and are so contaminated by their relationship to the US that they have to be replaced by leaders who want to enjoy peaceful economic, political and trade relationships with partners who are less transfixed on weakening the economies of the countries they trade with than is the US.
That will be the time to call, “Jubilee”, for the trading partners of the US to break away and cultivate their relationships with the BRICS and, at a political level, with the SCO, and to allow the US to stew in its rancid coffin of political juices.
America grew because of immigration, attracting skilled and semi-skilled immigrants who helped build the US in the years following the Civil War. Now, with the collapse of industry, the necessary skills no longer exist in the US on the scale required to re-build the US in a generation or two. But what immigrant would trust the US today with its highly financialised economy, a political system crippled by oligarchy, Executive Orders to change everything from ICE slapping anyone in chains whether they a an illegal migrant, a legal resident or a native born US citizen, to the direct policing of independent cities in independent states by the Federal authorities, all by Presidential whim, to a foreign policy of murder on the high sees and War-war, NOT Jaw-jaw? Like it or not, the US and European economies (and their war machines) are absolutely dependent on Chines and Russian goodwill, as are the economic fortune of Australia, Japan and South Korea.
I suspect we will soon have a European conflict which may be relatively limited and extend Russia’s sphere of influence across Europe, or the conflicts the US and Europe have thoughtlessly contrived over the years will finally end in a nuclear exchange. I hope not. But the US, like so many European countries, requires a full scale political and economic revolution if it is to become anything other than a shadow of its former self.
I’ve got to add today’s new information that although the U.S. agreement with Japan has remained secret, but the Financial Times obtained a copy. It reports that “reeks of coercion: a sovereign nation forced to fun¬nel private and public-sector investment to a much richer one under a struc¬ture unashamedly directed by the US president. Once Japan recoups its invest¬ment, it then reaps only 10 per cent of the cash flows from the project, to America’s 90 per cent. … there are no Japanese on the more powerful investment committee and it’s Trump who makes the ultimate call. Yes, Japan can elect not to fund an investment, but if it does so the US may impose new tariffs on Japan “at the rate determined by the President.”
The Financial Times reporter added that “a gloating Lutnick, appearing separately on CNBC … described as “off the rails” and the most fun he had working for this pres¬id-ent. Trump, he said, had “complete discretion” over Japan’s investments and would decide where and how he wanted Japanese cap¬ital spent in America.”
Japan has always been a military dependency of the US. I saw the US push Japan around in the 1980s, most important, the rapid bank deregulation (see comment above) which was massively destructive to them.
Japan managed to escape further abuse in the 1990s by being a basket case….except its export business was still doing well. I know people who claimed Japan exaggerated how badly its domestic economy was faring so no one would bust its chops over keeping the yen very low.
As polar ice diminishes, Polar Bears increasingly under threat eat their own cubs. Far easier than encountering walruses, grizzlies, or those humans. Story of the US if Aesop was around today.
I see posts popping up all over saying Trump is going to move the us’ $35 Trillion debt into crypto, and then devalue it.
Anyone around here understand what that means, and is it some how the opposite of MMT and the Trillion dollar coin?
I note my mind is telling me that Trump’s dementia has turned him into the ultimate sonofabitch who will just make the US as big a basket case as he has made Europe. And to think that I had reasonably high hopes that he would behave sensibly, decently and much more moderately than in his first presidency after the way lawfare was waged against him by his political enemies.
Now I know the 6 months I spent as a Boy Scout before rebelling against Church Parade on religious grounds (I’d become an atheist) really f*cked my sympathy brain cells.
No, Trump is not going to “move” the $35 Trillion debt into crypto and then devalue it.
What these sites are talking about is a speculative attack. But governments do not typically engage in a speculative attack against their own currencies. Usually this comes from the private sector. The borrower borrows a weakening currency and uses it to buy assets that are appreciating against that currency. For example, if you borrow USD at 4% and convert it into Bitcoin or gold (both of which are sensitive to changes in Global M2, and therefore increase much faster than 4% when M2 is rising), then you are engaging in a speculative attack, betting against the USD.
For obvious reasons, the US government can never be seen to be betting against the US Dollar. That is why the Fed has always downplayed the role of gold in the global financial system. It is fine to hold non-USD assets on the balance sheet, but if there was ever a perception that the US was engaging in a speculative attack on its own currency, it would be a disaster.
Speaking of Japan and tariffs… via Kyodo News:
U.S. to urge Japan, G7 to slap tariffs on China for buying Russian oil
https://english.kyodonews.net/articles/-/60871