Trump seeks to Make America Great Again (MAGA) is based on 2 basic assumptions; overwhelming economic and military strength over all the other nations. Trump is following the foot-steps of 25th ex-US President W. McKinley (Y1897-Y1901). Trump just rename a US highest peak as McKinley Mountain.
McKinley successfully led the U.S. in the Spanish–American War, overseeing a period of American expansionism, with the annexations of Puerto Rico, Guam, the Philippines, and Hawaii. On the trade front, McKinley's tariff policy raised the average duty on imports to almost 50%, an increase designed to protect domestic industries and workers from foreign competition. He also anchored USD as global currency with the Gold standard of exchange against USD.
Fast forward, Trump is talking about annexing Canada, Greenland, Panama and even Mexico. He has seek to impose 25% tariffs on most of US' trading partners.
Will Trump succeed in Y2025, as McKinley did in building up US manufacturing base while annexing neighboring nations of his times?
1. Reshoring manufacturing back to USA.
As CNN reported, Prof. Irwin said it was technological advances, including the increased availability of electricity, telecommunications and the growth of railroads, that helped feed the growth of US industrialization and the relatively free flow of immigrants into the country in 1900 era. While tariffs help to focus the industrialization, but is not the main factor. In Y2025, current global manufacturing competitiveness would not advantage US as in the 1900s. At the same time, competitors will also impose tariffs against US, given that the trade export level to US has been reduced to 3% or less for US major trading partners; China, EU), thus, it will also limit US ability to export their goods and services overseas with their counter-tariffs.
The worst effect of tariffs will be on US (though it can only helps to reduce marginally her budget deficits, USD1.8t, from the USD6.8t annual expenditure that make up 23.4% of US GDP), as it will reduce US trade and suffer from inflationary impacts. The inflationary pressure on US will further pressure higher US govt borrowing rate. Since US govt is already have a total debt of USD 36t, the heighten borrowing rate, will push up US govt debt USD 1.1333t annual interest charge to even higher levels. At the same time, inflation will weaken economic growth. In fact, 2025 US is now projected to go into a recession, in short, stagflation will kick in. Manufacturing will NOT return to USA with reduce demand and higher inflationary costs as US do not have the workforce that can compete with China. Should US ramp up her large defense spending further, then the govt deficits will get even worse. Ray Dalio, founder of Bridgewater Hedge Fund projected a US Debt Crisis (heart-attack) within 3 years.
2. Annexing her neighbors
Though Trump spoke about annexing the neighbors, but will these nations not stand up to USA army? Canada is now even asking France to provide nuclear umbrella against possible US attack. Europe is gearing up her military as part of the long term plan to counter any US or Russia attacks. For sure, Trump is trying to drive a hard bargain, as it can be seen, Panama just accepted the sales of Port operations, forced upon Lee Ka-shing's Hutchison, to US controlled company, BlackRock and MSC, including 42 other ports' operations. By exiting 43 ports operations, Lee Ka-shing is also indicating to the world that he expects global trades to be collapsing soon.
3. Keeping USD as THE global currency
Trump threatens tariff hikes on any nation that tries to move away from USD. Though USD is still the global currency, but when a US debt crisis is triggered, it will then be the fall of USD, and currently, EUR and Yuan are expected to share the load of international finance when that happens. In fact, a US Debt Crisis will pushed US interest rates to much higher level than current level. In Y1980, US short term interest rate reached 20%, though it did not damage the US economy as the US govt debt was only at 33% of GDP. Nevertheless, Since then, US govt debt to GDP has continue to rise, to the current level of 123% by Y2024.
To conclude, in Y2025 1st half, US economy is already expected to go into recession. Trump's US was hoping to get tariffs collection to pay down US govt debt, but it will backfire, as tariffs pushes up inflation, triggering rising interest interest, which will push up the debt interest payment on existing US govt debt. With high interest payment, US debt will also increase while tariffs yield will be relatively low, due to trade wars that will result in US' much less trades with the world. At the same time, due to US uncompetitive manufacturing structure, the reshoring of manufacturing will not occur, instead there will also be outflow of manufacturing to overseas. Within 3 years, if as Dalio projected, then there will be a massive US economic seizure. When that happens, US will no longer be able to annex any nations at will, instead there may be a break-up of USA due to some states pulling out of the union. What will the world be like after USA falling backward is a topic for another article.
References:
Economist (Asia Pacific), Mar 2025, article under Briefing Section pg18
https://en.wikipedia.org/wiki/McKinley_Tariff#:~:text=The%20tariff%20raised%20the%20average,Republicans%20and%20denounced%20by%20Democrats.
https://edition.cnn.com/2025/02/12/business/trump-william-mckinley-tariffs/index.html
https://www.marketwatch.com/story/ray-dalio-warns-u-s-could-face-a-debt-crisis-heart-attack-within-three-years-bd0d9f59
https://splash247.com/li-ka-shing-steps-back-from-ports-sells-to-msc-and-blackrock/
