The Dilemma of the American Economy

Elias Akleh

After the destruction of the European as well as many Asian industrial infrastructures and economies due to WWII, the American industry and technology dominated the world. The US became the strongest global economy. Yet, with the rebuilding of European and especially of Asian economy with relatively cheaper labor force, competition against the American economy became tougher. To maintain its unique position the US; since George W. Bush’s administration, started to outsource its industrial and technological infrastructures to cheaper countries.

This outsourcing had eventually devastated the American middle class, who started losing their businesses, their jobs, their homes, and many became homeless. The US Department of Housing and Urban Development’s report of 2017 gave a conservative number of around 554,000 homeless people. Homelessness has become a national crisis.

With the slogan of “Make America great again” the Trump administration launched a mafia style economic terror wars against the world in order to force other countries to buy American goods. Trump’s administration withdrew from international agreements and imposed trade tariffs and sanctions against other countries including its own European allies.

After becoming president, Trump started pressuring the EU to pay more for NATO complaining that member countries are paying only small fractions of the cost, and that the US should not have to bear the larger financial and military burdens of defending Europe. To raise the threat against Europe, Trump’s administration decided to withdraw from the INF Treaty (Intermediate-Range Nuclear Forces Treaty) that bars US and Russia from having long-range ground-launched cruise missiles. Recently Russia declared it’s willing to do the same. Such withdrawal could jeopardize the START (Strategic Arms Reduction Treaty) and could trigger a new nuclear arms race between the two countries.

Trump had also demanded protection money from Japan, South Korea and Persian Gulf Arab countries; Saudi Arabia, Bahrain, Qatar and UAE. Trump claimed that the US is protecting Japan and South Korea from the communist Chinese and North Korean threats. Trump’s administration keeps claiming that the entire South East Asia is under threat from Chinses colonization; overfishing, dredging, island building and clam harvesting. They also claim that North Korean ballistic missile system that could carry nuclear bombs is also a major threat to the region as well as to the US.

Soon after becoming President, Trump kept threatening to withdraw from Iran Nuclear Dear (JCPOA) demanding Iran to renegotiate the deal to include its ballistic missile system. The JCPOA was the result of months of preparations and negotiations after almost 40 year of ineffective sanctions, which serve only to push Iran to develop its own internal independent economy. The American administration also needed to contain Iran, who had helped Syria fight the terrorist groups created by US/Israel/Saudi Arabia to destroy and divide Syria. Iran has been also supporting Lebanese Hezbollah and the Palestinian resistance against Israeli occupation, and Yemeni Houthis against Saudi/Emirati war.

Beginning of May 2018 Trump announced US withdrawal from JCPOA and imposed economic sanctions against Iran aiming to kill off Iran’s oil export. These withdrawal and sanctions violate UN resolution 2231, undermine international organizations, negatively impact global economy especially those of America’s European allies, and increase conflict within the Persian Gulf region. When the US failed to garner international support for its illegal sanctions, false flag attacks against oil tankers in the Gulf of Oman were perpetrated in order to portray Iran as a threat to the critical oil industry in the region.

Under the justification of protecting the region the US has sent more troops, USS Abraham Lincoln carrier strike group and Patriot missile defense battery to the region, raising the prospect of war. Sale of all kinds of weapons to Saudi Arabia and UAE was also justified. Trump had also demanded more protection money from Saudi Arabia.

All these expenses and the projected threat will raise the price of crude oil even higher than what the market had witnessed lately. The high price of Gulf oil will match, and may even exceed in the future, the price of the expensively produced American shale oil, making it more marketable.

Iranian economy is not the only target of American sanctions. The competing Russian and Chinese economies have also been targets of American sanctions. Chines economy is considered the second global economy after the US. It is expanding and imposing a threat to the American economy. The Chinese Belt and Road Action Plan; a revival and expansion of the old Silk Road, is a land and maritime trade routes from China to Europe passing through Central Asia and the Middle East particularly through Iran. It will allow China to deliver its relatively cheaper goods, compared to American goods, to all these regions. Chinese Huawei 5G technology is faster, more reliable and more secure than the American 4G internet technology. China had also acquired the Russian SU-35 fighter planes and the S-400 defensive missile system making Chinese military a dangerous adversary to the Americans in the South East Sea.

Trump had accused China of unfair trade and of theft of American proprietary technologies. He announced his plans to raise tariffs on Chinese goods by $300 billion a year. He also banned the purchase and spread of Huawei’s technologies within the US and urged European allies to do the same. The American media went even further by falsely claiming that the Chinese 5G network pauses danger to the public and causes cancer among other types of diseases.

On the other side, Russia has been a major cheaper energy (gas and crude oil) supplier to Europe for a long time. Europe is one of the main markets for Russian gas in the form of Liquid Natural Gas (LNG) given its strict regulation for clean energy for domestic and industrial needs. For this reason, Germany has been for many years engaged in the Nord Stream 2 Pipeline, aimed to double the Russian gas from 55 to 110 billion cubic meter per year.

In order to reduce the trade deficit and benefit American companies the Trump’s administration has forced the EU to dump the Russian LNG and to export the gas from American exporters despite the fact that American LNG costs about 20% more than the Russian gas received through pipelines. Besides the 20% extra cost Europe is forced to build expensive offshore re-gasifiers on the Atlantic in order to process the American gas for their own safe usage. The US is also increasing pressure on Germany to derail Nord Stream 2 and to stop the construction of this important energy gas pipeline.

The Russian military industry has recently proved its superiority over the American’s as demonstrated in the Syrian theater. Russian S-400 missile system is highly advanced, capable of engaging a wider array of targets at long ranges and against multiple simultaneous threats. It is generally considered less expensive than the American weapons, and is sold without the expensive extensive maintenance support. American military old customers, such as Turkey, India and even Saudi Arabia are seeking to acquire the Russian S-400 missile system.

Rather than purchasing the American Patriot missile system Turkey made a deal with Russia to acquire its S-400 missile system instead. The US warned Turkey that acquiring the S-400 would force the US to impose sanctions on Turkey, and could prompt a re-evaluation of Turkey’s membership of NATO. The House of Representative passed resolution 372 (Engel & McCaul Resolution) calling on Turkey to cancel its acquisition of the S-400 system. Washington has also threatened to remove Turkey from its F-35 fighter program if the deal is not dropped. Russia is reported to deliver the S-400 missiles to Turkey during this month of July.

India, too, had signed in October 2018 a $5.43 billion deal with Russia buying S-400 missile system, whose delivery will commence on October 2020 and will be completed by April 2023. Trump’s administration is pressuring India to cancel the deal and is offering Lockheed Martin’s THAAD & Raytheon’s Patriot missiles and the fifth-generation F-35 fighter planes for India’s air force and navy instead. It also offered to exempt India on Iranian oil imports. India is not budging.

Saudi Arabia; America’s weapons number one customer, signed in May 2017 a deal with Russia to acquire the S-400 system. Russia and Saudi Arabia are currently negotiating mutually acceptable terms of the deal. A November 2018 CNBC’s report indicated that Saudi Arabia is among 13 other countries such as Qatar, Algeria, Morocco, Egypt, Iraq and Vietnam, who are interested in buying the Russian S-400 missile systems despite the threat of American economic sanctions. In August 2017 President Trump signed the Countering America’s Adversaries Through Sanctions Act to impose economic or political penalties against such countries.

Trump’s economic wars against the world produced only the opposite results. They are pushing other countries to unite and to isolate the US. They are also impacting many American companies. Many American companies, who had built its own infrastructures in China, and whose businesses had been meshed with other Chinese companies, had been negatively impacted by these American sanctions. Many may be forced to close their businesses.

Yet some large American corporations will defy these sanctions and keep doing business with China. Apple Corp is just one example. The company had decided to move its assembly of Mac Pro computers from Austin, Texas to Shanghai, China.

Many other tech companies cannot stand idle while the rest of the world is taking advantage of the 5G network technology. Despite Trump’s sanctions against Huawei and its 5G network, many countries such as Russia, India, Turkey, Japan, South Korea and even the EU are implementing and using 5G network. Many American computing companies such as Ericsson, HPE, Intel, Nokia and QUALCOMM, as well as communication companies such Verizon, AT&T, T-Mobile and Sprint are investing in, and building 5G networks within the US.

The American $300 billion tariffs against Chinese goods, and the Chinese $100 billion counter tariffs against American goods had impacted the global economy and not just the economy of the two countries. This trade war seemed to overshadow other subjects during the G20 summit last week. Many leaders including the European Commission President; Jean-Claude Juncker, Russian President Putin and Indian Prime Minister Modi, expressed great concern and called on Trump and Chinese president Xi Jinping to come to an agreement rather than risk global economic disaster.

Chinese Xi Jinping, Indian Narendra Modi, Russian Vladimir Putin and Iranian Hassan Rowhani seem to cozy their relationship together to counter American trade war and sanctions. During last month’s meeting in Saint Petersburg, Russia, Putin and Xi discussed a new bilateral economic strategy to use local currencies rather than American Dollar for their $108 billion worth trade payments.

Similarly, the deputy Iranian Foreign Minister; Abbas Araqchi, urged the international community to stand up to the American use of the Petrodollar as a weapon against independent countries. Such a strategy is being welcomed by many African, Asian, Latin American, as well as the EU countries besides Russia and China, in order to confront and to nullify the effects of the American economic sanctions, and to end the American hegemony over the global financial order.

Trump’s anti-Russia and anti-Iran hysteria had impacted the economy of America’s EU ally harshly. European countries have now to contribute more money to NATO, have to pay more for American NLG and for the building of regasification ports, and corporations, especially oil companies, who partnered with and invested in Iran’s economy after the signing of the JCPOA in 2015, are losing their investments.

The American sanctions on the EU would not continue without any reaction. Although the EU admits that maintaining Iran’s nuclear deal without the US is difficult and will create economic hardship to European countries, they keep stressing their willingness to maintain the deal. European Council President; Donald Tusk expressed that maintaining Iran’s nuclear deal is in the regional and international security interest, and that the EU is committed to the deal as long as Iran keeps upholding it.

Iran had recently exceeded the limit on the amount of enriched uranium in its stockpile set out in the 2015 nuclear deal to pressure the EU to live up to the agreement. The EU finally had finalized the INSTEX financial tool that will allow Europe to bypass the American Dollar in order to continue trading with Iran. INSTEX (Instrument in Support of Trade Exchanges) is a payment system allowing companies to trade with Iran despite harsh American sanctions, through the exchange of goods without requiring direct transfers of money between Iran and EU companies. This instrument bypasses the American Dollar, thus leading to the weakening of the Doller and in turn to American economy.

As for the NATO allies, some are described as free-loaders and delinquents by Trump, the Secretary General; Jens Stoltenberg, contrary to Trump, does not see any threat to any NATO ally from Russia, especially after NATO had increased its presence into the eastern parts of the alliance. He advocates for building better relationships with Russia and spending 2% of the GDP of each member on defense. Yet there is a rumor reported by BBC’s defense correspondent Jonathan Marcus that there has been growing talk among some allies of building a more autonomous European defense system.

It is obvious for the keen observer that the US is faced with possible future threats of economic depression/isolation and the devaluation of its mighty Dollar if Trump keeps up his belligerent rhetoric and economic sanctions against other countries. This explains the relatively softer and compromising demeanor of President Trump during the last week’s G20 summit.

In his meeting with Chinese Xi Jinping Trump declared that the two countries have agreed to resume trade talks, that the US would not add tariffs on $300 billion worth of Chinese imports, and that he decided to allow US companies to continue doing business with the Chinese tech giant Huawei.

Trump’s meeting with Putin did not seem to be that productive. Neither leader elaborated on the meeting. What is known is that the talks included armament reduction, return to the START agreement, and unelaborated discussions about the situations in Iran, Syria, Venezuela and Ukraine. The media concentrated on Trump asking Putin not to interfere in 2020 election, and Trump telling a reporter “none of your business’ when asked what did he talk to Putin about.

Trump had also provided Turkey a justification for acquiring the Russian S-400 blaming Obama’s administration for not selling Patriot missiles to Turkey. Turkish President Erdogan stated that Trump informed him that the US would not impose sanction on Turkey and would deliver US-made F-35 fighter planes in July.

Trump did not have any success talking to Indian Prime Minister Modi, who shrugged him off when he tried to engage him into conversation.

Trump had a successful working breakfast with Saudi Prince MBS though. They both ignored the Khashoggi’s murder, while Trump showered MBS with praise stating it is a great honor to meet him, and he has done a really spectacular job opening up Saudi Arabia who is “a good purchaser of American products.” Trump seems to insist that MBS stands next to him while taking G20 photos.

Trump exhibited a gesture to improve relationship with North Korea by sending a letter to leader Kim Jong Un suggesting to meet him at the demilitarized zone (DMZ) to consider negotiating a nuclear freeze by North Korea, rather than complete denuclearization. Trump became the first sitting American president to set foot into North Korea.

Trump showed his willingness to ease sanctions and to improve relationships with other countries except with Iran. Iran is Israel’s issue and Trump does not dare to cross this red line, for America’s Middle Eastern foreign policy is dictated by Zionists.