Breaking the economy
The capitalist economy of the USA requires large amounts of debt to operate effectively. That debt does not just need to be accessible to new, starting companies and consumers making large purchases, but also to already (highly) indebted companies and consumers. Competition and lack of real pay growth means that the only way to finance growth is through debt spending.
Private equity-fostered deals are down, and they are usually fine with higher risk investments and lending. Some are still investing, but the risks and the price have moved very high which in turn drives the prices up for everything else.
Things are not moving right now because of the perceived high risk of investing in new and upgraded production. Such slowdown is in marked contrast with the recent explosion of announced investments in things like AI, energy generation, and "data centre" growth.
There are many questions private investors are asking themselves about the nature of the USA economy, mostly around recession, policy stability, and costs of production. But, also war, state investment, regulation, and the competitive environment in the USA.
The current Administration is picking winners through an odd process of implementing destructive policy and then carving-out companies deemed worthy. Not carving out industries, but focusing on specific companies.
The "delay" of the tariffs on mobile devices, laptops, and some other digital devices is after intense lobbying by Apple. But, so are the Detroit Three auto companies getting a delay in those tariffs so long as their actions indicate they are closing down production in Canada, and promising to increase production in the USA.
Here is the best example of competition between layers of capital that we have likely seen to date in the USA. Trump's folks seem fine with shunning finance capital in favour of older industrial capitalists. This favouritism also means not paying attention to American savings (pensions and otherwise) which working Americans have in the markets because they have been told they can benefit from capitalism too if they are in the markets and/or real estate.
Real estate stopped being a focus in 2008/2009 when Americans realized that market can, in fact, go down. Workers are realizing that the investment market that they have access to can also lead to losses.
For now, investors and the public are in a bit of a holding pattern. Holding their breath, as it were. But, the USA economy cannot stand still like this when it comes to investment. Without active borrowing the economy starts to break.
The question for the left is, does this mean that capitalism is under strain?
It appears not. As winners are picked and capital starts to understand that the Trump Administration doesn't mean what it says to the public, but does mean what it writes in policy papers, capital and investors will shift their strategies.
Apple will lose money trying to pivot from China to more USA production, but it will be given more room to do this than other companies. So, that's where the investment will go.
The Detroit Three have been given time and space to reduce Canadian (and Mexican) production. Investors have flocked back to those stocks.
In the world of capital, winning can also look like not losing as much as the other firms. And, this is the world that the USA has decided to create. Losers everywhere, except the corrupt few who kiss the ring.
Strategy?
The new world order is not one of attempts to compete on a fair playing field, it is one of nepotism, corruption, and fealty.
Does that mean that the best strategy for other countries engaged in this morass of confusion is to fully lean in to fealty?
The Conservatives (and more and more liberals) in Canada seem to think so. "Negotiation through capitulation" is theme coming from all corners. This is not a surprise, the conservative ideology is to do whatever makes you wealthier.
This may work in the USA, but it will not work in other countries. Indeed, it is a mistake to think that the USA cares at all about pushback or not from others.
Trump and his cohort are a type of nationalist we have not seen in a while from the USA. The type of imperialism that these autocrats engage in is a more violent version because it starts with othering and dehumanizing their opponents.
There is no way behind the wall.
The only strategic response is to understand that there is nothing to be gained from trying to negotiate with the USA. Instead, think of the USA policy as you would a natural disaster, we can plan and build for that potential disaster, but you cannot stop it from happening and you do not know when it will happen.
We must engage with everyone else who is not a nationalist autocratic regime while building an sustainable local economy.
This means we must establish programs akin to public insurance and disaster relief. The focus should be on responding to the loss of American capital investment swiftly, focusing on saving essential production, retooling as we go, to establish industrial value production that can continue to financially support public services.
To be prepared for this, we must identify where it is likely that investment will leave. This is not going to be difficult, the Trump Administration has clearly written policy on what it considers theirs.
Canadians must understand that this natural disaster is heading for us. It might veer a little on its way, providing some hope to those who do not want to believe it will arrive. But, it will arrive, indeed it is already causing damage.
It is important that we build the infrastructure to withstand it before we are in the midst of it.