Tariffs on goods can become a prelude to the tariffs for money

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This month, many investors feel stunned and bewildered. No wonder: As the US government flirts Another termination And President Donald Trump strengthens his trade war, Indicators of economic uncertainty Even the 2020 pandemic or the 2008 financial crisis flew above.

But uncertainty can deteriorate. Against the backdrop of all tariff ups, there is another question that hovers: can Trump’s attack on free trade lead to attacks on free capital? Can tariffs for goods be prelude to the tariffs for money?

Until recently, the concept would seem crazy. After all, most Western economists have long seen the flow of capital as a good cause for America, as they helped finance state debt and business of $ 36 tN. For example, Elon Musk, an advisor to Trump, took advantage of Chinese investments, some of which are Private.

But some economists Maverick, such as Michael Petis, have Long disagree From this Orthodox view. Petis believes that these capital tributaries are not “just” inevitable and useful, a consequence of trade in America, but as the curse is exhausted. This is because the tributaries increase the cost of the dollar, contribute to the excessive financial and loose industrial base of America, it says that “that is,” capital has become a tail that punches the dog “by moving the deficit.

Pettis wants, so taxes like taxes. And six years ago the Senator Democratic Act on competitive dollar for jobs and prosperitywhich requires taxes on capital inflow and weak dollar policy in the federal reserve system.

The bill seemed to die. But last month the American Compass, a conservative analytical center close to Vice President JD Vance, said the capital tributary taxes can assemble $ 2tn for the next decade. Then the White House issued “America’s first investment policy” The executive order, which pledged to “revise whether to suspend or stop” the 1984 contract, which, among other things, deleted the previous 30 percent inflow of the Chinese capital.

This did not capture the headlines because Trump “flooded the zone” by other distractions, in particular at tariffs. But it is frightened asian observers And probably they contributed to the recent falling US stock market because some investors run away.

In reality, the tax change may not happen – or touch anyone but the Chinese. Trump is (B), of course, Mercurial, which makes it difficult to predict future policy, especially since its surroundings are broken into at least three warring factions: nationalist populists (such as Stephen Benan), Techno-Libertarian (like Muscovites) and the Congress. The last two factions can fight capital curbs with the concern of the destabilization of the Treasury markets.

But Trump also strives to use all available tools to strengthen his leverage on the world stage. And Petis ideas seem to influence some advisers, such as Finance Minister Scott Babe, Stephen Miran, Chairman of the Economic Advisor and Vens Council.

This trio seems to think to reset global trade and finances through Human Mar-a-lagoAlthough their ambitions are large than in Plaza Accord 1985. The last “just” weakened the dollar through joint currency intervention but peace vision According to the Mar-A-Lago Accord also includes the possible restructuring of US debt, which would make some treasury owners change them to eternal bonds.

Some well -related financial analysts such as Michael McNEER are also expecting to see a sovereign fund of wealth, Backed by gold inventory in America, which could buy non -dollars for balance the capital flow (for example, say, Greenland’s resources). The third idea is to bring taxes on capital inflows in a broader sense. This can be a preferred approach if the debt idea leaves rating agencies that threaten debt in the US.

“(Trio) The ultimate goal is not a series of bilateral (trade) transactions, but the main restructuring of the rules governing global trade and financial (to remove) distorted capital flows,” ” – says McNair. “Does this approach still need to find out, but the strategy itself is more agreed and far away than most observers recognize.”

Let me emphasize that I do not approve of this and do not predict with confidence that it will really happen. And it should be noted that the theories of Petis cause indignation among many major economists.

But Petis is Not assembled. And critics must also point out that the Baldwin Bill in 2019 was not only applauded by conservative groups as American Compass, But some voices of unions too. Because it has populist appeal, it can still fly.

In any case, the key point that needs to be understood is what is happening to the shift of economic philosophy, which is potentially as deep as the rethinking, unleashed by John Mainand Kins after the Second World War, or pushing the Neoliberals in the 1980s. Like Greg Jensen with Hedge Fund Bridgewater recently threwRecounting Miltan Friedman: “We are all mercantists now.” Don’t expect that it will be canceled soon.

gillian.tett@ft.com