President Trump’s activated policy of drastically reducing U.S. imports from the nations of the world, including the Global South, could very well blow out the world financial system, with its $2 quadrillion in derivatives, in any number of ways—or all of them at the same time. Whether or not Trump just means this as a “negotiating tactic” or not, is irrelevant to the hard reality of the processes being unleashed.
First: Reducing the U.S. trade deficit in goods by wiping out 50% of the excess of their exports to the U.S. over their imports from the U.S. (that’s the incompetent formula Trump’s advisers have fed him), will lead in short order to a wave of sovereign debt defaults by Global South debtor nations. The entire trans-Atlantic system was rigged from the outset, as Lyndon LaRouche explained, for those countries to export their hearts out to a dysfunctional U.S. physical economy that no longer can produce what it consumes, and then turn those dollar flows around and send them back to the U.S. financial system in the form of debt service and carry-trade looting.
Second: U.S. producers will also face a wave of bankruptcies, as the costs of their imported inputs skyrocket, and they are unable to pass on those costs. Farmers are at the top of the list.
Third: Consumer debt will not be spared either. With the kind of inflation that the tariffs will directly produce, already over-indebted consumers living at the edge will be pushed over as well—credit card debt, student loans, mortgage payments, you name it.