Peter Navarro is the senior advisor for trade in the Trump administration. He is also a dedicated Trump loyalist, having gone to jail for three months during the Biden administration. He is one of only three high-ranking White House officials to have survived the entire first Trump administration. Navarro is an accomplished writer and speaker. He hit the air waves recently. Vietnam has proposed a zero-zero trade policy vis-à-vis the United States. But Navarro was not happy with that.

He said that Vietnam should remove non-tariff trade barriers established against the United States such as cheap labour. Navarro’s aims dovetail those of Trump’s. Both say that the United States has been deindustrialized and that manufacturing must come back to the US. They point to the hollowedout Rust Belt, an entire swathe of Midwestern territory from where manufacturing has moved overseas. But in economics, water finds its own level. Do Navarro and Trump really expect Vietnam to raise its labour costs? Inexpensive labour costs are the unique selling proposition for manufacturing.

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Because of cheap labour costs, China became the factory of the world. Now as labour costs are rising in China, manufacturing is moving to lower-cost countries like Vietnam and the Philippines, and to a small extent, to India. The US has high labour costs. If manufacturing moves to the States, the cost of many goods will double, even treble. Americans have whetted their appetites on cheap car and smartphone imports. It’s hard to estimate, but almost 80 per cent of the goods consumed in the US are made overseas, most notably in China. Are Americans prepared to pay $3,000 for a smart phone or $80,000 for an economy sedan? The clear answer is no. Labour costs then are the sticking point in Navarro and Trump’s argument. On this one point alone, Trump’s plans will fall flat.

The Indian government has had a golden opportunity to move manufacturing inland, often through tariffs, but its efforts have been spotty at best. India’s labour is not skilled enough, not disciplined enough, and not dedicated enough like Chinese or Vietnamese labour. The fault lies not in the people. India is a chaotic anarchy and the labour reflects that behaviour. Still, many foreign cars and even smartphones are being assembled in India. But the Indian government has to push Make in India in a big way. Today, India’s competition is not China, but Vietnam and many other East Asian countries. The truth also is that the homegrown Indian is not exposed to global best practices.

Indians who go to the West seldom come back to contribute to their motherland. Many Indian companies still conform to an ownerrun, hierarchical culture. In the face of the Trump onslaught, Western countries (other than the US of course) are considering banding together and even with China. But that effort will fail. Today the world is dominated by whites. White countries will never partner with a coloured country like China to gang up against another white country like the US. Secondly, most of the innovation in the world comes from the US, notably from Silicon Valley. Trump is not stopping the flow of highlyskilled workers into the US. These workers, along with their native compatriots, come up with most of the goods and services that the rest of the world uses.

Liberals in the US argue that the country should stick to its basics – innovation – and forget about manufacturing. But the MAGA crowd will have none of that. Trump has sold the dream of in-house manufacturing to his MAGA base, and they are going to hold him to it. Steve Bannon, Trump’s chief strategist in the first Trump administration, is virulently opposed to H-1B visas. He has clashed repeatedly with Elon Musk on that issue. Musk wants H-1Bs to continue. Trump has sided with Musk. But Bannon and the MAGA crowd are not ones to give up so easily. Interestingly, in a recent TV interview, Bannon, realizing the power of Musk in Trump’s orbit, was heard suing for peace.

Both Musk and Bannon, in different venues, have given Hitler’s Nazi salute. That is the very essence of the MAGA movement. Trump has gone soft on the UK and only levied 10 per cent tariffs on that country. He will bow to pressure and sign reasonable trade deals with other Western countries. Will he do so with India? How much will Modi bend? China, a coloured country, is squarely in Trump’s sights. But the manna of manufacturing that Trump and Navarro are proposing will prove to be a poison pill for the United States, if on nothing else, but labour costs.

How are otherwise smart and intelligent people like Navarro and Trump able to miss that? Trump has bet his entire second term on tariffs and trade wars. Tariffs are going to jack up prices for American consumers both in the immediate term and in the long term. In the immediate term, because of high tariff costs that will be passed on to the consumer. In the long term, if manufacturing moves to the US on a large scale, then because of high American labour costs. The demise of the American empire is about to become entrenched.

(The writer is an expert on energy and contributes regularly to publications in India and overseas.)