Michael Hudson: Trump attacks Europe, Korea, Japan, forcing them to subsidize & move industry to US

Trump plans to reverse U.S. de-industrialization by targeting allies like Europe, South Korea, and Japan, forcing them to subsidize and move key industries to the USA, argues economist Michael Hudson.

By Michael Hudson

U.S. cold warriors have failed to prevent Russia, China, Iran, and other members of the Shanghai Cooperation Organization (SCO) from obtaining their economic independence. That means keeping the fruits of their economic growth for themselves, rather than letting it be drained off by U.S. banks, investors, consumers, and the U.S. Treasury through the monetary dollar standard.

Washington’s cold warriors have been unable to stop SCO members from moving forward and becoming independent from U.S. influence. Recognizing that they are unable to prevent this, U.S. policy is focusing now on how to prevent Europe (especially Germany), Japan, and South Korea from becoming industrial rivals and hence threats — while also targeting China and BRICS.

The solution by the U.S. deep state is to turn these longtime allies into neo-colonial dependencies.

The U.S. can’t de-industrialize the SCO or install leaders in Eurasia who put U.S. demands above those of their own economics. But U.S. diplomacy can arm-twist Europe, Japan, South Korea, and other dependencies (such as the ruling DPP party in Taiwan) to relocate their industry to the United States.

These governments are still suffering from Stockholm syndrome after wars that ended in 1945 and 1953.

Trump’s dream of reversing U.S. de-industrialization involves de-industrializing its allies as rivals, turning them into subsidizers of a shrunken unipolar West, forcing them to move their key industries to the United States.

Trump’s focus on economic war against the United States’ own allies

Most discussion of the historic SCO meeting held in September has focused on the rising strength of the group’s multilateral alternative to the attempt by the United States to impose unipolar world control under its own rules.

Trump is calling for other countries to subordinate themselves to U.S. demands, to concentrate all the gains from trade and international investment in Washington’s own hands. China, Russia, and now even India are creating an alternative to this control.

Trump seems to have recognized that he has lost the ability to treat these Eurasian powers in the way that he is controlling Europe and other allies whose political leaders (if not their populations) have remained loyal to the U.S. and stuck in its geopolitical orbit.

But the failure of U.S. strategists to control the SCO and BRICS has by no means diminished Washington’s basic ideal of control. It simply has led U.S. strategists to be realistic enough to narrow the scope of this control to focus on subjecting their own allies in Europe, South Korea, Japan, and Australia.

We can now see the “grand plan” of Trump’s tariff chaos policy

The United States is trying to do what the British colonial empire did in the 19th century.

The British and French empires drained the Sterling Area and Franc Area countries, and forced them to finance British or French industry as well as military spending.

The U.S. imperial strategy of control is based on two tactics.

First is to isolate Europe and other neo-colonial countries from the SCO, BRICS, and Global Majority.

The first step was to end Europe’s trade dependency on Russian gas and oil and its increasing trade with China for industrial products. The destruction of the Nord Stream pipelines and the Ukraine War guaranteed this.

This strategy requires making Russia, Iran, and the SCO appear as a military threat – one that needs heavy support for new U.S. cold war defense. The costs are to be paid entirely by Europe, Japan, South Korea, and Australia.

The second tactic of the U.S. imperial strategy is to relocate its allies’ industry to the United States, de-industrializing their economies to rebuild U.S. industrial self-sufficiency and strenghten its balance of payments.

Trump’s over-reaching attempt to control India’s economy quickly drove that nation out of the orbit of U.S. diplomatic dominance. (Although there is still substantial neoliberal support for India to join in the Atlanticist dream.) The question now is whether such demands will have a similar effect on driving other allies out of this U.S. orbit.

This plan seems to have failed. The EU and India announced their intention to create a trade agreement, expanding their mutual trade with each other. The hope is to complete it by the end of the year.

The question is whether Trump will now raise tariffs against the EU as punishment for its refusal to break with India over its purchases of Russian oil.

Trump also has asked Japan to impose tariffs on trade with China and Russia. This would deprive Japan of the Chinese market. If Japan caves into this demand, it is hard to imagine its pro-U.S. Liberal Democratic Party (LDP) retaining power.

The subsidiary question is whether U.S. success in enforcing this control will have the effect of economically weakening its European, East Asian, and English-speaking allies to the point where their ability to remain viable contributors is fatally crippled and will lead to a nationalist reaction to de-dollarize their own economies.

The U.S. conquest of Europe

The most obvious basket case is Europe, especially the most pro-U.S. members — Germany and Britain — where public opinion polls show their populations strongly rejecting their current pro-U.S. puppet leaders.

The most immediate breaking point is the EU’s open-ended submission to U.S. demands considerably beyond what was expected, with the abject surrender to Trump’s tariff threats by EU Commission President Ursula von der Leyen.

Von der Leyen had explained that her surrender was worth it for Europe because at least it provided an environment of “certainty.” But there can be no uncertainty where Trump’s diplomacy is concerned.

Trump pulled a fast trick out of his hat by sharply raising tariffs above the promised 15% base, by dissolving that promise into his broader 50% tariff rates on imported steel and aluminum. These tariffs were to promote U.S. employment (and hence labor union support) in these two basic materials inputs, despite raising costs for all U.S. manufacturers that use these metals in their own products.

This in itself was a crazy reversal of the basic principle of tariff policy: import low-priced raw materials to provide a cost subsidy for the high value-added products of industry. Trump put narrow political symbolism over national self-interest.

What nobody anticipated was that the U.S. Commerce Department would apply these 50% steel and aluminum tariffs to European and other foreign industrial imports of motors, tools, and agricultural and construction equipment. The Wall Street Journal quoted the head of Germany’s Mechanical Engineering Industry Association (VDMA), Bertram Kawlath, as warning that “about 30% of U.S. machinery imports from the EU are now subject to 50% tariffs on the metal content of the product,” which creates an “existential crisis” for its industrialists that is so serious that the European Parliament may not approve Trump’s July tariff dictates.

A company producing agricultural harvesting machinery, the Krone Group, laid off 100 employees and is reported to be redirecting its exports already being shipped to the United States. The German affiliate of John Deere has been similarly affected, as 20% of its exports are reported as being sold in the United States. The Germans are said to be insisting on the same 15% U.S. tariff limit that Trump extended to pharmaceuticals, semiconductors, and lumber imports.

The effect of Trump’s policy has been to help right-wing nationalist parties, which are gaining support by criticizing the pro-U.S. Atlanticist parties for participating in America’s war against Russia and China, and even picking up the costs of the fighting in Ukraine, the Baltic, and other areas bordering Russia, as well as for extending “Atlantic” protection to mischief-making in the South China Sea.

The U.S. conquest of Korea

U.S. foreign policy has also imposed strains on South Korea and Japan.

After Washington demanded that Korea’s automobile company Hyundai shift production to the United States by investing in a factory in Georgia, the U.S. immigration service ICE descended on the plant under construction and deported some 475 employees (of whom 300 were reported to be Korean) who had been hired to provide the specialized labor.

Hyundai already had invested $20.5 billion in the 2,900-acre complex, and was scheduled to invest another $21 billion between 2025 and 2028, according to the New York Times. The company’s battery maker for its electric cars, LG Energy Solution, had already spent $12.6 billion on production.

Despite this, Trump imposed 25% tariffs on Korean auto exports to the United States, costing Hyundai $600 million in the second quarter of 2025.

Hyundai explained that the workers were highly trained and under the direction of contractors that the company had used in Korea in order to complete the construction speedily, and indeed to avoid the problem of having to deal with the lack of vocational education in the United States needed to supply such labor – not to mention the price differential from using Korean labor familiar with work on such projects.

A South Korean government official told the Financial Times that U.S. policy had put Korean companies in an “impossible position” by sending such labor back to Korea and denying it the kind of working-visa arrangement that was granted to Australia.

For many years, Korea had sought to get equal treatment with workers from Australia, Canada, and Singapore, but was consistently turned down, although the immigration was permitted informally – until September 5, in what turned out to be a long-planned attack by armed ICE troops arresting the immigrants in manacles.

Hyundai and other foreign firms have discovered that investments they make in the United States allow “America First” administrations to use them as hostages, setting and changing the terms of their investment at will, knowing that the foreign investors are not prepared to simply walk away and lose their costly investments.

But countries are being browbeat to make such investments as part of the financial shakedown policy that Trump has adopted.

To avoid having U.S. tariffs raised against South Korea’s automotive imports from 15% to 25%, Seoul had to spend tens of billions of dollars to shift production to the United States.

The threat was to crash Korean export income (and hence employment and earnings) if it did not surrender to Trump’s terms – with no military conflict being necessary to impose this trade-peace treaty.

The U.S. economic conquest of Japan (and hopes of re-arming it with atomic weapons)

Trump used a similar bait-and-switch shakedown policy against Japan, threatening to create commercial chaos in its economy by imposing steep tariffs on its trade with the United States if it did not pay $550 billion in protection money for Trump to invest in projects of his own choice, keeping 90% of the profits for himself after Japan was reimbursed for its capital advance.

The Japanese version of the original agreement indicated that the profits would be split, but the U.S. drafted a final version saying that that split would only govern the initial reimbursement of investment by Japan, not the profits, according to the Financial Times.

Such was Japan’s desperation – an abject surrender to U.S. demands, German-style – that it accepted Trump’s tariff deal of “only” charging Japanese exports 15% instead of 25% – the same deal that he had made with South Korea. Japan was given only 45 days to pay up.

The resulting slush fund was a political godsend to Trump, who is now able to exploit it as bait for his leading campaign contributors and supporters, while using the more than half a trillion dollars to help finance his tax giveaway to the wealthiest Americans.

Trump also demanded a kickback on Japanese investment in U.S. steel production by Nippon Steel’s $15 billion purchase of U.S. Steel. The U.S. government received a free golden share of the company’s stock to ensure U.S. control over the company’s operations.

The agreement has remained secret, but the Financial Times obtained a copy, and reported that it

reeks of coercion: a sovereign nation forced to funnel private and public-sector investment to a much richer one under a structure unashamedly directed by the US president.

Once Japan recoups its investment, it then reaps only 10 per cent of the cash flows from the project, to America’s 90 per cent. Yes, Japan has nominal input via a consultative committee into which projects are chosen, but there are no Japanese on the more powerful investment committee and it’s Trump who makes the ultimate call. Yes, Japan can elect not to fund an investment, but if it does so the US may impose new tariffs on Japan “at the rate determined by the President”.

The Financial Times reporter added that

a gloating Lutnick, appearing separately on CNBC, denied Japan even the right to make that case at home. Japan, he said, had sought to “buy down” its tariff rate with a deal that he described as “off the rails” and the most fun he had working for this president. Trump, he said, had “complete discretion” over Japan’s investments and would decide where and how he wanted Japanese capital spent in America.

In the wake of the recent SCO and BRICS meetings, it seems unlikely that countries not already closely allied with the U.S. would make any such deals as Germany, South Korea, and Japan have done so far in 2025. These agreements serve as object lessons highlighting the contrast between the U.S.-allied West and the rest of the world.

Alastair Crooke described how:

The default psychological mode of the West will be defensively antagonistic. The U.S. clearly has not been prepared psychologically to go onto any sort of equal footing with these SCO powers. Centuries of colonial superiority have shaped a culture where the only possible model is hegemony and the imposition of pro-Western dependency.

To acknowledge China, Russia or India as having ‘detached’ from the ‘Rules-based Order’ and constructed a separated non-western sphere clearly implies accepting the end of western global hegemony. And it means accepting too, that the hegemonic era as a whole is over. The U.S. and European ruling strata are categorically not in the mood for this.

It obviously is not over for America’s relationship with NATO and other new cold war allies. But it is limited to them, and Trump is seeking to extend the U.S. sphere of control to the western hemisphere as a whole – not only Latin America and Canada, but Greenland as well.

The effort needed to lock in their dependency and withstand what one would expect to be nationalistic reactions against such subservience seems to have led U.S. policy to turn away from the conflict with its declared enemies Russia, China, and Iran, at least for the time being.

The great question is whether these abused allies will at some point seek to choose a different set of alliances.

Turkey is a wild card still up for grabs. Likewise for the entire Middle East.

U.S. strategists also still hope to put India back in play, and dream of destabilizing Russia’s economy to bring about regime change.

Where do we go from here?

As an ideological policy threat, the economic logic of SCO and BRICS members is to enact strong government regulation to minimize the rent-seeking and financialization that has led to U.S. deindustrialization.

You can read more about that in this article.