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The Policy of Rethinking

Donald Trump's new world order is more like disorder, and his policies bring with them a raft of unintended consequences

by Christian Rocca
10 January 2019
11 min read
byChristian Rocca
10 January 2019
11 min read

The capacity to anticipate the geostrategic moves of Donald Trump’s America is beyond any human or even artificial intelligence. All the more so now, as we are about to enter the second half of Trump’s first term, the two-year period 2019-2021, with a new congress and a House of Representatives led by Nancy Pelosi’s Democratic Party, which is not only unwilling to support his policy agenda but also looks set to keep the White House legal team and advisers busy with some ninety grueling investigations into the President’s actions. America has suddenly become unpredictable, and the reason is that the Trump doctrine is Trump himself - Trump First, we might call it, albeit supported by the nationalist pillar of America First - and his aim is to restore America’s lost greatness, in other words to Make America Great Again. One day the U.S. President declares a trade war on China, the next day he signs a truce; first he tears down the North American Free Trade Agreement (NAFTA) and then drafts a new, almost identical one with a different name, USMECA; he re-imposes sanctions on Iran, but then grants waivers to allied nations that have trading links with Teheran. In every area where American geopolitical interests are involved, from North Korea to the politically sensitive issue of his relations with Vladimir Putin’s Russia, confusion reigns. The only constant, at least at the time of writing, seems to be the solid alliance with Saudi Arabia, America’s longstanding strategic bastion. After Barack Obama’s attempt to shift the American-Saudi axis in the direction of Iran, Trump has returned to a more traditional security and energy policy. But this is where certainty ends. Trump is trying to build a new world order - although it seems more like a world disorder - the outlines and consequences of which are as yet unclear.

A world in quest of alternative models

The world we know was established seventy years ago based on America’s strategic insight that the most effective way to lead the world and secure social progress was by guaranteeing the free movement of persons, goods and ideas, and by spreading democracy. After 1989, that world extended to Eastern Europe and Asia, albeit with some limitations, and even made some tentative inroads into Africa, bringing shared well-being and improving the living standards for several billion people. Today, this model is facing a crisis, as it is not necessarily well suited to dealing with the far-reaching transformations of the global economy caused by the digital age and the growth of China. Trump might actually be the symptom rather than the cause of the problem. Whether or not he is the cure is too early to say. Be that as it may, while there are still no alternative models to the current system, Trump is proceeding to tear down the structure of relations, alliances and multilateral institutions that constitute the underpinnings of the world that emerged in the aftermath of WWII. Because he believes that structure is not useful for serving the principle of America First, he has embarked on a series of actions that include treating the G7 with contempt, tearing down the World Trade Organization (WTO), declaring trade wars against longstanding partners, engaging adversaries in dangerous conflicts, fueling tensions in the Middle East, from the Qatar issue to the question of Jerusalem, and even initiating two nuclear crises simultaneously, thereby violating one of the golden rules of American foreign policy which holds that the U.S. should not start a nuclear crisis on more than one front at a time. Trump’s iconoclastic fury has shattered this cornerstone of America’s national security, first by withdrawing unilaterally from the nuclear deal with Iran and then by meeting with the North Korean dictator Kim Jong-un, from whom he seems not to have obtained any more in return than what had already been formally agreed in 1990, with meager results. Trump is convinced he is a genius deal-maker, as he wrote in his book The Art of the Deal, i.e., the art of making deals that are actually good deals. He believes that the deal signed by President Obama and European leaders with the Iranian regime is very bad and that he can achieve a better one by using economic sanctions as a stick. This is more of an adolescent reflex action than a coherent doctrine, and its consequences on the world we live in are still unknown.

The issue of global trade is even more emblematic of Trump’s way of handling international issues, and potentially the one that will have the greatest impact. At the June 2018 G7 summit held in Canada, Trump initiated four trade wars simultaneously: one against China over America’s trade deficit, one against Mexico and Canada over the North American Free Trade Agreement (NAFTA), one against Europe and the rest of the world over tariffs, and one against the World Trade Organization over the rules of international trade. A few months earlier he had also withdrawn from the trade agreement with eleven Pacific countries, all of which are now ready to consider what China has to offer. Six months later, before and during the Buenos Aires G20 summit, he signed a new version of NAFTA, as Canadian Prime Minister Justin Trudeau defined it, and negotiated a trade truce with Chinese President Xi Jinping. This is Trump’s classic business model, upping the stakes and threatening “fire and fury” from a dominant position, to cite his words with reference to North Korea, and then getting the most he can, almost a surrender, from a deal with his adversaries. But the rules of geopolitics are not the same as those governing the real estate business and, we might add, even during Trump’s real estate years, his business ventures were not always brilliant successes.

Geopolitical Payback for China and Russia

Trump’s emotionally-driven policies are threatening to subvert the system of which, right up to his presidency, Washington was the guarantor and main beneficiary, along with its allies. The paradox is that those who stand to gain the most from this change in approach are not the United States, with companies like General Motors announcing layoffs and delocalization decisions, or the American consumer, who will see the price of many goods rising as a result of the protectionist backlash, but Russia led by Vladimir Putin and China led by Xi Jinping, the two chief adversaries of the United States and the main challengers of the post-WWII global order. Putin is reaping the benefits of his successful strategic campaign to divide the West and fuel global chaos, as he awaits the outcome expected in the coming months of the investigation conducted in Washington by Special Counsel Robert Mueller and the House Committee to determine the extent of the Trump team’s involvement in putting into action the Kremlin’s plan. As Barack Obama’s National Security Adviser Susan Rice suggested, there is no evidence that Putin is dictating America’s policy agenda, or that he did so in the past, but if that were the case it would be hard to imagine a better result for the Russian leader.

China, for its part, is attempting to fill the political and trade vacuum left by Trump, and is actively courting Europe, first and foremost, but also Japan and other Asian nations. The President has still to roll out his grand plan to rebuild America’s infrastructure, which is currently below standard for a superpower like the United States but which, with the new Democratic majority in the House, could be put back on track. In contrast, Beijing is financing the new analog and digital Silk Road. This project, involving the construction of highways, bridges, high speed trains and a fiber optic cable network for Internet connectivity, built with 5G technology, will boost links between Chinese-led Asia and Western Europe and Africa. Obama made his own contribution to China’s growing power by allowing Beijing to build new artificial islands in the Pacific that have become Chinese military outposts in waters where the American Navy has been protecting sea routes for over fifty years. There is a risk that in decades to come control of trade will shift from the Americans to the Chinese, particularly when it come to digital communications, and it is not the same to have the rules of engagement dictated by Beijing’s authoritarian regime rather than the world’s greatest democracy. Clearly, there is still the possibility that all these tensions will be resolved, on the economic, political and nuclear front, but as each day goes by, it seems increasingly unlikely that Trump will backtrack, or that the European and Asian allies will continue to put up with the President’s erratic behavior, or that China and Russia will decide not to take advantage of the global chaos that they have partly contributed to but which Trump has handed to them on a plate. All the more so since Trump is going to be kept busy by the Democrats and various investigations, defending himself against the accusations of collusion with the Russians and the use his institutional position to bolster his personal business.

A booming economy and the energy driver

Trump can rely on a thriving economy and a stock market boosted by his tax cuts. He also claims that the global order works to the disadvantage of the United States, knowing all too well that American voters like this kind of message as they struggle to cope with the delocalization of factories and technological innovation. The President thus still enjoys support even after the poor midterm results, an indication that Trump’s election was not an accident of history. The measure of America’s troubles, according to Trump, is the balance of trade. If America imports more goods than it exports, that is unacceptable: the balance has to be restored and there needs to be reciprocity. Most economists, however, believe that the trade deficit is a misleading indicator of whether or not trade deals are beneficial to the countries that sign them, partly because the gap between imports and exports is determined by macroeconomic factors rather than by trade policies. Moreover, Trump’s calculation of America’s trade deficit, which stands at USD 800 billion, only takes into account goods and not services, including financial services, in which the United States runs a surplus.

Finally, there is the difficult issue of energy. The Trump Administration is seen as being very close to the energy industry based on a series of policies, including favoring exploration and drilling, doing away with environmental regulations imposed by Obama on automakers, supporting infrastructure development, including oil and gas pipeline projects, and withdrawing from the Paris climate agreement. But that is not exactly how it is: Trump’s policy favors consumers. Via Twitter, Trump has put a great deal of effort into keeping oil prices low, probably winning political support from Saudi Arabia as a result and taking the credit for the reduction. This is despite the fact that low prices are damaging to the American shale gas industry whose costs are higher and which, in order to be economically sustainable, needs higher final prices. Ultimately, Trump is unpredictable on everything, including energy issues. Whether this is a good thing or not, we can only wait and see.

Author: Christian Rocca