The incumbent Trump administration’s policies to actualise its own invention ‘Make America Great again’ (MAGA) are ahistorical in so far as these represent the administration’s misreading of the American rise since the World War II. The strength of US economy has ever since been largely contingent upon the global public goods it provided to other countries and the confidence it inspired among them to play according to its playbook embodied in international liberal norms, financial institutions and currency ensuring lucrative returns back home.
The US-led international economic order set rules for international trade, ensured secure navigation in air and seas, sought to secure economies from uncertainties and provided stable currency for business transaction and secured savings.
By heralding as well as by throwing its weight behind the liberal international trade order, the US could maintain control over other states’ economy and security policies through legitimate channels without having to use coercive power. The US through this economic order also ensured that most economies derived the benefits of growth without succumbing to the threat of large-scale instability as well as the order facilitated integration of smaller economies with bigger economies through trade and investment.
The sense of financial security the US provided turned it into the most attractive destination for trade and investment. This apart, the security partnerships that the US forged around the globe not only intended to provide military security to the allies but these aimed at integrating the partners with the US economy through trade of its weapons, energy and industrial products including making profits from the payments the allies made for hosting American troops.
The US profited from the liberal international system by granting long-term loans, its corporate sector and workforce thrived by receiving massive foreign investment, acceptance of US technical and legal standards among the countries leveraged the US-based producers and profits were also derived from most states’ reliance on the financial system that the US provided for global transactions and reserves.
US is Tearing Apart the Order that Privileged It
Trump administration’s reckless efforts to break apart the US-led international economic order are likely to have bitter impacts on allies and partners including the US itself while its long-run adversaries such as Russia and China would benefit the most even as President Trump tries to financially rub these countries harsh. The allies and partners would face the hit because they are more dependent on US for trade, investment and greatly integrated with its supply chains.
The allies and partners have placed a larger share of their savings in US treasuries for much longer duration. They have been led to believe that they can sell their products more competitively in American markets, safely invest in production in the US and save their assets and move their savings out from US Treasury bonds with flexibility. Apart from raising uncertainties surrounding the stability of US financial system, market and currency, the Trump administration has also slashed funds for foreign aid and development that is likely to impinge on the financial stability of allies and partners.
As the US is pressuring its partners, allies and adversaries alike to look for alternative sources of trade and investment, dollar will begin to lose its weight under the incumbent administration making the assets of different countries in the US less secure.
However, China’s economic resilience allows it the capability to self-insure its economy providing with alternative markets such as those of US allies and partners scoured by the Trump administration. They will likely bet on China in the areas of trade and investment. The US is unlikely to rankle China beyond a limit with higher tariffs because the former depends on the latter for critical minerals and magnets. Russia under repeated US sanctions has, over time, developed its supply chains for its energy resources and positions itself to secure more partners as the US forces its own allies and partners to cross the Rubicon considered redlines under earlier administrations. Until Trump administration stops dissembling others by presenting concocted financial statistics and facts removed from historical context, the allies and partners will be forced to take steps to self-insure themselves.