US President Donald Trump is hastening the decline of the US like no other leader before him and he may take parts of the multilateral system down in the process.
He is leading his country backwards, back to the past century when the US was the hegemonic stabiliser and lender of last resort. History has shown that such a role worked most effectively when it was backed by a strong military.
Over most of the past 500 years European dominance and control of global trade has been rapacious. European individuals even “owned” territories abroad. In 1885 King Leopold of Belgium seized the Congo as his “personal possession”. On the north coast of Borneo the Brooke family “founded” and “ruled” Sarawak from 1841—1946. Those eras ended.
Yet Trump seems to imagine he too can acquire territories abroad (Greenland and the Panama Canal) and make Canada the 51st state of the US. And then there are the tariffs he imposed on imports from China — and Canada and Mexico before these were suspended.
These tariffs were imposed under the authority of the US International Emergency Economic Powers Act. White House officials have indicated that if affected countries retaliate tariff rates will be increased. But of course countries have to retaliate, even if doing so may hurt their workers and consumers. If they failed to retaliate they would look weak to their citizens, and to Trump.
Meanwhile, the US president is already planning his next moves. Though the new tariffs are bad enough by themselves, they may only be a preview of the havoc he intends to wreak on the global trading system in the months to come. Trump now has Europe in his crosshairs.
His ultimate objective, at least with respect to the tariffs, is to slap tariffs on all imports into the US, and place general levies on oil and gas, believing he will, through it all, “make America great again” and appease US anti-globalists.
What Trump has apparently not thought through — maybe he has, but has glossed over because he is anti-globalism — is the damage his actions may cause to the very system on which US power was built after 1945. The World Trade Organisation (WTO) in particular has been sidelined or completely ignored.
For some reason nobody in the US seems concerned about the future of the global trade body, or the US violating fundamental WTO rules and guidelines. This was illustrated by the 100% tariffs imposed on Chinese electric vehicles by Joe Biden. Such sanctions/tariffs against China are part of a broad Western opposition to China, at least according to Japan’s leading news agency, Kyodo.
On January 23 WTO director-general Ngozi Okonjo-Iweala warned that “tit-for-tat retaliation, whether it’s 25% tariffs (or) 60%, and we go to where we were in the 1930s, we’re going to see double digit global GDP losses. That’s catastrophic. Everyone will pay. We’ve seen this movie, as I said, elsewhere in the 1930s with the Smoot-Hawley Act”.
Okonjo-Iweala drew parallels with the period between the two world wars, when countries adopted trade restrictions in response to a US tariff act in 1930. Which, she said, made everything worse.
While China has said it will work through the WTO, Canadian Prime Minister Justin Trudeau initially announced concrete measures, including a tit-for-tat 25% tariff phased in across C$155bn worth of American products.
Trudeau pointed out that Trump had put at risk US consumers’ and industries’ access to much-needed Canadian minerals and resources, including oil, energy and timber. Presumably that played a part in Trump’s decision to suspend the tariffs.
Trump may be out of his depth, but he has no excuse for being ignorant. He is an educated man from a wealthy family and president of America. Perhaps he is misguided or ill-advised, or simply throwing stuff at the wall in the hope that something will stick. However, central to his “Make America great again” slogan is a realisation that the US is no longer great.
With reference to a conventional theory (referred to in the opening passages of this column) and historical evidence, the dollar as global currency is being challenged. The US is ignoring international institutions it created after 1945. Americans are turning their backs on globalisation. All that remains is US military power.
To be an effective hegemon you need all of those things to be in place. In November the US built four additional military bases (in the Philippines) and it maintains at least 700 others around the world. Who needs international institutions, organisations, rules, conventions and agreements when you have the biggest military machine in the world?
• Lagardien, an external examiner at the Nelson Mandela School of Public Governance, has worked in the office of the chief economist of the World Bank as well as the secretariat of the National Planning Commission.
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