Early on Sunday, I started to write a piece about global trade and it ended up morphing into a long-winded rant on the extent to which conservatism is an antiquated ideology that is increasingly incompatible with modernity.
When I started that post, my initial goal was to communicate how insane it looks to large swaths of the public when the people who are elected to look out of for the public good end up making policy that, by virtue of a misguided belief in ideals that are out of touch with the modern world, end up setting everyone back and generally pushing the world in a direction that isn’t conducive to the greater good of humanity.
I’ve said this repeatedly and I’ll keep saying it: you cannot turn back the clock on globalization and more to the point, you shouldn’t want to. I’m not at all convinced that there’s much long-term utility in adopting policies aimed preserving national “identities” and/or strengthening artificial boundaries that inhibit multiculturalism and progressivism. “Identities” are important to the extent they represent rich cultural heritages and customs. “Identities” based on arbitrary lines drawn on a map are not the same thing.
Pushing a nationalist platform in today’s interconnected world is an exercise in futility, but more importantly, it perpetuates the idea that we should subjugate what’s good for humanity to what’s good for “us”. At the micro level, that’s a necessary part of surviving. Self-interest is what keeps us alive. But the further out we pan, the less sense that makes.
Trump’s posture on global trade is an example of policy that sets the world back. He’s trying to turn back the clock and he’s managed to create a sense of nostalgia among some of his supporters for a “great” yesteryear. Even if we assume that’s desirable or that there is something “great” that’s been lost (see here for more on that), it’s a pipe dream. Trump cannot singlehandedly restore American manufacturing, he cannot make coal “beautiful” and “clean”, and he cannot bully the world into acquiescing to something nobody is on board with. Indeed there’s a certain irony in the whole premise. If America really isn’t “great” anymore and we’re really as weak as Trump claims, well then why should we all expect that a burgeoning hegemon like China is simply going to bow down to a not-so-“great” has-been hegemon? Oh, that’s right: it’s because Xi Jinping – the most powerful Chinese leader since Mao – is going to be in awe of Donald Trump the reality TV show host. That is laughably absurd. As Bjarne Knausgaard put it last year, “everything is explicit, but the plot cannot be taken seriously.”
Well just to give you a little visual perspective on what it is Trump’s trying to undo, have a look at this chart from Barclays:
It took 71 years to get to where we are in terms of trade openness and now we’re going to risk throwing it all away, for what? For Donald Trump and his promise to the American middle class who, by the way, Trump wouldn’t piss on if they were on fire.
But beyond that, this is a threat to the ebullient economic backdrop that’s helping to fuel the global rally by serving as one of the two pillars of the Goldilocks narrative. Here’s Barclays:
Protectionism and its adverse effect on the global trade system have been one of the key concerns in a ‘Goldilocks’ environment of favourable economic developments and rallying financial markets. The aggressive rhetoric on trade of the US started to turn into action this week, as President Trump’s approved ‘safeguard’ tariffs on imported solar panels and washing machines. Later, Treasury Secretary Mnuchin and Commerce Secretary Ross indicated at the World Economic Forum in Davos that further such trade measures could be forthcoming, while also criticising the WTO in principle. President Trump’s speech at Davos struck a generally conciliatory tone on trade, but also lacked any specificity to meaningfully alleviate concerns. In parallel, the NAFTA re-negotiations entered their sixth round this week, with growing risk of collapse, as the US will present its response to Mexico and Canada’s suggestions this Monday.
Will this deteriorate into an actual trade war? Or, more poignantly, is Donald Trump about to try and send the world stumbling backwards in time in the interest of being able to say “hell, I tried” when flyover America asks why nothing has changed for them three years from now? For Barclays, the answer is probably not, but the bank does say this:
We continue to believe the US administration will want to avoid deterioration into a trade war. However, the coming months will show whether this view could be too sanguine; markets will watch for the next steps in: NAFTA negotiations, additional trade actions by the US (eg, on steel and aluminium) and potential retaliation measures by China, as well as a possible turn of the US towards challenging its KORUS deal with Korea and a looming fight over the refusal of the US to grant China ‘market economy’ status in the WTO.
Let’s hope the worst case scenario doesn’t play out here. Put away your jingoism for a minute and ask yourself if you honestly believe that rolling back what you see in the chart below is really going to help middle America…