Donald Trump continues to amaze, enrage, and confound people with his actions and pronouncements. There have been few, if any, American Presidents like him. Lyndon Johnson once exhibited his post operation stitches to journalists which shocked them. Nixon was on the border of mental breakdown as later memoirs revealed. But, Trump is the first President who has broken all the conventions. This has made people think he is stupid as well as dangerous. Initial dislike at his surprise election led people to think he could be removed quickly by impeachment. But, here he is two years down the line and popular among the Republicans running for the midterm elections with many (myself included), predicting he will get re-elected.
If we are to think about Trump seriously, we have to look beneath the noise at the signals Trump is generating. Thus, when last year, he issued dire threats to Kim Jong-Un, and Kim responded in like terms, there was a fear that Trump was about to unleash a world war. But, Trump knew what he was doing, and also the language that Kim would understand. Now, we are witnessing a real breakthrough on the Korean front sixty five years since the Armistice; Trump meeting Kim in Singapore in June. The world is to witness the settling of a very tough diplomatic problem which has been troubling Asia and the world. Previous Presidents tried conventional methods and only succeeded in driving North Korea to a nuclear power status. Trump is proud of his deal making ability. We now see that his methods of deal making are unconventional, but they achieve their objective. People are used to transparent, almost linear, approaches. Trump plays non-linear games. He knows where he wants to go but does not take the direct route.
His tariff war is another example. Until he became President, the idea was that the world was interconnected and that the USA was to guarantee a liberal trading environment by its willingness to supply global public goods such as free movement across oceans and military security for America’s allies. Trump disagrees. He sees America as threatened by China’s challenge for the number one spot. Therefore, he wants to take on China in a bilateral tariff war, whatever the collateral damage. For Trump, the world is not interconnected, but a series of bilateral relationships – with China, EU, NAFTA, Japan, and Iran, amongst others. Trump wants to renegotiate all the treaties and agreements signed before he became President because he thinks he can get a better deal. He especially wants to do what Obama did, whether in domestic legislation (Obamacare), or internationally, like Iran, for instance.
Given this bilateral perspective, Trump has declared that he wishes to reopen all the old treaties. He is renegotiating NAFTA. He wants European members of NATO to pay their proper share towards defence expenditure, especially Germany with which America runs a trade deficit. He has begun a tariff war with China, which also impacts the European Union as he sees it as another antagonist on the trade front. He is not a free trader. Wanting America to be great again, requires Trump to be a mercantilist. He suspects the other countries have been free riding on American benevolence. Having spent a lot of resources policing the global trade system, Trump wants America’s money back. Here again, he is seeking a deal or rather two bilateral deals – one with China, and the other with the EU.
His move on Iran is one that will affect India the most as oil prices will rise. India also does business with Iran, and if US sanctions are to be re-imposed, India could be hit. I expect, however, that it will never come to that. The other signatories to the Iran agreement will scramble together a new agreement to stall Trump from an active war. Of course, in the Iran case, the Sunni kingdoms are egging Israel and America to contain Iran. The Israeli-Saudi alliance is a newcomer and it could be what Trump has been encouraging. Yet again, like in the Korean case, war is feared but Trump will manage a new dialogue on the two-state solution in an indirect way.
The most surprising fact is that while Trump came complaining about the state of the American economy, it is booming like it has not done in more than ten years. Employment, especially among African American workers is at its highest level. Inflation is low and the stock market is booming. He must be doing something right. It is just that no one wants to believe him. Missing the signals could be very damaging. Trump may yet be a great success.
Prominent economist and Labour peer