Nathan Gardels is the editor-in-chief of Noema Magazine.
A revisionist state seeks to change the rules and norms of the extant world order. In recent years, we have become used to castigating China and Russia as the chief renegades in this endeavor. Now, as Princeton political scientist John Ikenberry pithily notes, another “revisionist state has arrived on the scene to contest the liberal international order … it is the United States. It’s Trump in the Oval Office, the beating heart of the free world.”
One does not quite know what to expect from the American superpower joining the axis of upheaval. Trumpism, after all, is not a consistent ideology but a mixed bag of frustrations, grievances, resentments, fears and concerns — some very real and widely shared, others conspiratorially imagined by a marginal fringe.
At home, worrying signs of the incoming regime’s illiberal proclivities have already appeared in the nasty rhetoric of retribution against domestic political enemies, the pledge to pardon Jan. 6 insurrectionists and the president-elect’s scheme to bypass sober scrutiny of his mostly underwhelming nominees for office through “recess appointment” when the U.S. Senate is out of session.
No doubt, the overdue adjustments mandated by the public at the ballot box will be the first order of business: stemming a stream of immigration that has been greater than during the famed Ellis Island years at the early turn of the 20th century and plotting a wake for the woke sentiments that have pervaded American culture and institutions.
However, on the international front, where no mandate can be claimed, every move Trump makes will be countered by others with their own intentions, interests and insecurities. They won’t so easily play along or, in jiu-jitsu manner, will seek to maneuver any blows aimed at them to their own advantage.
It is in the crosscurrents of these interactions where the success of America First policies can undermine other critical aspects of national interest through unintended consequences. This may be most clear when it comes to the interrelation between tariffs and alliances or friendly alignments in the face of geopolitical competition with China.
Tariffs Might Well Work As Intended
The standard response of conventional economic experts to Trump’s proposed tariffs is that they will cause even greater inflation than he was elected to deflate while fostering the likes of a depression not experienced since the 1930s when the protectionist Smoot-Hawley Act led to severe economic contraction.
A surprising departure from this scenario comes from Michael Pettis, a respected scholar and author of a most insightful book, “Trade Wars Are Class Wars: How Rising Inequality Distorts the Global Economy and Threatens International Peace.”
In an essay titled “How Tariffs Can Help America,” published by Foreign Affairs, he argued that economists have drawn the wrong lessons from the failures of the 1930s.
“Tariffs are neither a panacea nor necessarily injurious,” he wrote. “Their effectiveness, like that of any economic policy intervention, depends on the circumstances under which they are implemented. Smoot-Hawley was a failure at its time, but its failure tells analysts very little about the effect that tariffs would have on the United States today. That is because now, unlike then, the United States is not producing far more than it can consume. Ironically, the history of Smoot-Hawley says a lot more about how tariffs today would affect a country such as China, whose excess production more closely resembles that of the United States in the 1920s than does the United States of now.”
He continued: “Americans consume far too large a share of what they produce, and so they must import the difference from abroad. In this case, tariffs (properly implemented) would have the opposite effect of Smoot-Hawley. By taxing consumption to subsidize production, modern-day tariffs would redirect a portion of U.S. demand toward increasing the total amount of goods and services produced at home. That would lead U.S. GDP to rise, resulting in higher employment, higher wages, and less debt. American households would be able to consume more, even as consumption as a share of GDP declined.” More domestic supply, along with enhanced purchasing power at home, would also serve to dampen inflation, though that would take some time.
“Even those who rightly oppose the creep of illiberal democracy must be prepared to acknowledge that Trump’s trade tax might well work as intended.”
In other words, even those who rightly oppose the creep of illiberal democracy must be prepared to acknowledge that Trump’s trade tax might well work as intended. Economic prospects could also be enhanced by further unleashing the animal spirits of technological innovators, as suggested by his newfound partnership with Elon Musk and the other silicon billionaires. How could getting it right go wrong?
Achieving China’s Key Strategic Objective
If Trump’s tariffs were aimed solely at China’s export of its overproduction to the U.S., it would fit with his administration’s other top objective of blunting the rejuvenated Middle Kingdom’s rise as a strategic threat.
But, to the extent such tariffs are part and parcel of a new isolationist mentality that applies elsewhere in Europe and Asia — even to neighbors such as Mexico and Canada — the effect would likely be the opposite. It would help China achieve one of its key revisionist objectives it cannot accomplish on its own: eroding confidence in the system of alliances and alignments around the world that secures the continuing dominance of U.S. power.
This is one reason why a top Chinese strategist, Yan Xuetong, recently argued that the leaders in Beijing “do not look at Trump with fear.”
The Chinese well understand, he wrote, that “in great power competition, foreign policy often plays second fiddle to domestic policy.” And so, starting with Trump’s first administration through that of Joe Biden, China has been preparing for enduring hostility from whoever occupies the White House. It has thus been reorienting its own priorities toward more domestic consumption, alternative trade relations with the global South and, as we’ve reported in Noema, reinvigorating the economic fortunes of the vast Eurasian lands reaching to Russia. At the same time, the Chinese have sought inroads within European, East Asian and Latin American economies fractured by their dependence on China’s market and supply chains or infrastructure investments. The country’s leaders seem prepared as well to hit out with their own tit-for-tat sanctions against the U.S. wherever it might hurt worst.
Despite punishing tariffs coming its way, Beijing sees more strategic opportunities opening up with Trump than with Biden because, as Yan put it, “Trump’s political isolationism — the diplomatic counterpart of his economic protectionism — may lead the United States to reduce its investments in protecting traditional allies. The president-elect has long berated U.S. allies for riding on the coattails of U.S. power and largesse.” In tandem with tariffs on friends, this loosening of ties that bind “may drive U.S. allies, both European and East Asian states, to see the merits of hedging between China and the United States.”
The playing field will then surely have been leveled, but not in the one-directional way Trump seems to expect.
In effect, the success of the America First agenda would paradoxically serve to diminish the weight of the U.S. in the global balance of power, not unlike how Brexit markedly demoted the presence and prestige of Great Britain on the world scene. That is the very revision of the liberal world order the other axes of upheaval have long sought.
