Nathan Gardels is the editor-in-chief of Noema Magazine. He is also the co-founder of and a senior adviser to the Berggruen Institute.
What pushed the MAGA momentum across the majoritarian threshold at the ballot box was the price of eggs.
I don’t mean that literally, of course, but metaphorically. Countless voters told pollsters during the election campaign that, while not entirely sympathetic to the Trumpist agenda, they were more concerned about the rising cost of living, which the presidential candidate promised to fix. So, overlooking the rest — including repeated pledges to launch a global trade war — many gave him the benefit of the doubt.
All they are left with now are doubts, deepened by the self-inflicted damage carried out in their name, without the benefits.
For now, uncertainty perpetually unsettles markets, which gyrate one way or another every other day depending on whether the commander-in-chief is pushing the fast-forward or pause button at the Resolute Desk.
Trillions of dollars in wealth have evaporated so far, including from the retirement portfolios of millions of working and middle-class Americans. Markets have only partially recovered due to the 90-day tariff pause but are poised to plummet again when they resume. Investors across the world are abandoning U.S. Treasury bonds, which had long been regarded as among the safest and most trusted stores of value anywhere.
The cost of living is set to inflate significantly across the board while a recession on the order of the Covid years waits in the wings.
In anticipation of foreign retaliation and the disruption of supply-chain lifelines, layoffs in the auto industry are already rolling out across the very upper Midwestern states that were decisive to Donald Trump’s election victory. Facing the stiffest tariffs, China is rewarding Trump’s rural voters in the central plains by cutting off the massive flow of soybeans and other imports from American farmers.
All this is a stunning case of how, in a democracy, the seeming sanity of making choices based on immediate self-interest at the retail level can add up to wholesale madness.
In one sense, you can’t blame an electorate conditioned over the years to expect that bombastic campaign rhetoric will morph into moderation once politicians arrive in power. Mostly, inhabiting the White House has entailed rising to a measured sense of responsibility.
This time around is different. Emboldened instead of humbled by the possession of power, Team Trump is maximally leveraging its mandate to strike out on everything, everywhere all at once with a reckless ineptitude rarely seen at the highest level in mature democracies.
When all is said and done, Trump is only able to wreak havoc from on high because the voters put him there. Ultimately, the buck stops at the ballot box.
As a superpower with tendrils of interdependence spanning the globe, what happens in America doesn’t stay there. American democracy has upended the world economy.
Tariffs Are An Act Of War
Warren Buffett, the great master of value investing who has lucratively navigated the global economy for decades, said recently that “tariffs are an act of war, to a degree.” They are a hostile act aimed at coercing other powers to accommodate your interest at their expense.
The higher the degree of tariffs between trading partners, the more intense the hostility becomes and the more it bleeds into all else — not least by unraveling security alliances among friends and feeding the impetus for hot wars with adversaries.
Whatever Team Trump’s customized negotiations with countries around the world might yield in the coming months, the core geopolitical reality going forward is that the aggressive 145% tariffs on China and its angry retaliation in kind and scope amount to a war mentality between the two largest powers on the planet. Everyone else will, in some form or another, seek to “de-risk” their relationship with both while diversifying trade relations among each other.
Once decoupled economically, there is little incentive for either the U.S. or China to keep their fists in their pockets and reach a compromise when push comes to shove.
Stability Vs. Steady Disruption
This warring cast of mind will play out differently in the United States and China. What most differentiates the two powers is the contrasting political environments of stability versus steady disruption.
In China, the one-party state’s leadership is unleashing a “whole dragon” approach that mobilizes all aspects of society, business and government to respond as a unified collective to the American assault. Once the course is set, a largely competent administration will stick to it over the years with discipline, unencumbered by courts, elections, carping media or a disgruntled public. In the Middle Kingdom, the buck stops at the Politburo.
“American democracy has upended the world economy.”
We all know, of course, that this apparent strength of an authoritarian system is also its chief vulnerability. We saw during the Covid crackdown how necessary course corrections are impeded when feedback signals are suppressed.
By contrast, in the U.S. we will see ongoing resistance to President Trump’s policies from various state governments, the courts, civil society and business, not only on trade issues but on all the rest, from downsizing government to climate retreat to the dismantling of DEI. High-profile splits will appear within the ideological tangle of Team Trump, as we already see between Elon Musk and the chief trade strategist, Peter Navarro, whom the world’s richest man has publicly called a “moron” and “dumb as a sack of bricks.”
As the costs mount before any benefits can materialize, midterm elections for Congress will register popular disaffection, not least among those who thought electing Trump would bring down the price of eggs.
While the aim of Team Trump’s tariff strategy is to tame the China juggernaut and bring manufacturing back to the U.S., Keyu Jin, author of “The New China Playbook: Between Socialism and Capitalism,” points out that the tariff war will also result in reshaping China’s industrial structure, likely strengthening it further.
“Technological leaps are rarely born in comfort,” she wrote recently in the Financial Times. “They are forged in conflict, competition and necessity. From nuclear energy to the space race, and now the unfolding artificial intelligence rivalry between the U.S. and China — innovation accelerates when the stakes are highest.
U.S. President Donald Trump’s catastrophic tariff war may inflict serious economic pain on China, but it could also ignite a technological surge — not by design, but by necessity. Although China’s most urgent economic challenge remains internal, 145% U.S. tariffs give Beijing a clear pretext to act — to stimulate aggressively, subsidize strategically, sharpen its survival instinct and double down on technological supremacy.
If Washington’s aim is to suppress China’s rise, it’s going about it all wrong. Tariffs don’t just alter trade flows — they redirect resources and reshape industrial structures.”
As we have written before in Noema, most recently with respect to DeepSeek’s open-source AI model that matches the best of American Big Tech, it is a comforting myth in the West that China can’t innovate. As Jin points out, efforts to keep a capable nation like China down don’t so much stymie as stimulate its persistent rise.
The fate of the U.S.-led campaign against Huawei is another case in point. Instead of being crushed by concerted Western efforts, its net profits doubled last year.
After a recent visit to China, Tom Friedman wrote, “I’d never seen anything like the new Huawei campus. Built in just over three years, it consists of 104 individually designed buildings, with manicured lawns, connected by a Disney-like monorail, housing labs for up to 35,000 scientists, engineers and other workers, offering 100 cafes, plus fitness centers and other perks designed to attract the best Chinese and foreign technologists.
The Lianqiu Lake R. & D. campus is basically Huawei’s response to the U.S. attempt to choke it to death beginning in 2019 by restricting the export of U.S. technology, including semiconductors, to Huawei amid national security concerns. The ban inflicted huge losses on Huawei, but with the Chinese government’s help, the company sought to innovate its way around us.”
Not only did Huawei come out this year with a globally competitive triple-folding smartphone powered by locally fabricated advanced chips, but it has also moved rapidly into integrating AI into industry — a long-standing objective of President Xi Jinping’s “internet plus” strategy initiated over a decade ago.
As Friedman reports, “The company also went into the business of creating the A.I. technology for everything from electric vehicles, self-driving cars and even autonomous mining equipment that can replace human miners. Huawei officials said in 2024 alone, it installed 100,000 fast chargers across China for its electric vehicles; by contrast, in 2021, the U.S. Congress allocated $7.5 billion toward a network of charging stations, but as of November, this network had only 214 operational chargers across 12 states.”
When it all shakes out, the global trade war comes down to a war between two governing systems, a test of which will end up on the winning side of the future. The outcome, far from a foregone conclusion, will have world-historic implications.
