In the short run, Trump’s shake-up of U.S. alliances and his effort to end the war in Ukraine are likely to stimulate the global economy through greater fiscal spending and cheaper energy. But the longer-run effects of his quasi-imperial ambitions are more complicated and potentially less beneficial. They could make it more difficult for U.S. companies to do business globally.
Trump’s economic advisers are beginning to sketch out a strategy for a global realignment that could help to alleviate some of the globalization-induced economic woes of middle-class Americans that have been at the heart of the president’s political message. The risk is that Trump may not believe what his advisers say, or opt not to follow their advice. His willingness to undermine pro-Western leaders may weaken alliances that have kept many democracies peaceful and prosperous for decades, and accelerate an economically damaging trend toward trade wars. His constant threats of tariffs heighten the risk.
Russia’s full-scale invasion of Ukraine in February 2022 has killed tens of thousands and helped stoke inflation globally. Why, then, embrace Vladimir Putin, the autocrat who kicked off this catastrophe, as Trump has effectively done by adopting the Russian position that Ukraine was responsible for the war and insisting that Zelensky doesn’t have democratic support in Ukraine?
Secretary of State Marco Rubio offers an intellectual answer. The world is no longer unipolar, he told journalist Megyn Kelly on Jan. 30. Having one center of power that acts like a global government, as the U.S. did after the fall of the Soviet Union, “was an anomaly,” Rubio said.
“It was a product of the end of the Cold War, but eventually you were going to reach back to a point where you had a multipolar world, multi-great powers in different parts of the planet,” Rubio said.
Accepting that diffusion of power means, in effect, ceding influence over Ukraine to Moscow.
Trump’s actions can also be seen as a form of realism, says Marko Papic, chief strategist for GeoMacro strategy at BCA Research, an investment-advisory firm. The war is at a stalemate, and Putin and his nuclear arsenal aren’t going away. Trump’s rhetoric is a way of creating domestic support for unsavory interactions with Putin that are now required to fulfill Trump’s promise to end the war and achieve peace.
The president is guiding his movement toward support of what, at least in market terms, is a relatively “status quo outcome,” Papic says. The Ukraine mineral deal would give the U.S. future rights to some revenue from Ukrainian natural resources, but otherwise the battle lines remain largely where they were shortly after Russia’s initial assault on Ukraine fizzled. The deal doesn’t come with security guarantees Ukraine has asked for.
The Treasury Department didn’t respond to a request to estimate the economic value of the deal.
European leaders are outraged over Trump’s demands of Ukraine and his insistence that Europe bear the economic burden of the conflict. But Trump’s moves ironically may lead to greater political and economic cohesion in the European Union, which so far has remained largely incapable of making unified decisions about fiscal spending and military strategy.
Increased military spending in Europe could stimulate the bloc’s anemic economies. Reduced sanctions on Russia following a presumptive truce could see oil prices fall 5% to 10% and gas prices fall 25%, the asset manager Allianz estimates. Oil fell below $70 a barrel this past week as cease-fire talk ramped up.
Some Trump advisers are looking further out. They believe the return of multipolarity gives Trump a narrow window of opportunity to reshape the world in the U.S.’s favor. Trump’s starting point—U.S. economic growth that far outstrips Europe’s and China’s—looks even better than President Ronald Reagan’s in the early 1980s, when the U.S. faced recessions and an inflation crisis. Yet, Reagan struck arms deals and put the U.S. on the path to victory against the Soviets.
Treasury Secretary Scott Bessent has said he wants to advance a “global economic reordering.” He has spoken of creating a “new economic and security commons,” an idea he credits to Kevin Warsh, a former Federal Reserve official who is seen as Trump’s likely nominee to be the next Fed chair.
“Put plainly, if a country acts as a trusted security partner of the U.S. and treats American businesses and citizens as it treats its own, the U.S. will act reciprocally,” Warsh wrote in a 2024 essay. “If, however, foreign countries disfavor U.S. interests, they won’t gain the precious benefit of American protection or ready access to U.S. technology or markets.”
Bessent described that in a speech as a “trading bloc maintained by nations that don’t pursue mercantilism and share security interests that can serve as a first line of defense against the true sources of international economic imbalances.”
Trump, in this view, is making the world safer for U.S. capitalism. Those who sit within the U.S.-led bloc—including Europe, Canada, and Mexico—need to get on board with the new U.S. global strategy or find themselves outside it, while U.S. adversaries can more clearly see their limits.
The shift would ideally re-empower U.S. manufacturers and exporters, who have lost out as China and others flooded the world with cheap goods. U.S. businesses would have clear rules of the road: Work within the security zone and face few restrictions, or go outside it and face many. There would be less risk of sudden shifts, such as the need to abandon business in Russia, as happened in 2022.
To be sure, this global strategizing may amount to no more than the rationalizations and ambitions of Trump’s brain trust. It isn’t clear that Trump has any grand strategy in mind. And even if he believes in these ideas, his penchant for mocking and undermining U.S. allies, even amid active wars, could easily undermine them.
“Whatever the historic photo opportunities of Trump’s geopolitical counterrevolution, his ‘America First’ dealmaking agenda could collapse on any or all fronts, triggering dangerous new/renewed conflict risks,” wrote Christopher Granville, managing director for global political research at advisory firm TS Lombard, in a note to clients.
At home, Trump’s overtures to Putin have already alienated powerful potential allies, such as Sen. Mitch McConnell (R., Ky.), the former Senate majority leader. “ ‘Peace for our time’ is a noble end, but hope that appeasement will check the ambitions of this aggressor is as naive today as it was in 1939,” McConnell said on Feb. 24, in a thinly veiled critique of Trump.
Yet, the traditionalist wing of the Republican establishment, represented by McConnell, is in decline, both intellectually and numerically. McConnell, who has served 40 years in the Senate, announced recently that his current term will be his last.
It’s Trump’s world now. The rest of us are left to wonder whether his efforts will result in the new golden age he has promised, or take us somewhere darker.
Write to Matt Peterson at matt.peterson@dowjones.com
Source link