The myopic Mr Trump

European newspapers today lead with the story that Donald Trump has disassociated the US from the communique agreed at the G7 summit in Canada. There did not seem to be anything particularly controversial in the communique which, amongst other things, “acknowledge[s] that free, fair and mutually beneficial trade and investment … are key engines for growth and job creation. We … underline the crucial role of a rules-based international trading system and continue to fight protectionism. We will work together to enforce existing international rules … to foster a truly level playing field.” In short, everything that that the international community has endorsed for the past 70 years.

Then this

 

which is an ad hominem attack on a fellow G7 leader – and a good neighbour to boot.

This, of course, comes after the US imposed tariffs on steel and aluminium imports, which affected Canada and the EU. It follows the unilateral US decision to walk away from the Joint Comprehensive Plan of Action designed to slow the rate at which Iran develops its own nuclear capacity – something by which the EU has set great store. More damage has been done in the last couple of months than at any time since the 1930s to the global order which has underpinned economic prosperity and stability since 1945, as European leaders realise that they can no longer trust a US leadership which puts its own interests first in such a naked way. There is, of course, nothing wrong with putting your own interests first – all nations do. But the way to do it is in the conference hall behind closed doors. In any case, the US has the clout to get its own way most of the time. But capricious decision making, of the kind demonstrated by Trump, destroys trust and it will cause a rethink on the global stage.

It puts the UK in a particularly difficult position. The British government has long believed that it has a special relationship with the US and that it could turn to it for some support in the wake of Brexit (there again, most nations think they have a special relationship). Trump’s actions of late have confirmed what some of us thought all along – the UK cannot rely on the US. I will deal with the ramifications of last week’s Brexit events in my next post but it is now clearer than ever that the UK’s future lies with Europe – for better or worse. The government will thus have to think very carefully about whether and how it wants to loosen ties with the EU at a time when geopolitical threats are rising and the degree of competition from the likes of China are intensifying. This makes Boris Johnson’s recent (leaked) remarks about Trump all the more interesting. “Imagine Trump doing Brexit … He’d go in bloody hard… There’d be all sorts of breakdowns, all sorts of chaos. Everyone would think he’d gone mad. But actually, you might get somewhere. It’s a very, very good thought.”

It’s a very, very bad thought for many reasons. Not the least of which is that the UK does not have the clout of the US. And as Louis Staples put it in The Independent, “What is most worrying here is that Boris seems to admire the chaos that encircles Trump. Suggesting that a man who simply can’t decide whether he wants a summit with North Korea or not, and whose shambolic and widely condemned decision to move the US embassy in Israel to Jerusalem … shows borderline contempt for the wellbeing of UK citizens and those abroad.”

What about the rest of Europe? There has been mounting concern for some time that the US has been throwing its weight around to excess. There is, for example, a lingering grievance that European banks were singled out for transgressions by the US authorities in the wake of the financial crisis and were slapped with heavy fines. There is also concern that the US is increasingly willing to exert its financial muscle by putting pressure on countries using the dollar to process transactions which run via the US financial system, if they fall foul of the US government’s policy objectives. Moreover, the US can impose extraterritorial or “secondary” sanctions by refusing to do business with a company that does business with a blacklisted party. If Europe continues to feel bullied in this way, it can and will do more to encourage the use of the euro as a means of international payment. Also, the inexorable rise of China means that its currency will eventually become part of the global reserve system resulting in a diminution of the dollar’s role (another subject I will deal with at a later date), and with it a reduction in the US’s ability to exert its financial muscle.

 As The Economist put it this week, “In the short term some of Mr Trump’s aims may yet succeed … Yet in the long run his approach will not work. He starts from false premises. He is wrong to think that every winner creates a loser or that a trade deficit signifies a “bad deal”. He is wrong, too, to think that America loses by taking on the costs of global leadership and submitting itself to rules On the contrary, rules help deter aggressors, shape countries’ behaviour [and] safeguard American interests.” In short, all this posturing may help Trump's poll ratings but he will not be the one who has to pick up the pieces when it all goes wrong.