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Trump's weekend of geopolitical success
Lots of headline announcements from Trump himself, and the biggest one in terms of the markets is not necessarily something you'd call a success. It's more a backtrack, but a useful backtrack nonetheless and one that we're all glad to see. Trump, of course, kicked off this global trade war with pretty much everyone, but especially with the Chinese, where he was essentially talking about a decoupling between the two largest economies in the world, raising tariffs against China to 145%, meaning nobody's going to buy any goods from China. Chinese doing the same against the Americans, raising up to 125%.
China was not going to pick up the phone to call Trump, and he was surprised that they hit back. He thought that this was going to lead to a negotiation and much more careful caution from the Chinese. As you saw from a lot of American allies around the world, not the case. And so, not only did he get his own administration to respond and talk with the Chinese and say, "We'd like to engage in person." But also sent Treasury Secretary Scott Bessent and Jamieson Greer, US Trade Rep, by far the most capable on the trade side that are senior and report to Trump.
And after a couple of days of meetings in Geneva, we've got 90 days off, and we have 125% off the American tariffs. So, we're at, what? 30% or 115% off, or 30% for the Americans, 10% for the Chinese. In other words, trade can happen again. And a joint statement from the US and Chinese governments, which is very rare under any government, frankly, with China, certainly with an adversary, to show that there is no daylight on the desire to pull back against decoupling, and also to engage directly between the two countries over the coming months to try to ensure that these trade gets to a mutually more respectful place.
Now, what's interesting is Trump had been trying to push so many allies around the world to align with the US on decoupling from China as part of the trade negotiations, that obviously, that piece of the negotiations isn't going to move anywhere. Japan pushed back, most countries aren't interested, certainly not the Europeans. Now, it's not really going to be credible, and I think Trump will quietly drop it, and the markets of course shoot up as a consequence of that.
So, two steps forward, two steps back. We're kind of where we were before Liberation Day on US-China. Yes, there are some additional sectoral tariffs, and this is going to be costly. But on the bilateral relationship, frankly, not an enormous amount has actually changed. Okay, so that's not a win.
What do I mean that he's had successful time on the global stage? Well, internationally, there've been a bunch of wins. India, Pakistan, significant escalation on the back of this Kashmiri terrorist incident, with lots of Indians getting killed, Indian civilians. The Indians respond by hitting Pakistani terrorist targets, according to India, but in civilian locations, so they don't mind that Pakistani civilians are getting killed. Then Pakistan responded, then India responded, and the Americans stepped in and facilitated a ceasefire.
Marco Rubio probably his single win on the global stage that we've seen so far, helps him with Trump. He also announced there would be trilateral engagement going forward between the countries. That's not going to happen. But we are, I would say again, at the status quo ante on Pakistan, India at this time, the Americans facilitated.
The Houthis had been threatening US and other shipping through the Red Sea. The Americans decided to blow up lots of Houthis military leadership capabilities. That was the Signal Gate leak that came out. And a few weeks after that, the Houthis said, "Okay, we won't attack the shipping lanes anymore, as long as you stop attacking us." That's a win for the United States. It was facilitated by Iran, who's engaged in direct bilateral negotiations with the United States right now, and Iran in a much worse position geopolitically, the Gulf states would love to see that happening. They're hosting Trump this week. That's likely to progress significantly. Maybe even Trump will meet with high-level Iranians. We'll see if we get a surprise there. But nonetheless, that's all in a much better position than it was before. And so too relations between the Gulf States and the US. Saudi US bilateral relations, including a willingness to allow for nuclear energy and development in Saudi Arabia.
Lots of new investments that are going to be announced with all three stops. Yes, there's this unfortunate announcement of a gift that shouldn't be accepted from Qatar of a 747. And then that's going to wrap up the first trip that Trump makes internationally, as well as the release of the sole remaining US hostage in Gaza. And that had been driven by the Israelis together with the US and the US angry with Netanyahu, who's continuing to engage in a war and taking over lots of territory in Gaza and not allowing humanitarian aid in. The Americans deciding they were going to negotiate directly for themselves, and with success before that trip.
So, all of those things, announcements that are frankly welcome. And the one big conflict where we're not seeing progress is Russia, Ukraine. It is plausible that there will be a bilateral meeting between Putin and Zelensky on Thursday. Zelensky is calling for it, the Europeans, the Americans are calling for it directly. Let's see if Putin actually shows up, or if he says, "I want to do a lower level meeting to start." Either way, it looks very unlikely that he's going to actually accept a ceasefire on terms that would be remotely acceptable by the Ukrainians, the Europeans, or even the United States, which means not much progress there.
But at least Trump not willing to do a deal with Putin absent a ceasefire, which means the Americans, the Europeans, and even the Ukrainians are more aligned today than they were a week ago, two weeks ago. Certainly during that shambolic Zelensky visit to the Oval just a few weeks back. So, good news over the weekend, and some good news coming this week. And I'm personally delighted to be able to report some things that are positive about what's happening in Trump administration, as opposed to things that are breaking and things that are falling apart. Let's hope that continues. I'll talk to you all real soon.
Can Trump and Carney reset US-Canada relations?
But it has reduced cause for panic, in part because Trump stated a commitment of the United States to the basic alliance, to the security umbrella, to defending Canada as necessary, which was something he wasn't saying over the past few months with Justin Trudeau. He clearly likes Carney more than Trudeau, which is not surprising because that bar is pretty much on the floor. And also stopped with the governor speak, which is clearly disrespectful, but did push on the 51st state issue, and how much better it would be for Canada if they were actually a part of the United States, not that he intends to take it over militarily, but rather something he's going to keep talking about.
And Carney didn't interrupt Trump when he was going on and on, talking about that, but then responded with his best line of the conversation, which is, "I've spent the last couple months going around talking to the owners of Canada, meaning the voters, the citizens of Canada, and it's never, never, never going to happen." Trump says, "Never say never," and they kind of agree to disagree on something they shouldn't be talking about to begin with. But at the end of the day, not much there. The bigger problem, of course, is that there is an incredibly important trade relationship between the US and Canada. And no, it is not true that the US doesn't do much business with Canada. In fact, Canada actually buys more from the United States than any other individual country in the world does. And if you go talk to the governors, the senators, the representatives of all of the northern states that border Canada, they can tell you just how integrated those supply chains are, how essential the Canadian economy is for them.
And some of those are blue states, some of those are red states, and it don't really matter, they all care a lot about their relationship with Canada. So, it is important. But because Trump is individually taking the right to tariff from Congress, where it legally sits, and using legally contestable national emergency clauses to enforce tariffs, impose tariffs on other countries, including those that are governed by pre-existing trade relationships, like Canada, which has a robust USMCA, US-Mexico-Canada agreement, that Trump himself helped drive, negotiate, and trumpeted as a huge win at the time, but now he is singularly undermining it. And what that means is that we are very unlikely to get to a new agreed USMCA in the coming year, despite the utility of renegotiating it with the sunset clause, and instead... look, I don't think anyone's going to run away from it, I don't think it's going to break, instead, it means that every year we're going to kick it down the road and renegotiate so that you can keep it going.
And that means that the Canadians don't feel like they have a functional multilateral trade arrangement with the US and Mexico, that also means, because the US president can change it at any moment he wishes, and also that an enormous amount of time is going to be spent in those negotiations, not just now, but every year, creating more uncertainty for those that need to want to rely on the long-term stability of that trade relationship. And here is the rub, which is that the US-Canada relationship will stay important, it'll stay robust, but it will become more transactional, where it had been built on trust and shared values, and that means the Canadians will work really hard to hedge and de-risk their relations from their most important trading partner.
About 75% of Canadian trade is with the United States right now, they rely much more on the US than the Americans rely on Canada, Trump is absolutely right about that, but they now see that as a vulnerability. And for the last 40 years, the Canadians, really since '88, '89, the Canadians have focused singularly on increasing their interdependence with the United States. They built out all of this infrastructure from the provinces, not east-west, but rather north-south. If you look at the way that rail transit, and energy infrastructure, and supply chains work in Canada, it's as if these provinces were independent republics set up to do business just with the United States, not focused on what would make sense for an independent sovereign Canada over the long term, if that relationship suddenly were ruptured.
Well, that needs to change, and that's something that you're going to see the Canadians work very strongly on over the coming years. Easier for Carney to do, because his relationships internationally are much stronger than previous Canadian prime ministers, certainly generationally, if you think about the fact that he was Central Bank governor in the UK, and that one of his best international relationships is actually with the French president, Emmanuel Macron, and others and others, I think you're going to see a very strong effort to work with the UK, to work with the Commonwealth, to work with the EU, and to help shift those trade flows over time to hedge further away from the US.
And the costs of that will be significant, the impact of the trade rupture in the near term will be a major recession in Canada imminently, and a mild recession in the United States imminently as well, but over the long term, my view is no one benefits from that.
So, that's the main takeaway, a little less theatric maybe than the internet, apologies for that, but it is the way I see it, and I'll talk to you all real soon.
Trump’s ‘less is more’ message is un-American
Ian Bremmer's Quick Take: I wanted to spend a few moments talking about a quote I heard from Trump this weekend. Did an interview where he said, "I don't think a beautiful baby girl that's 11 years old needs to have 30 dolls. I think she can have three dolls or four dolls. They don't need to have 250 pencils, they can have five." And my immediate thought was, this is one of the most anti-American things I have ever heard a US president say. I was very surprised by it, honestly. I heard back from a lot of folks and they said, "Well, how about when Trump in the same interview said that he wasn't sure about upholding the constitution? Isn't that worse?" And I'm like, well, yeah, maybe it's worse, but it's not more anti-American. I mean, not knowing how the constitution works or claiming you don't know how the constitution works, that may be bad, but it's not anti-American. But saying we shouldn't be able to buy and have all the stuff we want, that's anti-American.
We Americans want maximum stuff. I remember growing up with George Carlin, you needed places to put your stuff. When you ran out of places to put your stuff, you had a garage so that you could put your stuff there so that you could go out and buy more stuff. This isn't new. We've had this for a very long time, and this is Trump's in, right? He puts his name on planes and buildings. It's not about less but better high quality stuff. That's other countries. Japan does less amount of stuff, but very, very high quality. Takes decades to make that kind of stuff. Artisans spend their entire lives sort of on one carving or one piece of chocolate. No, we don't do that. We are a country of 250 breakfast cereals in the cereal aisle, and that's separate from granola. I'm just talking about cereal.
This is Trump's id. This is the guy that has turned the Oval Office into Versailles because there wasn't enough gold plating, gold gilding. Nobody reflects the supremacy of American consumption better than Donald Trump. Trump steaks. Trump watches. Trump gold sneakers. Trump coin. More stuff. And look, when he said beautiful baby girls have dolls, that's on brand, right? No question. Not boys. Boys can't have dolls. Boys have action figures which are basically dolls, but they sound tougher, and they should ideally have guns or pencils. Boys can have pencils. For me, Tonka truck, right? Maybe he didn't have time to think of a Tonka truck. It was a live interview, but a Tonka yellow dump truck. That was my favorite toy without question as a beautiful baby boy of 11 years old growing up. But either way, the point is not that an 11-year-old beautiful baby girl needs 11 or 20 or 30 dolls, but what if they want 30 dolls?
And God forbid that dad before 'Liberation Day' couldn't afford 30 dolls, but could only afford three dolls. What do you do then? Now, that girl only gets a third of a doll, right? Which part of the doll then? Just the head. I guess just the head. Because then at least you can keep an imaginary conversation going on with the doll. You don't want just the feet. And by the way, Zuckerberg I think can help with that since he's all about AI so that Americans who don't have as many friends as the average American wants to have can have that many friends. Now, that's super dystopian, but it's not anti-American. That's American. If we can't have as many friends as we want, we should be able to buy those friends, even if they're not real people. That's American. So look, Trump isn't actually saying we can't have 30 dolls, but Trump is saying it's going to take time with all the tariffs that we have to be patient.
And look, patience is anti-American. You don't elect Trump if you're patient. You elect Trump because you want stuff now. What, is Trump now going to say that America's going to embrace the slow food movement? That's not American. Trump's the guy that won the election after serving at McDonald's, right? And by the way, not serving at the counter, but serving at the drive-thru because it's not enough to have fast food, but you have to fast food even faster than you would normally have fast food by going into the restaurant. Trump is the guy that made RFK Jr. eat McDonald's on the Trump plane. Trump's the guy that brought hundreds of thousands of calories of McDonald's for that football team when they visited the White House, when we may have some of the world's highest levels of obesity. But if you just give us a minute, we will also have the world's highest consumption of Ozempic. Mr. President, make America great again. Thank you.
Ian Bremmer on Trump's first 100 days
Ian Bremmer's Quick Take: It is a hundred days of President Trump's second administration. How's he doing? And the answer is not so well, certainly not if you look at the polls. Worst numbers for first a hundred days of any president since they've been taking those polls. Markets, of course, down, global economy also down, so much of this self-imposed. And it's not the big-picture policy ideas. The things that Trump says he wants to do are not only popular, but they're also sensible policy: end wars, secure the border, and fair trade. Running on those three planks would work for pretty much anyone in the United States, the things that Trump is committed to, the things that previous administrations, including Biden and the promise of Harris, had not been particularly effective at. But the implementation has been abysmal. The lack of interest in policy specifics, lack of ability to effectively execute, and the dysfunction inside the Trump team/teams, economy, national security has been really challenging.
Tariffs, of course, so far have been the big problem, big internal fight on what it was that Trump should do and for what purpose. In terms of the purpose of these tariffs, you had so many ideas, and a lot of them were mutually contradictory. You're meant to raise revenue and lower taxes and reshore manufacturing and balance deficits and decouple from China and improve national security and on and on and on. These tariffs were going to be a panacea for absolutely everything, and you can't accomplish all of it. And that means that all of the fights that are going on, these countries don't know what the Trump administration actually wants. Bessent, the secretary of treasury, came in with one idea, and Peter Navarro, who initially won, came in with a second, the senior trade advisor in the White House, and Lutnick sort of had a third, and now Bessent is in charge for now, nominative.
Of course, Trump is really in charge, and Trump isn't interested in the specifics. He just wants deals. He wants wins. And he's saying, "Well, you guys, you other countries, you tell us what you're going to do. Well, it's not our job to tell you what we want, even though we're the ones that are expecting these deals to come together." And of course, it's happening with the Americans picking fights with all of these countries, literally everybody in the world simultaneously. And the impact that's going to have on the American economy is going to be dramatic. It's going to be long-lasting. It'll be, in many ways, as big as the pandemic, but completely self-imposed.
And even if deals were put together tomorrow, and they won't be, with the Europeans, with the Mexicans and Canadians, with the Chinese in particular, you'd already have a massive long-term disruption because the supply chains, the tankers, the contracts have already been severed for a period of time. And every day this goes on is a day that it's going to get worse. So that's going to lead to a lot of inflation in the United States, going to lead to a lot of bankruptcies and need for stimulus in other countries around the world, and the average voter's not going to be happy about that at all, which does help to explain why they did Liberation Day the day after elections in the US, special elections in Wisconsin and Florida and elsewhere.
Ending wars, Gaza did have a ceasefire early on, but not now. And now Trump is planning his trip to the Gulf and doesn't have Israel on the schedule, at least not yet, because there's more fighting happening between the Israeli Defense Forces and what's left of Hamas. And that fighting is not something Trump wants to see. Let's see how successful he is at bringing it to a ceasefire.
More important for everyone right now in the United States is the Russia-Ukraine War. The Americans are pushing to end that war, and Trump has had some success in getting the Ukrainians to the table because they understand that the or else is their intelligence and defense support from the US will be shut down, as it was suspended, so they're taking it very seriously. But the Russians are not because Trump has not displayed much of an or else for the Russians, hasn't said directly that if Russia refuses to do a ceasefire, that the US will provide more support for Ukraine, even though Trump advisors were saying that before he became president, has said, "Well, maybe there'll be secondary sanctions." But Trump is not making this very serious for Putin, and so Putin isn't taking it very seriously. Nobody thought he was really going to end the war in a day, but it's been a couple of months of effort, and clearly now Trump and team are losing patience and it's looking increasingly that they might walk away, which is why they're engaging with the Iranians and why, heck, Kim Jong Un probably is going to get a call at some point, right? Because Russia-Ukraine not working so well. So much for ending those wars.
And then on the border front, where Trump is having much more success in terms of policy, you don't see illegal immigrants coming into the US at anywhere close to the numbers they were under Biden or during Trump first term, and that has been a response to effective US policy. But there's also been overreach in terms of refusal to carry out the rulings of federal justices and even the Supreme Court, and that overreach is something that most Americans oppose. So even in the area where Trump is doing the best, his numbers are actually not as favorable as you might otherwise expect because of the dysfunction and because of the overreach of a more revolutionary Trump orientation.
Look, even DOGE, where I was kind of hoping in the early days that DOGE was certainly going to be effective at taking a lot of the corruption and the overspending out of the US government, but much less has been done on that front. There's been lots of claims of fraud, but very little evidence of actual fraud. There's been lots of claims that they were going to take two trillion, then one trillion, then maybe 150 billion, and now looks like less of that with Elon in charge of DOGE. And the focus that they have had has been much more politicized, much more ideological. Anything that looks like DEI or woke, let's just remove all of it and not necessarily do it with a scalpel, but more with a sledgehammer or a chainsaw, which means a lot of important programs get caught up, along with programs that no Americans should be funding.
And so overall, it's been a very challenging first hundred days. This is very much a move fast and break things approach. They are moving very fast. They are breaking a lot of things. There's not a lot of building, at least not yet. And a lot of Americans, while they feel that their government is inefficient and bloated, very few Americans want to see the government be broken further than it already is and less effective than it is, and that is so far what people are seeing. They're seeing it at home and they're seeing it internationally.
And they're not seeing a lot of restraint, even as mistakes are made, not only because Trump is never going to admit to have made any mistakes, of course that is something that you see from pretty much every president, but also, unlike most presidents, he's surrounded by people that don't tell him when he gets things wrong. And that is very different from Trump's first term, and that's a problem because you want to have people, irrespective of how loyal they are to you, you want them to be loyal first and foremost to the country. But Trump doesn't want that. He wants them loyal to him before they're loyal to the country, and that means not giving him information when he screws up because he will retaliate against them. And that's going to get you negative outcomes, I think, not just for the first a hundred days, but also for a much longer period of time in the United States and internationally. I hope I'm wrong. I certainly want to see him succeed, I want to see the country succeed, but that is not the trajectory that we are now on.
That's it for me, and I'll talk to y'all real soon.
Inside the Harvard-Trump showdown
Ian Bremmer's Quick Take: Hey everybody. Ian Bremmer here and a Quick Take to kick off your week. I'm here at the Kennedy School at Harvard University, with my buddy Steve Walt.
Stephen Walt: Nice to see you, Ian.
Ian Bremmer:
And kind of ground zero for a lot of things happening geopolitically right now. How does it feel to be an independent variable?
Stephen Walt:
It feels better than it felt two or three weeks ago when many people at the university were worried whether we were going to actually bend the knee, cave in, give the administration what it wanted, do pretty much what Columbia did. And when the administration, perhaps mistakenly, sent that letter last week or so, and the president responded appropriately, I think there was a huge collective sigh of relief in the Harvard community. And the response that Harvard has gotten now, including from people who don't like Harvard, that someone finally stood up and said, "This is unacceptable," has been quite gratifying.
Ian Bremmer:
Harvard, huge endowment, not a poor campus, lots of influence in Boston community and around the world, but we're talking about billions of dollars of funding a year. We're talking maybe about not providing green cards for international students, lifeblood of the Kennedy School. What's at stake here, do you think?
Stephen Walt:
What's at stake is the presence of independent centers of thought in a free society. I mean, ultimately this is an attempt by the administration to bring Harvard, as the world's most prominent private university, under its control. If you read the letter carefully, they were basically wanting to have control over who got hired, control over what got taught, control over content of curriculum, control over admissions, in a variety of different ways. At which point the university is no longer independent. It has to get up every morning, say to itself, "Gee, what does the president think of what we're doing here?" And that means you don't have independent thought.
So two big problems. One is of course this is going to reduce scientific and technological progress in the United States in a whole series of areas.
Ian Bremmer:
Because that's so much of what the funding is actually going for.
Stephen Walt:
That's exactly right. Particularly medical research in particular. But it's also important in a free society you have a wide range of opinions, people who can challenge what's going on, and can challenge it from the right, challenge it from the left. One of my colleagues is one of the people who discovered the China shock, that a bunch of American jobs had gone to China due to previous economic policies. Something that of course Trump has played on, etc. So the point is you want lots of different ideas in a free society. You don't want the government to be able to control what people can teach, control what people can think, because how you get big mistakes. That's how you get Mao's Great Leap Forward because no one could criticize him, no one could challenge it, no one could even report what was happening. So there's actually more at stake than just scientific research here. It's also independent thought. Again, from across the political spectrum.
Ian Bremmer:
Does it feel like a resist moment on Harvard campus right now? Is that the kind of emotion that comes with it?
Stephen Walt:
This isn't a sort of let's go to the mattresses moment. The university did not want to have this fight. I think they were negotiating in good faith to see if they could come to an accommodation that would satisfy some of the concerns, including some legitimate concerns about whether or not a wide enough range of viewpoints was being expressed on campus. So I think they were negotiating in good faith.
The one advantage in the government's letter was it was so extreme that we had really no choice at this point. And I think the university now is going to go about its business. It's going to continue to teach. It's going to continue to do the research we want to do. It's going to have to do it with fewer resources. And I think we're all aware of the fact that there's going to have to be some costs paid by the faculty, unfortunately by our students and staff as well. And I think we're willing to do that.
Ian Bremmer:
And Harvard is well-known, has been ever since I was a kid, as the leading higher education facility in the United States and in the world. Also has gotten itself part of the political tribal fighting going on and we saw the former president basically ousted under that pressure in part. What do you think Harvard needs to do to be seen not just as the place that you want to go to university, but also as a place that is above the political fray?
Stephen Walt:
Well, because universities are islands of thought they're never going to be completely separate from the political fray. But I strongly believe in institutional neutrality, that the university should not be taking public positions on political issues that do not directly affect the university. So yes, we do have a public position on say, student visas. That's important for us. But we don't necessarily have a public position and shouldn't have a public position on the war in Ukraine or what to do about the Middle East or whether affirmative action was a good thing or not. Gay marriage maybe would be one that you'd say. It's not something where the university takes position. Individual faculty can say what they want and should, and they can disagree and they will, and they do. But the president of the university, the board of trustees, et cetera, they don't take a particular institutional position. I very much agree with that.
That doesn't mean the university won't be political and it won't be politicized as well. I think first of all, we need to reaffirm that, that our business is doing independent research and doing teaching, that we are open to a wide range of opinions, that we care about rigor and honesty and research. We can disagree. You can even be wrong. Scholars are wrong all the time. But they can't be dishonest. So we have very high standards and we're not advancing a particular agenda other than the pursuit of truth for the benefit of society as a whole.
Ian Bremmer:
So broader point before we close this down. State of democracy in the United States right now. What worries you most and where do you see the most structural strength and resilience?
Stephen Walt:
What worries me the most is the inability of a set of institutions that I would've thought 20 years ago were pretty rock solid to impede what looks to me like an authoritarian grab for power.
Ian Bremmer:
Are you talking about the judiciary?
Stephen Walt:
I'm talking about in part the judiciary.
Ian Bremmer:
Or Congress?
Stephen Walt:
And Congress and the fact that they've been willing to essentially suspend most of their checks and balances roles in recent years.
I am encouraged, unfortunately, by the degree to which opinion seems to be shifting as to whether or not the direction of the Trump administration is the right course for the country.
Ian Bremmer:
Specifically on trade at this point?
Stephen Walt:
Trade, one, economic effects.
Ian Bremmer:
Yeah.
Stephen Walt:
I think people are starting to be uncomfortable with the idea that we're gutting the engine of scientific progress that has driven American technological and scientific leadership for decades. That that's going to have consequences sooner rather than later. And I think people are nervous, not everybody, but people are nervous about turning what have been some of our closest friends in the world into adversaries or enemies. I mean, when you pick a fight with Canada, the greatest bit of geopolitical good fortune the United States ever had, having Canada as a neighbor. When you turn them into an adversary, that's not going to end well.
Ian Bremmer:
Steve Walt, always good to see you, my friend.
Stephen Walt:
Nice to see you. Take care.
- Larry Summers has a few thoughts about Trump's trade war ›
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- Free speech in Trump's America with NYT journalist Jeremy Peters and conservative scholar Ilya Shapiro - GZERO Media ›
Who benefits from Trump's tariff wall?
Ian Bremmer's Quick Take: A Quick Take to kick off your week and what a week it is going to be. An extraordinary downturn in US and global markets. The reaction to 'Liberation Day' where American citizens will be liberated from the highest performing economy in the world. Now, globalization, of course, is what is being undone here by the United States. The US benefited massively from globalization, from cheaper goods and services and capital and people moving more easily across borders all over the world. But the fact that the United States economy as a whole benefited did not mean that the average American benefited. They did not. And indeed, while the top 10% did much, much better in the US over the last 40 years, the top 1% even better, the top 0.001%, not only extraordinarily well, world leading well, but also had the money to capture the US political system and ensure that the policies were exactly what they wanted.
And that has led to a massive backlash in the United States where most voters no longer support free trade. Most voters no longer support collective security. Most voters no longer support US leadership on the global stage. They voted in Trump, and Trump is giving them what they voted for, which is a "tariff wall" around the United States that at least for the first few days, he is not backing down. And the implications of that are going to be significant destruction of wealth in the United States and in markets all over the world. And you saw it this morning, Hong Kong, Hang Seng down 13%. Other markets across Asia down 6%, 7& to 10%. The Europeans now following suit, though not quite as dramatic and same in the United States with the opening for the Dow and the Nasdaq. Now, look, I'm not a market watcher. I'm a political scientist.
As a political scientist, what I find very interesting here is this fight between "Deep MAGA" and "Dark MAGA." And Deep MAGA being the people that really do believe that the US has not represented them for a very long time. And what they want is a fair shake from people that are more representative. They want the ability for working and middle class to have better lives and not be taken advantage of. They want non-predatory policy domestically. Dark MAGA, globalism, free trade, and capturing the policies of a smaller state that do their bidding. And this last weekend has been a repudiation, at least tactically of Dark maga by Deep MAGA. This was the fight you saw between Elon Musk and who runs DOGE, and this happens to be the richest man in the world and the second most powerful heretofore in the Trump administration. And Peter Navarro, who is trade and manufacturing counselor for the White House and nowhere near as powerful as Elon, and yet told Elon to stay in his lane, said, "You're interested in selling cars, and what we are doing is making America great again."
Navarro's not in a fight with Elon to be clear. Navarro is supporting a policy that he knows Trump wants. And so Trump has decided that on this one, which is the most impactful policy he's put in place globally in this or in his previous administration, that he is decisively going against the globalists and he's going in favor of using American power to have manufacturing and capital in the US. Now, nevermind the fact that this is going to take a long time. That if it were to work, and if it were to work, you'd want it to be consistent. You'd want to build up American reputational capital. You'd want rule of law to be strong. You'd want people to think that they could come to US universities and prosper, that the US would be the most attractive place to send their kids to have jobs, and Trump isn't doing any of those things, so that's a problem, right?
The fact that the US is making itself less attractive as a destination and less predictable as a destination really undermines US putting massive tariffs on highest you've seen in over a hundred years to make other countries pay. But politically, what Trump could benefit from doing here is actually leaning in against the globalists. In other words, if he were to say, "Yes, this hit to the markets is a feature, it's not a bug. Portfolios, they're going to get hit. And the rich people that have benefited on the backs of the average Americans, I don't care if they don't make a lot of money. Just like the foreign governments that have been taking advantage of American free trade policy," which is overstated. But nonetheless, the politically smart thing for Trump to do domestically would be to then say, "I'm going to snap back the tax breaks that I gave to the highest bracket.
You guys are going to start paying again, and I'm going to take the money from the tariffs. Take these effectively a sales tax, all the money that the US government will be collecting from these higher goods, and I'm going to redistribute it to the average American. I'm going to give that money to the workers so that they can deal with the fact that their pensions have just blown up by 10%, by 20% or more over the coming weeks. I'm going to give them an opportunity because they're going to have to pay higher prices in a more inflationary environment where you can't actually substitute away from imports because all goods are so interconnected, whether it's automotive or it's a plane ticket or it's just a cup of coffee at your local Starbucks."
All of those things, Trump has the opportunity to lean in to the Republican base, which is also a lot of the former progressive base among Democrats who they have lost, in part because they have moved away from policies that have very popular under Trump in firming up the border against illegal immigrants, and also in opposing overly progressive woke policies that are very unpopular across the United States. Having said that, I don't think that's what he's going to do. And the reason for it is because I think that ultimately Trump is more interested in kleptocracy than he is in taking power for himself. I think he's much more transactional. He's much easier to buy off as an individual. If you give him money, he will give you the policies he wants. He's not going to throw Elon away.
Elon's already given over $250 million to the campaign, and we'll give a lot more and we'll find ways to benefit Trump and his family. A lot of people like that, that want lower taxes for the rich. A lot of people like that, that want lower regulations that allow their companies to benefit more, that ultimately screw the average person in the United States. And I think Trump is more interested in that. If you really wanted to ensure that you could benefit the poor people, you wouldn't be taking away so many of the capacities of the IRS for example. You'd want audits on wealthy people instead of wealthy people being able to avoid taxes because the IRS doesn't even have the capacity to do the most complicated audits out there.
You would have a group of policies that would be much more focused towards ensuring that the wealthy actually pay their fair share, that legal and tax policies are not buyable by special interests, and ultimately that the swamp could be drained. And that just, even though I think that's where JD Vance is more oriented, and I think that's where increasingly house Republicans are more oriented. Lord knows that's the Republican base, which today are less educated men, working class and middle class. The Democrats have lost almost all those voters, but that's not where Trump is. And I think as a consequence, the political opportunity that he has will be constrained.
That ultimately also means that there'll be more of a balance and probably more of a snap back eventually in reducing these tariffs and finding deals earlier than you would otherwise expect. So maybe the market hit long-term is not as bad as it could be in a full-on anti-globalist push by the Trump administration. But ultimately, one thing we've learned by Trump, who again used to be a Democrat before he was Republican, he's fundamentally not ideological. He's fundamentally about Trump. And here navigating that probably means less pain as opposed to more. Even though in the near term today, this week, there's going to be plenty of carnage in the United States and around the world. That's it for me, and I'll talk to you all real soon.
Trump's tariffs & the end of globalization
Ian Bremmer's Quick Take: It is the day after 'Liberation Day,' April 2nd. I'm not sure that day is going to stick. It was good not to do on April 1st. Not only because it's April Fools, but also because you had a couple of key elections in the US, in Florida and in Wisconsin. And Trump clearly wanted to go after that because he knew that these weren't going to be super popular. And yet, this is exactly what he was promising.
He has been promising tariffs. He's been promising securing American borders, securing borders from people coming into the US illegally, also securing US borders from unfair trade practices. And that is precisely what we're seeing right now. Overnight, the United States is moving to having the highest tariffs against countries of any major economy in the world by a very long margin, and also the largest average trade tariff in over a hundred years.
This is a new era. It's a post globalization era. It's a post post-war era. It's kind of the equivalent of what the Brits did with Brexit just on a global scale. Now, why these tariffs and what's behind the percentages? Because Trump's been talking about reciprocal tariffs for a very long time, and yet these aren't reciprocal. There are no countries that have the percentage tariffs on the US that the US is now putting on them in terms of goods. So how did they do that? That's the extraordinary thing, is the calculation wasn't based on the tariffs that are imposed on US goods. Rather, it was a look at the trade deficit that the US runs against those countries and taking the percentage of what the trade deficit is and applying a tariff that would get you to parity. In other words, what reciprocal from Trump's perspective is whatever would actually bring that trade deficit into trade neutrality and then just impose half of that, which makes no sense economically whatsoever.
Why not? Well, first of all, because there are a lot of poor countries around the world that have trade deficits with the US because they can't afford American goods, and the US wants to buy commodities, for example, from those countries or low tech manufacturer like from Bangladesh. And are you angry because the Bengalis aren't capable of buying Teslas from the US or buying smartphones? And the answer is, of course not. And all that's going to be is a tax. The US government will pick up revenue and the Americans will have to pay more for inexpensive goods that the US isn't going to produce. Some cases, these are goods that the Americans not only wouldn't want to produce because the labor quality and cost is really, really low and no one's going to do that work, especially when you're closing borders and taking illegals out of the population. But also, because the US economy couldn't produce them.
I mean, your tropical fruits, I mean some of them can be in the United States, but most of them need to come from other places. Coffee beans, I mean all sorts of things that the Americans are just not going to be substitution effect producing that now are just going to be higher costs for the United States, for average Americans. And then in places where the US was not in deficit, then you're just throwing a 10% tariff against. Why? Is that about fair trade? No, that's just about the Americans wanting to ensure that there are tariffs on absolutely everyone. It reminds me of the January 6th conversation where originally Trump was talking about, "Well, maybe we've got to look more carefully at all the really violent types and we're not going to want to give them amnesty. But there are a lot of people that were treated very badly, very unfairly, and so they should have amnesty and they should be pardoned."
And as the details and the debates on who should and shouldn't get a pardon came out, Trump got sick of the debate, got sick of the nuance, and said, "I'm just giving it to everybody." And I think that's what happened with tariffs. There were debates going on with large numbers of advisors around Trump, right until the last minute and he just said, "Ah, I'm just putting tariffs on everybody." And that's what's happened. And now there will be individual deals that will be cut with a bunch of countries to try to get out of that. But the reality is that the biggest trade partners of the United States, there's no quick fix. Not with Europe, not with Mexico, not with Canada, not with China. And given that, we are clearly not only out of a US-driven globalization era... That's been gone for some time now. Globalization has been moving apace, but the US has not been driving it.
The US had been kind of standing on the sidelines and pushing their own industrial policy. But now you have the United States actively unwinding globalization. And the question will be how effective will other countries be in playing defense, in hedging, and in bringing some production, more production to the United States? Because in the near-term, you expect to see a lot of countries will try to limit the damage that's being done. And the US economy is, of course, stronger and more powerful. So that will mean that a lot of countries won't immediately do reciprocal tariffs, but will try to cut deals with the Americans. A lot of companies will try to find ways to manufacture more in the US. That's near-term.
In the medium and long-term, there will be hedging. There will be efforts to find ways to de-risk their economies from the United States, from the uncertainty, the volatility, the high costs. And sure, you'll want to produce things in the US for US consumers, but most things are not being consumed by Americans. And that is increasingly true around the world. And therefore you wouldn't want to produce most things in the US in that environment. So you'll see more hedging of the Europeans towards other countries, including in some non-AI fields towards China. And I think you'll see that in bigger ways in the Global South who already have their principal trade partners as China anyway.
And then final point is keep in mind that the Americans are not really good at being patient. And Trump has been talking the entire way, not one of the most patient people in the world that, "Look, I mean, yeah, they're going to be costing in the near-term, and I don't care if the cost of cars go up. But long-term, this is good for Americans." And certainly near-term there's going to be a significant economic hit, not just in the stock market, but also in US GDP and also in inflation. And Americans, I suspect are going to be pretty angry about that because Americans are very short-term in orientation. It's a nature of free market capitalism, kleptocratic or not in the US and it's also the nature of the political system.
So that's where we are. A lot to think about on the back of these unprecedented policy moves. And remember, it is a marathon, not a sprint. We are only a couple months in. Trump has four full years, and a lot is going to happen over the course of that administration. And I'll be here to talk to you about it. Thanks a lot, and I'll talk to you all real soon.
Will Marine Le Pen's conviction really keep her out of French politics?
Ian Bremmer's Quick Take: A Quick Take to kick off your week. Turning to France where Marine Le Pen, who has long been the leader of the National Front, now renamed National Rally Party, and principal contender her party to win French elections in 2027, which would be an absolute turning point in French elections, as meaningful for France as Trump's second win in 2024 in the United States, has been found guilty in a criminal court in France of embezzlement charges up to $500,000 directly and millions of dollars in terms of mishandling the way European funds were being used for staffers, including her sister and her best friend and a bodyguard. Not a political case at all, actually just a criminal court. Nobody arguing that the judge is particularly politicized here. And while two of the years of the jail term's suspended, the first two years, she has to wear an ankle bracelet. So we'll probably get a video of that real soon. I'm sure it'll be fashionable, since it's France.
But the point is, this would prevent her from running in 2027. And that would mean that Bardella, who is number two essentially in that party, all of 29 years old, nowhere near as popular as Le Pen and would completely tank the ability of the National Rally to win, would become the candidate. It is too early to say that this ban is going to stand up. She has an appeals process. She can bring it to the French equivalent of the Supreme Court, a constitutional counsel, to answer what'll be called a priority question of whether her immediate five-year ban from politics before her appeals against the conviction can stand as valid. And there's a very good argument that has been made in the plaintiff's favor in recent cases that this would not stand. And that while her appeals are going on, she would still be eligible to run, and indeed, she'd be able to go through this appeals process through 2027.
So what now looks like and is being reported in the English language press as she's being thrown out of politics probably isn't going to stand. So in other words, Le Pen out for now. Le Pen probably back soon. And France, in 2027, a really significant, maybe watershed moment from where European politics are going to go. Because if you look at politics right now, you have Friedrich Merz, probably shortly after Easter going to be putting together his grand coalition government, very strongly pro-Europe, very centrist government. You have Meloni, who certainly has a good relationship with Trump, but nonetheless, very strongly pro-EU and very much wanting to act as a bridge to support the EU in using her relations in the United States to be effective in that regard. Macron same, and even Keir Starmer in the UK, post-Brexit, yes, but wanting to be seen as a European leader. Hence taking the lead with Macron in all of these Ukraine summits. That's for now.
But as we look forward to what politics in 2027, '28, '29 look like in Europe, we could easily see that in Germany, suddenly Alternative für Deutschland could do better. Especially if the economy is not doing well. And could force the Germans to be in a position where they would have to enter a coalition with them. In France, very much the National Rally Party and Le Pen still in contention. In the UK, the Reform Party in contention too. So the end of Trump's term for Europe and the transatlantic relationships looks radically different than the beginning of Trump's term. And today's news headlines on France are a blip, not a structural shift. Watch this space as Le Pen is still very relevant indeed. That's it from me, and I'll talk to you all real soon.