The second Trump administration has combined aggressive diplomatic engagement with a confrontational trade policy that alienates allies and risks triggering a global recession, despite legitimate concerns about America’s industrial decline. While Trump's trade agenda aims to restructure global commerce to favor U.S. interests, its unilateral execution and failure to build a coalition undermine its effectiveness and may isolate the U.S. rather than restore its manufacturing strength.
(Photo: Paul Sancya / AP)
Since his return to the White House, U.S. President Donald Trump has sought to jolt America out of manifold quagmires. He has pressed European allies as well as Ukraine to find a peaceful solution to their long-drawn conflict with Russia, culminating in historic negotiations in Türkiye. Just as crucial are his efforts to pressure Israel to accept a long-lasting ceasefire in Gaza amid an unfathomable humanitarian catastrophe, while exploring a new nuclear deal with Iran.
None of these disruptive geopolitical moves are expected to yield immediate results and will likely collapse in absence of more structural measures, but Trump has correctly injected new energy into diplomacy to either end or prevent devastating conflicts. The second Trump administration’s ‘peace through strength’ foreign policy approach, however, has coincided with a brazenly aggressive trade policy, which has rankled allies, provoked rivals, and could potentially trigger a global recession.
In fairness, there is a method to the madness. Lest we forget, the U.S. desperately needs to address its steadily declining manufacturing capacity, which would have massive geopolitical implications, including in the realm of military power. But the U.S., which accounts for only 9 percent of global exports and barely half of China’s share of global manufacturing, is in no position to unilaterally dictate the terms of global trade.
Moreover, China is too powerful and determined to cower in the face of tariffs. Domestic resistance is also building up, with a U.S. federal court recently questioning the White House’ prerogative to unilaterally impose across-the-board tariffs. Crucially, the second Trump administration is alienating key allies, which would be indispensable to any coordinated and multilateral effort at revamping the global free trade regime. It could also end up distracting itself from more optimal solutions, notably a 21st century industrial policy, and, worse, risk triggering a global recession.
New Populism
Standard journalistic coverage of America’s foreign policy often seems too ahistorical. The second Trump administration’s disruptive policies have been met with almost universal outrage among the chattering classes and mainstream media outlets. Upon closer examination, however, it’s clear that the past is prologue. Lest we forget, the post-war period has been replete with countless instances of American foreign policy adventurism, culminating in the overthrow of numerous post-colonial regimes, including a democratically elected nationalist government in Iran.
The post-Cold War period, which saw the U.S. emerging as the sole superpower, saw its own fair share of American unilateralism. From Bill Clinton’s military interventions in the Middle East and Africa to George W. Bush’s full-fledged occupation of Iraq, the United States has frequently acted with disregard for international law and multilateral norms.. Even the seemingly pacifist Obama administration, which correctly pursued diplomacy vis-à-vis traditional enemies in Havana and Cuba, relied on extensive drone operations against suspected terrorists, often in contravention of international humanitarian law. In short, American presidents have prodigiously maximized their ‘war powers’ to execute their foreign policy in often cavalier ways.
What makes Trump’s approach quite unique, however, is its unabashedly populist bent. The meteoric political rise of the former real estate mogul can’t be understood without recognizing the upsurge of anti-elite sentiments in the opening decades of the 21st century. Fed up with unaccountability of politicians in face of blunders in Iraq and Afghanistan and further enraged by the impunity of bankers behind the Great Recession, a growing number of American voters embraced populist politics, which boosted the political fortunes of ‘anti-system’ figures as varied as Bernie Sanders and Donald Trump.
Far from an irrational phenomenon, the populist turn in American politics has also been grounded in precipitous material decline. While the working and middle classes suffered income stagnation and occupational precarity in recent decades, the U.S.’ industrial base has dramatically shrunk amid relentless outsourcing and neo-liberal globalization. This has serious national security implications too, since America has become reliant on high-tech imports from overseas while its defense industry could degrade too in absence of a national manufacturing revival.
The numbers are staggering. Over the past five decades, the share of the manufacturing sector’s contribution to Gross Domestic Product (GDP) declined from a high of 27 percent to barely above 10 percent nowadays. In fairness, the U.S. economy in nominal terms remains the biggest in the world, accounting for about a quarter of global GDP. But its share of exports is in single digits (9 percent), underscoring the country’s anomalously import-dependent character. Once the world’s industrial heartland, the U.S. is largely a consumer-based economy. Even by Western standards, consumption as a share of the economy (68 percent) is abnormally high – significantly surpassing Germany’s (52 percent) and more than 50 percent larger than China’s (39 percent).
A consensus among economists is that tariffs alone have limited utility when it comes to reshoring and reviving American manufacturing. After all, the U.S.’ lack of competitiveness is driven by more fundamental factors, ranging from relatively expensive labor and poor infrastructure. This is why the architects of Trump’s trade policy have something more dramatic in mind.
Arguably, the most influential and sophisticated thinker among American trade hawks is former U.S. trade representative Robert Lighthizer, who worked during both the Raegan and first Trump administrations. Bemoaning how the U.S. ended up outsourcing an estimated 20 trillion of its wealth—in terms of total debt and equity—to rival ‘predatory’ economies, he has argued for a fundamental rethink of globalization altogether.
At the heart of his analysis is the contention that “lopsided industrial policies” such as “government subsidies” and “market-access limits” “below market [lending] rates to manufacturers” and lax labor and environmental laws have allowed “chronic surplus” export-oriented economies in both Asia and Europe to “distort the global market-driven allocation of resources.” Since free trade “doesn’t exist,” he argues, there is a need for restructuring global trade altogether to balance the scale.
Accordingly, Trump’s trade guru has advocated for the creation of a multi-tiered international trading regime, whereby U.S. allies and likeminded powers enjoy preferential treatment while rivals and hostile powers will face higher tariffs and various forms of tech-transfer restrictions. Since “large trade surpluses are the real villains,” Lighthizer argues, what is needed are strict measures to constantly balance trade between the U.S. and the rest of the world through a mixture of incentives and punitive measures.
Three immediate problems, however, arise. First, history is replete with examples of failed multilateralism, hence the steady collapse of the U.S.-led Bretton Woods system in the twilight decades of the 20th century. This leads to the second problem, which is America’s diminished global position in recent years—thanks to both its blunders and the economic miracles in the post-colonial world—which put into question Washington’s ability to effectively shepherd a new global trading regime. So far, the Trump administration has struggled to convince a single major economy—whether in Asia, Europe, or North America—to succumb to its trade terms. And here enters the biggest challenge, which is the failure of the second Trump administration to build or recognize even the need for a coalition of likeminded nations, especially in face of China’s inexorable rise as a manufacturing and technological powerhouse.
By alienating allies through maximalist demands, the U.S. has undermined its ability to potentially secure support of allies in Europe and Asia for creation of new global trading regimes. If anything, the second Trump administration even risks driving key economies, including Europe, into Beijing’s embrace or, at the very least, encouraging other major economies to create parallel trading regimes excluding America. Despite its best intentions, therefore, Trump may end up making “America Alone” rather than resuscitate its flagging manufacturing base and, by extension, national power.
