Fundamentally wrong, brutal and paranoid. A preacher of voodoo economics, attacking the US’s allies and enemies alike. Condemnation of Donald Trump in the chaos since his “liberation day” has been swift.
For most people the self-inflicted damage makes no sense, and rightly so.
Far from making America great again, the president has made Washington an international pariah. There will be financial pain for ordinary Americans: from the wealth destruction in the markets, higher inflation, and a probable US recession. Living standards elsewhere will be damaged, too, amid expectations for the worst global slowdown since the 2008 financial crisis, excluding the Covid pandemic.
However, it would be wrong to revel in the backlash for too long. Trump’s tariff madness is not a unique moment. The forces underpinning his political project – if the chaos can be dignified with such a label – have been long in the making, and will require more than a rout in the bond markets to suppress.
As Tim Kaine, Hillary Clinton’s running mate in 2016, has warned: Trump is a symptom of a global sickness, not the cause. The events of the past week are only the tip of a much deeper crisis in globalised, free-market capitalism that has roots stretching back decades.
In the long march of globalisation – advanced with the most zeal, ironically, from Washington – it is well documented that winners and losers have been created within rich countries. Yes, consumers broadly benefited from access to cheaply produced goods, supporting living standards. But it has not been entirely cost-free. That became patently clearer after the 2008 crash, and in the devastating years of austerity economics that followed.
When announcing his tariff plan Trump pointed to data showing that, between 1997 and 2024, the US lost 5m manufacturing jobs in one of the largest drops in industrial employment in history. This ought not to excuse the president’s flawed and reckless policy: the US was not “looted” by other countries. The pillaging was directed, ironically, by US-based corporates, backed up by Washington Consensus economic policy. However, it at least helps to go some way to understanding the backlash.
Employment rates for working-class men, in particular, have fallen sharply, while wages have stagnated. Inequality research by the UK’s Institute for Fiscal Studies shows that US male hourly wages, after accounting for inflation, are worth less today than in 1975, despite the vast accumulation of wealth at the top of the pile.
Across other western economies, including the UK, Germany and France, a similar hollowing-out has taken place; made worse by the weak, uneven economic growth of the past 15 years since the 2008 crash.
In the grip of the Covid pandemic, the issues with lengthy, low-cost supply chains came further into sharp relief. That was then compounded, as the Société Générale strategist and infamous markets uber-bear Albert Edwards says, by multinationals using the inflation shock after Russia’s invasion of Ukraine as a smokescreen to engage in a round of greedflationary price-gouging.
“To be sure, western corporates’ quest to maximise profits by outsourcing production to China and elsewhere has lifted millions in the emerging world out of poverty,” he wrote in a note to clients last week. “But it has impoverished much of US labour at the expense of capital. Profits have boomed at the expense of workers and now they are as mad as hell.
“The financial community speaks with one angry voice when they see what they regard as self-inflicted damage from President Trump’s tariffs binge. But just as mainstream commentators failed to comprehend why people voted for Brexit, they are missing the point of tariffs.”
Politically, the years of economic disappointment and the sense of being “left behind” for many voters have created fertile ground for snake-oil salesmen such as Trump to exploit.
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Politicians of the centre-left broadly understand this. Joe Biden’s vast inflation reduction act stimulus package was starting to make headway in tackling some of the concerns. In Germany, fiscal orthodoxy is being sidelined to enable more spending on defence and infrastructure, while Keir Starmer’s Labour party is promising investment to fix the UK’s battered public realm.
However, there is a danger of the promises still ringing hollow. Progress remains insufficient to encourage sceptical voters that politicians from the same parties who governed during the years of economic disappointment really know how to fix things.
Some of their actions are also actively making matters worse, not least in Britain, where Labour’s benefit cuts and austerity-lite policies are undermining the idea that Starmer represents very much “change” at all from the Conservatives.
To plot the way forward, Gordon Brown was right last week to call for an “economic coalition of the willing” among countries willing to stand up to Trump. As odd as it may sound, tackling the shortcomings of globalisation is best achieved through international collaboration. No country is an island, entire of itself.
Globalisation cannot be entirely unpicked, nor would it be desirable to do so, especially at a time when countries around the world face collective challenges; from existential climate breakdown, to war and poverty.
Any coalition of the willing must, however, face up to the problems with the old Washington Consensus. While it is clear Trump’s bullying and intimidation must be stopped, it should not involve rebuilding the pre-liberation day world exactly as it was.
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