HARDLY a week goes by without another tweet storm from Washington DC. “You’re fired” was heard by Secretary of State Rex Wayne Tillerson and national economic adviser Gary Cohn (although strictly speaking, he resigned).
Cohn left over Trump’s tweet that “trade war is good”, whereas Tillerson, who was already in trouble over moronic remarks was fired because he differed with his president over Russia, Iran and other issues.
There are three basic reactions to the threat of trade war.
The first is that the real aim is at China, so everyone else wants exemptions from the steel and aluminium tariffs that on first sight seem to hit everyone else more than China. That’s the heads-in-sand approach.
The second is the conventional analysis that you should not take Trump seriously because the rational conclusion is that no one will win from a trade war. The collateral damage to not just China and the US is so great that we may see a repeat the disastrous 1930s, when US protectionism sent everyone into the Great Depression. In other words, realistically and rationally, everyone will have to settle down pragmatically to serious negotiations. Fire and Fury becomes Smoke and Mirrors.
The third view is that you should pay serious attention to a rising Trade War. Although most analysts are now paying attention to views of US trade representative Robert Lighthizer and director of office of trade and manufacturing Peter Navarro, I was listening carefully to what Steve Bannon was saying.
Having left the White House as chief strategist in August 2017 and then leaving Breitbart News after controversial comments in Michael Wolff’s best-seller Fire and Fury: Inside the Trump White House, Bannon has become the lightning rod of the Alt-Right movement, first in the US and now in Europe.
In my opinion, Bannon still has the best strategic overview of what Trump’s White House agenda is all about, despite the tactical moves that seem to go all over the place.
In his latest speech to a far right audience in Zurich (https://youtu.be/qJDOnGtWar4) earlier this month, he attributed the present populist revolt by a global far right movement to the beginnings of Brexit. Brexit was driven by older Conservatives who felt that Britain was being led down a path by Brussels that would not be sustainable.
According to Bannon, 75% of Americans think America is in decline. As he and others recognised more shrewdly than the Democratic liberal establishment, the American middle class has been hollowed out and deeply angered how their share of power and income has been eroded since the Reagan years.
The liberal establishment was seen as self-referential, satisfied with the status quo, arrogant, corrupt and incompetent, blind to the plight of the Precariat (the white working class that are surviving on the brink of receding into poverty despite working harder than ever).
At the forefront of Bannon’s analysis of what drives the populist nationalist movement are central banks, the establishment and technology giants.
He called it “central banks are in the business of debasing your currency, central governments are in the business of debasing your citizenship; central technology conglomerates are in the business of debasing your own personal sovereignty, your own personal data that you generate.” Data or information is today all upside down. All these are given away for free. These are used “basically to enslave you”.
What he did not say is that the biggest central bank, government and tech giants are all American.
From his perspective, there is a new serfdom and only national populist movements can restore people power. Interestingly, he sees cryptocurrencies as a means to empower this movement, companies and governments to get away from central banks and slave wages that take away thrift, efficiency or productivity.
But at the heart of his anger and blame is the rise of China, which is unprecedented and accelerated by American and global elites. By labelling China as a mercantilist totalitarian state, he blames China for global deflation because in his eyes, China exported its overcapacity that gutted the industrial heartland of Europe and America.
Consequently, he deeply feels that trade and illegal immigration are two sides of the same coin. This is not about a currency war or a trade war, but a job war.
Whether you agree or disagree with Bannon or Trump, the reality is that they are stirring up anger against globalisation, trade and China. But as everyone should know, exports from China are only mainly assembled in China, with imports to US mainly by US companies, drawing on components and materials from all over the world. The same is true for European imports.
The objective reality is that as the rich countries age, they fear the rise of the rest. Global wages would have to adjust because of the increase in labour force of not only China, but also India, Asean, Latin America and Africa – in short the rest of the world.
As the latest IMF study (IMF Working Paper 18/54) showed, globalisation benefits global welfare, but it is up to national governments to mitigate the costs, especially inequality and domestic wage and income distribution. Foreign governments cannot interfere in national policies on domestic redistribution. What Western democrats have difficulty coming to terms with is that if the rest of the world moves into middle class and the world works on one person one vote, the distribution of power, both economic, social and culture, will be very different from today. Is it wrong for the rest to copy the mercantilist, national policies of colonial history that enabled the West to become rich?
The unipolar world is shifting to a very complex multipolar situation that the West is uncomfortable with. It has become clear that American Exceptionalism is no longer exceptional.
After all, Foreign Policy magazine is calling Trumpism as moving America from a liberal hegemony to an illiberal hegemony. For the rest of the world, which has lived under different varieties of colonial hegemony, it does seem that America has joined the rest. But watch out for trade wars that may break out into more serious wars.
Tan Sri Andrew Sheng writes on global issues from an Asian perspective.