Talk to a supporter, and he has won the games handsomely. Converse with a critic, and he is not remotely close to a single win. The truth, as we know, is not known socially. It lurks under the data and figures, and under trends and patterns. The fact remains that the US president Donald Trump is caught in a zero-sum game. Each time he wins, some Americans lose. Each time he loses, outsiders win. But the fact remains that while the US may not have gained much in the past 10 months, it has not lost much.
Four reasons explain why things have neither gone south for Trump, nor gone north. They indicate two sides of the same coins. The first is that America is not an export-driven economy. Indeed, selling to others constitutes a mere 11 per cent of the GDP. In China, the figure is nearly 20 per cent. For South Korea, as expected, it is nearer to 45 per cent. Even in the case of India, the number is more than 22 per cent, which is higher than China. Thus, if the US shuts out a part of its exports, via high tariffs on some nations, the impact on its economy will be minimal, though substantial in some sectors.
Second, most nations run a trade surplus with the US. This implies that America buys more from several sources, and sells less to them. This is true of China, South Korea, Europe, and even India. When it comes to services, the situation is more complex, and is in America’s favour vis-à-vis Europe, and tricky in the case of India. The truth is that other nations have a greater vested interest to maintain smooth trade with the US, rather than the other way around. This is why Europe, Japan, and South Korea rather meekly accepted Trump’s demands in exchange for lower tariffs, and more trade.
Third relates to investments. Since the pandemic, and the China+1 strategy among MNCs, which has forked into several others like America+2, others+India, and so on, the investment-distance underwent a change. According to a recent McKinsey report, firms wish to invest nearer to their headquarters, rather than farther. This somehow feeds into Trump’s insistence that American tech invest more locally, and not globally in far-off locations. It wants Europe to look westwards, rather than eastwards. Japan too may wish to invest more in the US, and keep up its presence in India.
One thing is sure. Whichever firm or nation has the money, it cannot avoid America. When Japan was rich, and its economy was strong, investments flowed across the Pacific in hordes. The same happened with South Korea, and even Taiwan. Europe has invariably wanted to tie its future with the US. China too, given a sliver of chance, will pump billions in the US, apart from Asia and Africa. Thus, when Trump thinks that he has twisted the arms of nations and firms to commit huge sums in American factories, he has opened the doors to those, who were anyway jumping in through the windows.
Finally, like it or not, whatever Taiwan may believe, and whatever China may think about the future, America is the Emperor of Tech. Futuristic tech emanates from the land of dreams, and most of the world is forced to adopt, and adapt it. Innovation, and productivity increase through tech starts in the US, and ends in every other corner. Hence, whether it is Europe, Japan, Asia, or Latin America, they cannot wish away America. Remember, most of China’s tech gains came because it begged, borrowed, and stole from the US.
A combination of the above factors implies that nations need to fall in line with Trump’s tantrums. They cannot escape, and be freed of the American trade-and-investment net. It is a tariff trap that they can only embrace, whatever their private reactions, and emotions. Come to think of it, India is slowly bending backwards, despite a minister’s claim that trade deals are not done with a gun on one’s head, to accommodate some of the American demands. This is why the talks have escalated, with predictions that a draft will be ready by the end of this month. In any case, India has understood that speed matters.
As a recent book noted: “Today, the world is richer and riskier than ever before. There is a case for pessimism, and many see it in the results of the 2024 election. At the same time, Americans have survived worse periods in the 1890s, 1930s, and 1960s. For all its flaws, the United States is an innovative and resilient society that, in the past, has been able to recreate and reinvent itself.” The world knows it too. America is today a crippled giant. Maybe it is reacting like a wounded beast. But once it gets better, when it does, the world will relax in its shadow. Maybe Trump knows it too.
Knowing, as we know, is not enough. If Trump hopes to Make America Great Again, America must lead from the front, and not twist arms, and ink sweet deals for itself. A renowned essayist wrote almost a decade ago, “What is missing for most Americans (including the current president), however, is a sense of strategy and purpose in American foreign policy.” One can say this about politics, and economics too.
