Dazed and Confused: How the World Must Respond to Trump’s Assault on the Global Trading System

Back in the day, ‘Dazed and Confused’ was just the title of a rather good Led Zeppelin song. Today it is the reaction of the international community to Donald Trump’s daily onslaught on the global trading system. Yes, the one the US itself created from the rubble of World War 2, and which has been the motor of both US prosperity and global poverty reduction ever since.

Reelin’ In the Years

Countries and companies from Ontario to Osaka wake up in disbelief each morning at the latest Trump broadside. Last week a 25% tariff on Mexican and Canadian goods. On Wednesday new tariffs on steel and aluminium imports from every country, including the UK which had been counting on King Charles’ letter to secure an exception. On Friday a plan to raise US tariffs to mirror every other country’s tariff (the Reciprocal Tariff Plan). A threat to tax the BRICS 100% if they drop the dollar in international transactions. And the latest creative proposals: a tax on any imports brought on Chinese-owned ships, and a 200% tariff on EU wine from 1 April.

I Want It All

But it’s not just tariffs. “Tariff Man” is using the carrot of the American market and the stick of America’s security umbrella to secure geopolitical goals aimed at “Making America Great Again” – defined variously as reducing dependency on China, wresting control of critical minerals and semiconductor production, blackmailing companies to re-shore into the rust belt and his white male voting base, and removing the protective ring around Taiwan, the key supplier of advanced chips.

Which is why the Trump administration is also using the USA’s trade and market leverage to try to annex Greenland and Canada, remove the Panama Canal from HK Chinese management, provide a security guarantee for Western Ukraine only if it hands over US$500 bn of rare minerals; and tariffying (if not terrifying) NATO partners unless they raise defence spending – especially on US arms purchases – to 3.5% of GDP.

One Step Beyond

Is there method in the madness? Trump’s goal is to maintain American hegemony in the face of an increasingly aggressive and expansionist China. Trump is, Canute-like, trying to push back the waves of a multipolar world. Trade policy is an easy instrument to wield as it is largely immune from Congressional oversight. The jury is out on whether Trump’s trade policy is carefully calculated to deliver shock and awe or whether it is just the equivalent of throwing clods of mud at a wall to see what will stick. What is clear is that Trump’s transactional approach relies on threats to test the resolve of partners.

Like Canute he will fail. Trump’s trade policy will not make America great again. It will impoverish America, not strengthen it. Stock markets are plunging – last Monday’s losses equalled the annual GDP of Russia – investment is drying up, farmers have fewer places to sell their crops. The US equivalent of white van man is losing his job and has no medicare.

And Trump’s systematic dismantling of the international rules-based order – disengaging from WTO, WHO, the Paris climate agreement, dissing NATO, undermining the EU, and presumably more to come in the weeks ahead – will also weaken the USA. One does not lead or exert influence by retreating into one’s cave.

So assuming climate change has not wiped out our planet in the coming decades, our grandchildren will be taught in school that 2025 was a pivotal year like 1789, 1945 or 1989. Years in which, as Dylan said, “You’d better start swimming, or you’ll sink like a stone”. The year in which the Pax Americana and the Washington consensus died.

Keir Starmer’s ‘Geo-Political Minefield’ Between Donald Trump and Europe

With Starmer thrust into a damage limitation exercise by the Ukraine crisis, Chris Painter reflects on the fluctuating relations between British Prime Ministers and American Presidents. 

Professor Chris Painter

The Winner Takes It All?

If there were to be a Nobel prize for the worst ever book, Trump’s The Art of the Deal would win every year. His negotiating approach is based on two premises: might is right, and every negotiation is a zero-sum game: one wins, the other loses. It’s as subtle as Abba’s ‘The Winner Takes It All’. That is not the spirit in which the multilateral system was created after WW2, quite the opposite.

Trump’s negotiating theory is wrong. The author of this article, with decades of successful negotiating experience under the belt, can assure readers that the only agreements that stick, that are “sustainable” in today’s jargon, are ones entered into freely and satisfactory to all in the long term. Compromise is not a dirty word.

Which means that the international community, faced with Trump’s Don Corleone model of trade protectionism, needs to rapidly reassess how to react – and react as one. The reaction to Trump cannot be a technical one with each country haggling over individual tariff lines, arguing about supply chains, or that a tariff on EU or Canadian parts will hobble US manufacturing and lead to a two per cent spike in inflation in the wider Milwaukee region. Truth Social does not do facts.

Babe I’m Gonna Leave You

The only way in which the rest of the world can still the US’ protectionist wrecking ball is to unite and retaliate hard against the USA until it sees sense again. It is the only language that Trump understands.

That unity can only come from a core group who still believe in the Washington Consensus. The members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a regional free trade agreement comprising Canada, Mexico, NZ, Australia, Japan and some other Asian and Latin American countries, along with the European Union and the European Free Trade Association (EFTA) is the only group with collectively the economic heft to call the US’s bluff. This group accounts for half of world trade and investment. China should de facto join it. Top political-level determination will be needed for this group of countries to dictate the meal, not be on the menu. They need to meet now.

Come Together, Right Now

The coalition should agree first on firm, and coordinated retaliation against US protectionism, being prepared to restrict the importation of US goods, services, investment, movement of people, procurement; and remove intellectual property protection. Canada, Mexico, China and the EU have all already taken retaliatory measures and are preparing for more if the US goes ahead with its threats.

To be credible, the EU, Japan, Canada, Mexico, China and all involved must be prepared for some political and economic pain in loosening trade bonds with rogue America. But there is no alternative, other than to continue to sit supinely and wait for what the US will impose next. 

Two, with that collective Damoclean sword over the US’s neck, the major economies must signal readiness to negotiate a settlement comprising no changes in tariff rules, no non-tariff barriers, no discrimination, and ideally a restoration of the WTO’s judicial function perhaps with some recognition of US complaints of judicial overreach.

The EU, while announcing retaliatory measures on Wednesday, signalled that its door is always open to negotiate, to avoid a trade war that will only damage workers, consumers and the global economy.

It would be desirable as part of an overall settlement with the US to add demands for renunciation of any US territorial claims anywhere, a fair deal for Ukraine and Gaza, and support for Taiwan, given that Trump’s trade policies seek US leverage on all these questions, but there is insufficient common purpose amongst the coalition to pursue these thorny foreign policy, as opposed to trade policy, aims.

Nigel Farage’s Reform UK is Now Britain’s Biggest Far-Right Threat, Finds Report

The ‘State of Hate’ report comes in the wake of last summer’s racist riots and growing waves of extremist sentiment stirred up by public figures like Elon Musk

Max Colbert

Where All the Ladders Start

This coalition aimed at – truly – making America great again as it was in 1945 and 1989, will need to act with boldness, realism and conviction, and recognise that America itself will need to be able to defend a balanced outcome to its increasingly febrile constituencies.

A large part of the conversation will be how to provide US with ladders to climb down without losing face. With Trump that is a challenge, especially since the damage he is wreaking on stock markets, the US economy, and American workers is now so evident that he is finding it hard to defend his actions.

The ladders may include more purchasing of US products, better access to critical minerals, some manufacturing relocation to the US in the auto and hi-tech sectors, and – possibly – increased NATO expenditure on US weaponry.

This exercise is littered with moral hazard and will be a balancing act worthy of Houdini: how to satisfy the US without buying a way out of its illegal actions? Why do we pay Don Corleone not to burn the restaurant? We will see in the weeks ahead whether statesmanship in 2025 is comparable to that of 1945.