No one has been more consistent in denouncing globalists and globalism than President Donald Trump. If ‘tariff’ is the favourite word of his dictionary, ‘globalist’ is his preferred term of abuse.
How ironic then, that Trump is turning himself, and the US administration, into an uberglobalist, and one who is hurting the US more than other countries. The longer-term effects of his chaotic policy style – whose only charitable explanation is that it is shocking the world into a new paradigm – will be to make for more globalisation. It might even lead to a better and more multilateral version of globalisation.
Trump’s tariffs
It used to seem that the tariff regime initiated by the first Trump administration, and lamentably continued under the Joe Biden presidency, was shooting itself in the foot, in the sense that – as later academic studies showed – the tariffs did not generate new jobs (although the measures had a political effect in that they increased support for Republican candidates).
The new regime after 2 April is much more destructive. It increases costs for a large number of US businesses, including very important exporters. Steel and aluminium tariffs inevitably damage machine tools, engineering and aerospace, with the cost of imports (a direct burden on American producers) rising by some $100bn. Automobile producers are hit by increased costs of parts that are shipped from Canada and Mexico and then turned into US cars that are then exported. The tariff regime is America shooting itself in the head.
Some of the worst Trump tariff damage will be done to relatively poor countries, such as Lesotho, which had the distinction of topping the 2 April list with a 50% rate and sells a mixture of high-value diamonds and cheap textiles. UNCTAD, the United Nations’s trade and development experts unit, explained how Madagascar with a 47% rate was being taxed for sales of goods that the US does not produce. The tariff regime is America shooting itself in the heart.
The Make America Great Again movement on the surface is about turning one’s back on the rest of the world. It demands turning back all the elements of the globalisation that drove the world at the turn of the millennium. What it is in fact doing is attempting to create a heartless and headless world, driven solely by the great power fantasies of autocratic rulers.
But in fact, globalisation is continuing, just in a different form. Former key Trump adviser Elon Musk has a vast international portfolio of business interests, notably in China. Trump himself has global real estate; his family is busy extending the company’s footprint. These interests play a key role in defining US policy. The only really powerful card the administration might play to bring Russian President Vladimir Putin to the negotiating table over an end to his war on Ukraine is the prospect of a large inflow of American investment in energy and minerals.
The chances for multilateralism, and for Europe
Europe has a powerful role to play here. Its political and economic elite is now speaking with new confidence. It is possible it may also act with more confidence.
Economic weapons can be a tool for Europe to assemble the basis for a new, better, and more universal multilateralism. Trade and exchange rate policy in past eras of globalisation were characteristically handled by different agencies, commerce departments and finance ministries; their interaction has always been contentious.
A further mechanism has now come to the fore. This can best be understood through reflection on the balance of payments. A country with a large trade deficit, like the US, still needs to be in balance, or fund the deficit, and it gets there because foreigners buy US securities or invest in America. The inflow of foreign funds to finance corporate investment, but also government deficits, now running at very high levels – over 7% in 2024 and estimated at a similar level in 2025 – is so crucial because Americans do not save very much. Thus, the country imports savings from the rest of the world, and they pay for the trade deficit.
This is where Trump tariff proposals complicate matters. The US wants foreign investment as a key to future American growth. Biden needed this for the big infrastructure investments under the Inflation Reduction Act and the Infrastructure Investment and Jobs Act; and Trump needs this even more for reshaping the country – making his ‘golden age’ – through AI.
There may be an irony in the way a project of reclaiming sovereignty to launch what Trump calls ‘a thrilling new era of national success’ depends on technical change paid through global funding. It was after all the combination of technology and globalised finance that made American workers and the America middle classes vulnerable. Job losses and insecurity turned them into Trump voters.
The dependence is not just rich in irony. It makes for a fundamental vulnerability. The success calculation depends on foreign money, but if that dries up, the promise of a miracle also fades. And it is possible to think of different ways that abundant funding – which had been the key to the era of globalisation – might end.
Impact on financial flows
First, the funding might end if globalised bond markets worry about the capacity of the US to repay the large debt built up. Since 2022, and the experiment of the Liz Truss government in the UK, which wanted to make a similar gamble on growth, the British bond market has been cited as a warning to Americans. The privilege of having a reserve currency does not mean that you can do absolutely anything. At some point, and usually very dramatically, as in 1931 or in 1971, the sentiment shifts. Revulsion and incredulity replace credibility. The use of the US dollar as a foreign policy instrument in a divided world makes that outcome even likelier.
Second, the funding would stop if the promise of the future suddenly appears oversold, or if the technology disappoints. Many investors worry that the soaring stock prices for tech stocks indicate a bubble on the point of bursting. A gamble on growth will require vast investments, but if the bubble bursts they may be unfinished, orphaned and wasted.
Third, the funding would end if major providers of capital intervened to stop their citizens and their corporations investing in the US. Such an action could well be a response to the problems created across the world by some combination of American tariff policy or a strong dollar regime.
The flow of funds across frontiers has been most readily influenced by governments by changing the tax treatment of foreign investments. One of the drivers of the new Trump initiatives is pressure from the tech giants to change unfavourable tax treatment, notably in Europe. The global corporate minimum tax, negotiated by the Organisation for Economic Cooperation and Development, is under threat. An escalation of the tax conflict would mean Europeans taxing not only foreign corporations in Europe, but their own corporations and citizens investing in the US. Such a step would make the balancing of US payments harder, but might also divert European funds back into Europe. It may be one of the quick paths to decline that Trumpian shock tactics have opened up. It should be presented as a way of increasing European competitiveness.
Economic fashions are contagious. It is only a matter of time before the logic of the tariff imbroglio becomes apparent, and somebody makes ‘Make Europe Great Again’ the central slogan of European politics. But the real debates will be about the management and control of investment and financial flows, and not about trade. As the new discussion unfolds, it will be the perverse and unintended result of the globalist US campaign against globalism. Alternatives to globalism will actually prove to be just as global as the world order their followers wanted to, and tried to, replace. Globalisation will be back, in a reinvigorated and multilateral form.
Harold James is the Claude and Lore Kelly Professor in European Studies at Princeton University, Professor of History and International Affairs at the Woodrow Wilson School, and an associate at the Bendheim Center for Finance.
This is an edited version of an article first published by Internationale Politik Quarterly.
Image source: White House
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