If There Is One Thing Investors And Foreign Officials Should Know About The US...

Domestic issues have dominated the news of the first 50 days of the Trump Administration. With the German Chancellor's trip to Washington tomorrow, Secretary of State Tillerson in Asia, and the G20 meeting, foreign affairs may knock the debate about the US budget and health care off the headlines.

Investors and policymakers appear aware that there are different views in the Trump Administration. They are not all what has become known as alt-right, or subscribe to the populism. Partly, Trump's (and Bannon's) worldview does not appear to find many adherents among the pool of potential candidates for Cabinet and other senior posts. Another consideration is the Republican Party is itself a large coalition.In the Netherlands, there are more than two dozen political parties, half of which will be represented in the new parliament. The US political culture is different and what might have been political parties elsewhere are factions within a larger party.

Although Trump has not held public office, his views are well known and were not entirely made of new cloth for the campaign. He has been critical of the liberal globalism for which there has been a rough consensus since the end of WWII. He consciously harkens back to an era before WWII. In particular, the slogan "America First" is a throwback to the 1920s and 1930s. 

That was an America that turned its back on its president's proposal for the League of Nations. Many historians talk about this period as isolationism, but it is neither fair nor accurate. Foreign leaders and investors are mistaken to think that the Trump Administration is isolationist.  

It is true that the draft 2018 budget calls for large cuts in the State Department (28% cut from FY2016 levels). It is also true that the Trump Administration let it be known that it is not obligated to follow WTO rulings. Trump has also been critical of the IMF and the UN. Some analysts and politicians are talking about these measures and others as evidence of isolationism; they are better understood as part of the tilt toward unilateralism.  

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Dick Kaplan 3 years ago Member's comment

Excellent article, and the last sentence sums it up well: "The #Trump Administration is more about unilateralism than isolationism, but its unilateralism may find it more isolated." 'America First' does not necessarily equate isolationism, but rather forces decisions to be viewed through the lens of "does this actually benefit America."

Gary Anderson 3 years ago Contributor's comment

But if the lens is not able to interpret the data correctly it could be that the viewers in the White House cannot make decisions that really benefit America. For example, they don't seem to understand the role of the reserve currency. They could implement aggressive export plans that would put that role for the dollar into jeopardy.

Gary Anderson 3 years ago Contributor's comment

Interesting article, Marc. I would say that as to foreign policy, Trump is not an isolationist. But as for economic policy, he could very well listen to his minions and lean toward isolationism, or a form of mercantilism that shuts out the world with high tariffs.

Marc Chandler 3 years ago Author's comment

Thanks Gary. Yes, you might be right. I tend to think of foreign economic policy as a subset of foreign policy. And one of my points is that Trump Admin has both free-traders and protectionists. I don't think the message is autarky. I think that what is emerging is lobbying the multilateral institutions to better enforce current rules. The president and the executive branch has limited ability to raise tariffs without Congress. There are some thing Trump can do if he says there is a balance of payments crisis, which would be hard to substantiate. Time will tell which wing of the administration carries the day. I think Mnuchin's comments today give sign that the internationalist wing may come out on top, while the other wing gets to pursue the domestic agenda.