After overcoming significant political and economic headwinds during the past decade, the US economy now appears to have undergone its longest sustained expansion in history. Yet, behind the data showing historically low unemployment and long-awaited wage growth lie vulnerabilities that cannot be ignored.
Photo courtesy: White House/Flickr
Almost every week of late, it seems something new, startling and historically unusual is happening in U.S. trade policy. President Donald Trump’s actions are undermining the credibility of American negotiators, increasing uncertainty for traders and investors, domestic and foreign, and potentially threatening to throw the economy into recession.
Today, as policy makers and commentators confidently assert that trade wars are easy to win or that hot wars with China are either impossible or inevitable, the experience of being proved wrong again and again should remind us that events will, more than likely, not turn out as predicted.
The dispute is part of a much bigger issue. Washington is trying to keep its southern neighbour in check, and it’s trying to remind Mexico, which has been pursuing a more independent foreign policy of late, that the U.S. is the dominant power in the Western Hemisphere. The revival of the Monroe Doctrine is one of the most important processes underway in North America right now, but it’s challenged by the fact that the U.S. and Mexico have different visions for Central America.
Brexit is an all-consuming maelstrom of political dysfunction, one that has compelled Britain’s eyes inward. Yet amid the chaos, Prime Minister Theresa May has been steadfast in her determination that the country’s international role should not succumb to the same myopic fate as its departure from the European Union has.
There is a dirty little secret in economics today: the United States has benefited – and continues to benefit – from the global slump. The US economy is humming along, even while protesters in the United Kingdom hurl milkshakes at Brexiteers, French President Emmanuel Macron confronts nihilist yellow-vested marchers, and Chinese tech firms such as Huawei fear being frozen out of foreign markets.
China and Russia have signed more than US$20 billion of deals to boost economic ties in areas such as technology and energy following Xi Jinping’s summit with his “best friend” Vladimir Putin. The meeting between the two presidents, who have spoken of their desire to boost practical cooperation in the face of increasing rivalry with the United States, marked the start of Xi’s three-day visit to Russia to commemorate the 70th anniversary of the establishment of diplomatic relations between Moscow and Beijing.
Whether it was confidence due to his growing domestic strength, a belief that the balance of economic power in the U.S.-China relationship had already shifted, or a concern about appearing weak in front of Trump, Xi seems to have reached the conclusion that China, under his leadership, can successfully challenge the United States. This appears to have been a dangerous miscalculation. Xi may soon find that a perfect storm of agricultural problems, internal unhappiness, and his own chosen hard line on the trade war could undermine the domestic power he has worked so hard to consolidate.
India Prime Minister Narendra Modi meeting with the President of China, Xi Jinping, on the sidelines of the BRICS Summit, in Johannesburg, South Africa on July 26, 2018. File Photo/PIB
During Modi’s first term from 2014-2019, India unambiguously recognised that its strategic interests in Asia would be best served by betting on the US. But beyond the great power rivalry context, Modi will carry forward a complex bilateral agenda with China into his second term. The border dispute between the two countries remains as intractable as ever and concerns in Delhi about China’s big strategic and economic bet on Pakistan are growing.
United States President Donald Trump’s trade policy action against India suggests the narrative of a Rising India may well have met its comeuppance. The action has been explained away by some as collateral damage with the main targets being China and the trade-surplus enjoying OECD economies, especially Germany and Japan.
