Is the advent of nationalism to destroy economic neo-liberalism?

Acting Deputy Commissioner Ronald D. Vitiello of the U.S. Customs and Border Protection, visits the Border Wall Construction Site near the Otay Mesa Port of Entry as eight different prototypes of the Border Wall were unveiled at the U.S. border with Mexico. October 26 2017. Photos Courtesy of U.S. Customs and Border Protection. Taken by Yesica Uvina.

All major stock exchanges suffered severe losses on the first day of this week not because Tesla and facebook stocks are falling, or even because the Chinese announced on Sunday night their retaliative import tariffs of 15% to 25% on 128 US products; all that was known and probably discounted for during the past few weeks. It was the ‘America first’ President Donald Trump who provoked the sell off at the beginning of the week. He suddenly announced the US will target Chinese technology products with punitive taxes. It was the elaboration of the earlier decision to impose import taxes on Chinese goods worth $60 billion, on top of the extra tariffs of 25% and 10% on steel and aluminum imports respectively.

This Friday, the American administration will publish the list of Chinese advanced technology products to be punished with extra import levies. Trump has even commented that he targets the hi-tech sector, because the Chinese have made their policy stealing American technology. This rhetoric by the tenant of the White House increased uncertainty further this week over global growth, being potentially threatened by the Trump trade wars.

Surprising everybody

The US President has all by himself released the initial flares starting a real trade war. The Chinese retaliation is targeting agricultural products of interest to regions which voted overwhelmingly for Trump in November 2016. As of last Monday, China imposes extra import tariffs of 15% to 25% on US frozen pork, soya, fruits, nuts and wines.

This doesn’t constitute a revelation for the capital markets. The Chinese answer was more or less not only expected but predicted in its details. The new thing that shook the stock exchanges was the aggressive tone that Trump adopted last Sunday commenting on the Chinese measured retaliation. True, Beijing decided to adopt a moderate answer and is punishing American products of a total value of just $3bn, in comparison to the US targeting Chinese goods of $60bn.

Attacking Amazon

This week, Trump didn’t restrict himself to perturbing global trade. Stock markets were astonished to watch the American President escalating his aggressive rhetoric against the company which has recorded the biggest ever market capitalization; Jeff BezosAmazon. Trump criticized the largest on line retailer of the world of over exploiting the US Postal Service, paying few taxes and destroying small and medium retailing businesses. This is the latest incident in the series “Trump against Bezos”.

However, this is quite risky for capital markets, because investors do not take such things lightly. Actually, this could have been the main reason why stock markets lost around 2% in a few hours last Monday and gold – the standard safe haven for investors – gained a similar percentage.

Inviting Putin to his…White House

Another difficult to understand Trump initiative that was revealed last Monday, was his invitation to the Russian President Vladimir Putin to visit the White House. He acted as if the White House is not the most officious American institution, at least for the foreign eye, but just the domicile of the Trump Family.

According to Reuters “A Kremlin aide said on Monday that U.S. President Donald Trump suggested the White House as the venue for a summit with Russia’s Vladimir Putin when they discussed the idea of meeting in a telephone call last month. Since that call, on March 20, preparations for a possible summit have not progressed because of a diplomatic row, the aide, Yuri Ushakov, said”. And all that, at a time when there is a most serious ongoing investigation by special counsel Robert Mueller, threatening to touch Trump personally for colluding with the Kremlin to help him beat Hillary Clinton in the 2016 Presidential election.

Playing with foreign affairs

All that constitutes an impossible and unwarranted prying of Trump’s White House on US foreign affairs. Traditionally, the State Department has the priority in the foreign front and that’s why Rex Tillerson was firstly neutralized and then dismissed.

Trump has also trespassed in the capital markets. He is influencing free market play with unwarranted comments, the sacrosanct of the US ideology and practice. Trump’s butting of Amazon has gravely shaken investors, who hoped that, despite this President’s unpredictability, there would at least be some limits; they were trumped. For the first time in the history of the NYSE, a sitting President systematically fires at a listed large business group.

Targeting Germany too

In the foreign front, the ‘America first’ President has created even greater uncertainties with his bellicose rhetoric against China and Germany. Both countries have shown moderation in responding to Trump’s aggression. In Germany, however, there is more uncertainty and even fear than in China. Apart from its financial strength, Berlin has nothing else to confront Washington with. Beijing, on the other hand, apart from its economic might is a formidable military power, with a nuclear arsenal, strong political influence in the entire Pacific/South East Asia part of the globe and a veto power in the UN Security Council.

For this reason, the Germans are more terrified than they seem. Their wellbeing and global position is fully dependent on free trade and multilateral agreements, that Trump is currently attacking without any hints where he may stop. Germany has been hinging her economic excellence on the neoliberal construction of free international trade and totally liberated capital movement. All along the past thirty years the neo-liberalism triumph was very actively supported by the Germans. Berlin forgot, though, that with its unbending Teutonic convictions, liberalism is or rather was until now restricted to trade and capital movements, without political reciprocation.

Exorcised political liberalism

The Germans have never been a truly politically liberal country like Britain and strict nationalism has always being lurking in the alleys of the major Teuton cities. Unfortunately for them, Washington is now becoming likewise. Under Trump it more or less withdraws from the liberal western economic constellation. This is possible because the West, with Germany being probably more responsible for that, refused to accept liberalism also as a political, not just economic, guiding principle.

So, the West has developed a limping liberalism in the economic sphere, leaving its political elites to slosh about in the dump of nationalism and xenophobia. The European Union didn’t run an existential danger with the 2008-2010 financial Armageddon. Unfortunately, some hundred thousands of immigrants were enough to completely politically undermine the EU and cut it into three pieces; the directly hit South, the completely uncooperative East and the bewildered affluent West. This proves that, politically, Europe and the world have remained exactly at the point where WWII ended.

No doubt, what Trump has started in the US is not going to end with him. The next President of the US may well be even less political than him, and of course not a liberal internationalist. It’s not difficult to explain, then, why the world has developed, through token voting, a fast growing bunch of nationalist autocracies in Russia, Turkey, Egypt, the Philippines and South Africa to mention just the big ones and many more countries in Asia and Africa. Is the West to follow? The US will show the way.

 

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