Hello and welcome to the forecast. So Donald Trump has opened fire on a global trade war and countries around the world are working out what to do. Even the Penguins in Antarctica must be shuffling around wondering what they've done to preserve it. The UK faces 10% on everything and 25% on cars and steel. So what does it mean for us? Where's this heading? Does economic war put us on a road to something even worse?
With us today, the American author Robert Kaplan, whose new book is cheerily titled Wasteland, a World in Permanent Crisis, and our economics correspondent Helia Ebrahimi. Robert, thank you very much indeed for joining us. It's a. Pleasure to be here. Let's look at this through the prism of how you analyze where we are at the moment with sort of strong men, democracy in crisis, and where you think this is actually heading.
Well, I think it's history shows that trade wars can lead to real military conflict because trade, free trade cushions the impact of bad relations between great powers because they have too much at stake economically. But if you put up economic wall walls, that increases the likelihood of the probability of the military conflict. And I'm thinking about China specifically because markets have priced in rather impressively, the Gaza war, the Ukraine war.
Nobody notices a difference on their savings accounts when because of those wars, you know, to be brutal about it. But if there was a high end military conflict between the world's largest economies in the South China Sea or Taiwan, it would have a devastating impact on global markets. And by putting and starting a tariff regime does not 'cause that, but it increases the probability of an of something
like that happening. Because for decades the US China relationship has been cushioned by trade between the two countries and and by the fact that each country knows that there's too much to lose if there was a real war. So that inhibits both parties. Why would that not continue to
be the case? Well, the problem now is that if he's putting high tariffs on China, for instance, as an example, the relations go South, you know, the relations get more tense and you know, it's Shakespearean, you know, in terms of what's going on in the minds of leaders, will they, the Chinese just keep finished conducting a military exercise involving the occupation of Taiwan.
And this comes on top of that. So you know it again, it increases the likelihood or the probability that that one or both leaders will miscalculate. And and if it is Shakespearean, then let's look at the characters. You know, if you look at Trump and Xi Jinping, yeah, how how do the way they are developing that? Trump is post literate. I didn't say illiterate. I say post literate. He, he can use a smartphone. He can he, you know, he can send social media messages, but he
doesn't read books. He never has. So by not reading books, how can he know about the origins of the Western alliance or of the treaty alliances in the Pacific, which were established 80 years ago? It's too long for memory, for a living memory. So he has no appreciation of that. So he's reduced to like, brutal territoriality. And he's surrounded by people who don't tell him neither.
Right, You know, take Greenland because it's an extension of North America. Make Canada subservient, take the Panama Canal, you know, create like a greater North America on on the map to compete with China and Russia, countries that he takes seriously. He doesn't take seriously as much the European Union because he sees it as weak and divided and has and as I said, has no appreciation for the origins of the Western alliance. Now Xi Jinping is, he's a
Leninist autocrat. China has been different things under different leaders. It's had, you know, a revolutionary anarchy under Mao, a kind of Mandarin aid, a wise Mandarin aid under Deng Xiaoping and Zhang Zeman and Hu Jintao. And now it is a real hardcore Leninist where you have ideologues making complex financial decisions. Again, so much power is invested in these two men, to say nothing of Putin, that the chances of them to miscalculate are great.
It's amazing how even markets which are supposed to be rational, supposed to be rational, are affected and have big downturns because of human error. You know I'm talking about human Shakespearean era here. I. Mean just on that is there? Is it? Is it too much of A stretch to say there's a little bit of Leninism in Trump as well? You know, in in the sense of a man who who believes in punishing the innocent to some degree. That's, that's the best way to describe Leninism.
Don't just punish the guilty 'cause that gets you nothing. You have to, you have to strike fear into the hearts of the innocent. That way you get total control. That was the innovation of Leninism. And there's a little bit of that of Trump, but that's not really where he is. He's not serious enough to be a fascist or an ideal or a Leninist ideal. You know, to be a fascist or a Leninist ideologue, you have to read, you have to have a program, etcetera, etcetera.
But it's quite interesting because the the economic vision that he has is not really in line with western modern economics. You know that he wants to bring back AUS economy that belongs to the last century. It's fantastic. He's saying he's doing all of this because workers have been disrespected. He he wants American workers to have respect again. He wants manufacturing to come back to the US. Now the US has really transitioned from a manufacturing nation to a services behemoth.
You know does. The political problem he's got is workers who are worried about their jobs and worried about their incomes, and that's what he's playing to. Yeah, and he has. No, he has no concept of complex global supply chain. And I think that is the problem. And he thinks the that you are going to have these massive
onshoring. You know, he points to, he says, well, look, I got Apple to promise, you know, $500 billion of reassuring, although poor Apple, they're getting hammered in the market today because despite placating Donald Trump and saying we're going to bring back all of these jobs to the US. You saw the tariffs that were hit not just against China, but across Asia, across Vietnam, all
these countries. To your point, Robert, that created that link between these blocks, between the China block and the US block, allowing trade to flow the kind of back door through China. They've also been massively hit with huge, huge, huge tariffs. And I think The thing is that he thinks that you're in a wink of an eye going to bring back all of these manufacturing jobs and bring back all of this
investment. But when you talk to companies, Chris, they tell you we don't even know where Donald Trump stands because he changes his mind so. We. Can't have a 10 year plan. Exactly. Apple. Poor Apple. As you said, you know it's
supply. Chain that you say that there is it. Is so it's supply chain is so in so dependent on China, Yes that you know, when Tim Cook made this bet, you know, a decade and a half ago to locate in China, he had no idea of the character like Xi Jinping coming to power. So, you know, so it so it really effects them as well.
But but they have tried to work with Trump's, you know, previous Trump won type of tariffs and get some of their manufacturing, which has happened across not just Apple, but a whole bunch of American companies where they've taken Chinese manufacturing and parked at somewhere else. And that is also in the crosshairs now. But you know, Trump would tell you, look, we've got you know, even LVMH has talking about beefing uppers production in the US.
But I think to the core of the economic issue is you said there's a political issue because, you know, the Magas love those manufacturing jobs. How, how many of those jobs are really going to exist? Because if you are going to build modern factories, they are not going to be labour intensive. They'll. Be AI intensive. Exactly, they'll be AI intensive. So who are going to get these jobs? So at the moment he's because his argument when he stood there with his board and he said,
well, they charge us 67%. Gotta love a man with a board. And, you know, and he laid it out. You can see why it might have seemed persuasive to some people who haven't yet gone to the shops and seen their prices going up. When is that going to happen? Well, look, in terms of prices, it's going to happen in the US, You know, it depends how much the companies pass on. Remember that this is a tariff. You know, we're talking about potentially $700 billion of tariffs that the US is going to
collect. So is that a big win for Trump or is that $700 billion going to be passed on to US consumers? So they're going to have to pay more for car industry. For example, analysts think that cars at the top end will now now cost $10,000 plus plus plus more. And even at the bottom end of the car market, it's going to cost one or $2000 more. And it's not just that it will cost more, it's that people will stop buying cars. It's not just OK Consumers will just, you know, stump it up and
it'll be out of their pocket. They will actually stop buying these products. Very few economic decisions from the average American consumer that have so much of symbolic effect on their lives. It's the price of a new car because many Americans now lease cars, which means they exchange them every three or four years. And if the lease goes up by 1000 or $2000, that's like when the gas price goes up. It could change an election if the gas price goes up.
So what? You don't, I would say, to keep your attention in terms of Trump's popularity as we go forward on the bread and butter thing like people's retirement savings accounts. We look at the market today, you know, the price of cars. Also, he's gutting the Social Security Department, the Health and Human Services department. So when consumers call up to see because there's a mistake on their retirement check, there's nobody to answer the phone. They they're on hold for five hours.
Those are the things that change votes. And, and you've got, so you've got these first round effects, Chris, which is, you know, prices are going to go up. If companies don't, you know, swallow the hit and have less margin, they pass it on to consumers. And at the moment, analysts are talking about inflation going up to 4%. You know, that is quite considerable. I'm predicting a recession now. Predicting materially a bigger risk of recession.
So one of one of the caveats I would say, and there's been a bit of chatter from the administration today is look at the markets. Don't look at the markets because we're going to give all of that money back to you, the
US citizen through tax cuts. So I think that is an interesting thing to watch and will impact how you know bigger risk for recession there is. And tax cuts will generate a higher deficit, which is which is such a, you know, the the building the deficit is like high blood pressure. It's the silent killer. You know, people just it's an abstract mathematical story that nobody bothers to read, but it really impacts the health of a nation going. But what do they do? If they pay down U.S.
Debt, then they definitively will have a big so their choice. Just to be clear, their choice is to either pay down the debt or to give it back to people in tax cuts. And what Trump said last night is we're going to give it back to you. And so consumers will be will be expecting that, but that is going to be quite challenging. And you've got to think, Chris, that because I was talking about first round and second round effects.
So the first round, as prices go up, you people who are Trump voters go into their supermarket and go hang on a moment. I no, I don't like this. I don't want to pay more for buying groceries. That's not nice. I don't want to pay more for my cars in this field, you know, suddenly unhelpful. And then all of a sudden, businesses invest less and the economy starts to shrink.
And that's going to happen not just in the US but, you know, that story of the US sneezes and the whole world catches a cold. It's amazing that we live in a world of so many brilliant financial experts and yet and yet democracy has produced someone who's an economic illiterate in some respects. So how, how do you get Robert from that? Because you know, the, the natural reaction to that as well. It's all going to go wrong quite
quickly. Surely the American voters will see this and Trump will be forced either into a climb down or they'll be swept out of power and the world can can reset. Why do you not think things are going to go that well? I think. From your point of. View I think things are not going to go well. Remember, the president is in power in the American system for
four years. He may lose the midterms dramatically, but he still has enormous power in foreign policy, even if he loses both houses in the midterm. And I think we're entering an era of real where all great powers are threatened. As I layout in my book, they're all in decline, but at different rates and in a very slow way and in different ways. And great powers in decline have a tendency to lash out and take risks.
I mean, there's nothing more dangerous than a China where billions of dollars are fleeing the country and at the same time they're planning on invading Taiwan. But interesting isn't it, when we talk about kind of the spheres of influence that just last week you had a meeting, I think the first in five years between China, South Korea and Japan talking about trade, you know, and that is the these are the kind of shifting tides of what's going to go on.
Right, There's an important point to make with that, which is that, you know, China is there. It is the geographical, economic, debt, demographic organizing principle of East Asia and the Western Pacific. America is 1/2 a world away in a real clash between the US and China, with the US providing its allies with less assurances than
in previous administrations. Countries from Japan and the North to Australia and the South can slowly, gradually, without admitting it, be captured by China, you know, move in the direction of China. You know, to to the extent that Trump may be helping China created the its old tribute system, which is not exactly imperialism. It's something more subtle than that. Well, I mean, it's, it's, it's very interesting. I mean, they, they are relatively small countries to
worry about, I suppose. But when you look at, for example, what's happened with Australia, yeah, you had a situation where the Biden administration had pulled Australia in. Right, exactly. Created orcas they were going to get nuclear powered submarines. Suddenly Australia is pulled away from China, yes, which is what, you know, it had been growing, growing, you know, increasingly under China cell over the last 10 years.
But that's kind of now blown out the water because China's now saying these are not the actions of a friend. Yeah, remember, Australia had it good for decades. It was getting rich off China and it was protected by the US Navy and Air Force. So it was kind of hedging a bit while being in the western camp. August, as you say, you know, which is the treaty to provide Australia with nuclear powered submarines has shifted Australia to the to the to the western side. But some but.
Some of this could change. This could change everything. But some of the kind of economic philosophy of what the Trump administration are doing so bizarre. Like you, Yeah, Lutnick today was talking about Australia. Well, why did you, you know, slap Australia with 10% tariffs? Oh, well, you know, they just buy LNG from us. We don't want to sell them LNG. That's what they want. But hang on a moment. That is not how the global economy works. That is how a managed economy
works. They're so concerned about we want to sell our beef. We want to sell our agriculture, which I don't know if yes, it that will resonate, as you said, Chris, with a contingent of American MAGA or, you know, voting, but it's not all of America because they they're more interested in the wider, you know, U.S. economy than just agriculture. There is something deeper going on, which is this happened in the Weimar Republic, where you had a lot of smart people at the end who were experts.
And all of that gets swept in. You know, it's swept gradually into the Nazi Party, saying things that they didn't really believe. But we're so interested in their careers in power. And we're seeing some. Yeah, they're enthralled by the proximity to power. And we're seeing some of that with people who should know better are saying things. Remember, Marco Rubio was in It was a neoconservative 12 years ago. Where's that gone? Yeah, that's nowhere in this in administration. Exactly.
It's all about proximity to power. I mean, you look at these tech billionaires, that tableau of the inauguration. Never has there been this much collusion between massive wealth and political power as now where you take people who are worth 10s of billions of dollars. Yet they feel the necessity to get on their hands and knees before Trump, who may be broke for all for all. We know his finances are so complex.
The the other thing about this that that you know, that makes you wonder is quite, quite a lot of the theoretical upsides are long term. They are not likely to materialize in the next two to three years. Yeah. So these do not look like the economic plans of a man or a movement who think they're going anywhere. Yeah, that's absolutely true. Trump and well, in this sense, JD Vance, who in the vice president, who in some respects is more extreme than Trump, when
you actually look at his. Yeah, he really believes a lot of this is, you know, he's only in his mid 40s. He can run for president. You know, he could be a president for eight years. And that, you know, the, the Trump, the Trump, the Trump party could be in power for 12 years. But Trump, as you said, is not laying the groundwork for that with this. But the rhetoric will be there, Chris, you know that I, I proved, you know, I brought these many.
Jobs, you mean by your comparisons to Weimar and sort of where that really takes us with a with? A well, Weimar, Weimar led to Hitler. The the world, the United States and the world are not going to have another Hitler. But if you look at the look at the patterns of how the Weimar system, you know, ended and how the Remember, Hitler was very popular.
Had he died in 1938, he would have gone down in history as a, you know, as a fairly popular German leader who got back lost territories, revived the economy and and, you know, and did things like that. So it's like Weimar in the sense that, you know, it's it's a human proclivity that people brilliant but are but are absolutely obsessed with their careers and their social position get swept into this
wave. And I think the Lutnick comment is is is very symbolic of this because he should know better of all people. And, you know, the, the, the language that the administration using is that America has somehow been ripped off. I mean, if we've been ripping them off, we've not done a very good job because they're the wealthiest nation in the world. But that they're being abused that the whole global economic system is built on the back of
ripping Americans off. This morning they were saying again that, you know, it's not just tariffs that are problem. It's all all the rules that different countries bring in, you know, that are barriers that somehow subsidized our national interests above US interests. And then that is the dragon that Trump and Trump's administration has to say that was not realistic, that kind of portrait of what's happened. But. There is also a logic for the
MAGA crowd. If you look at the trade restrictions India imposes on America and. Yeah, they don't buy. They don't buy American corn, you know, So that's why. Or whatever it might be that you go, well, hang on what you know, why are we not charging something similar? You know that that is a difficult one to answer, I think, when you look at the protectionist policies of other countries.
You know, one of the things that Trump realized before other politicians back in 2014, 2015, was that the elites, Republicans and Democrats were all in favor of free trade. And he saw how free trade was making life more difficult for American workers. It wasn't just jobs, manufacturing jobs in the northern Midwest lost to China. It was, it was the, you know, it was, it was other things as well that that, that there were less good paying jobs.
And the states that lost the most jobs to China in 2016 were the states he carried by thin margins, which enabled him to beat Hillary Clinton. So from his perspective, he's been ahead of the curve when you know, when he looks back at it, that because he started attacking free trade before almost anyone did. And, and it resonates with
voters. And I mean, in that way, it's quite interesting because it, you know, it, it could be a traditional very left wing philosophy that we need to, you know, that it's not a very, as you were saying, but not a very Republican kind of economic ideology. And it does resonate with people. You know, he's going to be able to say, look, Louisiana, I got Hyundai to bring steel manufacturing and invest, you know, six billion, 6 1/2 billion dollars there.
That will win votes. That will bring people on side. But just because people, you know, it resonates with voters, it doesn't mean that that is an accurate reflection of the US as trade situation. What's happened in America is that there's no center anymore. You have the the the far right Trumpian right, not the center right of the old Republican Party. And you have a progressive left, not the center left of the old Democratic Party.
And the center has been lost, I would argue, because of two big reasons. You can name 20, but I'll name 21 is globalization has split American Society down the middle. It's it's created a globalized, cosmopolitan, multilingual wine sipping class of people dreaming of European vacations and stuff. And then there's the other half that has been left behind in the old nation state in the fly over states of Kansas and Nebraska and etcetera.
So globalization divided America as it has some other countries as well. I mean, there was a bit of this in Brexit. And the other thing I would mention is the change in the media environment.
America was a great mass democracy in what I call the print and typewriter era when people got their news from centrist and their and you know, got not only got their news, but their whole outlook on the world from centrist Fact Check, professionally written long, you know, long articles and newspapers that provided people with complexity and context that they could understand. The digital video era has erased
that. It's created a social media environment of passion, ideology and simplicity. Simplistic narrative, so and. Trump rise that very well, yeah, but the genie is out of the bottle now, isn't it? You can't. You can't put. That no, you can't put that. And what that goes with also is the hollowing out of of the of the American bureaucracy, which Trump is sort of slashing and burning.
And and that is really weakening US power, the hollowing out of the bureaucracy, because what we see of American foreign policy is like an iceberg. You see the top, you don't see everything's underwater, everything that's underwater. And what's underwater is the 10s of thousands of foreign service officers working in complex, troubled countries like Pakistan, Nigeria, Colombia, etcetera, etcetera, who are solving crises on a daily basis so that they never reach up to
the newspapers. It's amazing what the US Foreign Service accomplishes, keeping the world at Bay so that the president only has to deal with the three or four top foreign policy issues on a daily basis. And Trump is hollowing this out. What what do you think in terms of the geopolitics happens to Britain, Europe, the sort of the medium sized players, if you like? We're not superpowers, we're never going to be. And we're trying to sort of find a role in this, in this new world.
And Britain sort of sees its role as sort of convening, trying to be the glue, trying to be a sort of a a player that sort of punches above its weight and size. Does that get anywhere in this new? For so many decades, Europe less so Britain, less so France.
But Europe has has been in a state of dependency on the United States for its security and that's lasted 80 years and 80 years is a long time, you know, And so getting its act together to, you know, to produce a military, you know, a capable your pan European military. It's not just a matter of budget procurements. It's a matter of a mentality of producing a military that actually fights, not just like Aun toy soul soldiers in
southern Lebanon, you know? So that I think that's the Silver Linings argument is could everything that Trump is doing all, are there some repercussions that could be positive in terms of defence? Has it catalysed Europe to do what it should have done a very long time ago? Does it catalysed Europe to think economically very differently? We had the Dragu report a while ago saying Europe was inefficient.
Maybe, maybe this is an opportunity to say what can we do to be a kind of economic force of the next century? You know, you think about kind of American hegemony, and a lot of it has been through the big tech companies. Something that has SAT politically a little bit uncomfortably with Europe is now the moment where the economics and the politics work side by side. But this? Is where I think this is slightly sort of fairy land because in your argument and all
the great powers are in decline. Yeah. And the truth is so, so, so are the medium sized and small ones. There's there's nobody really in the ascendancy in this, in this world is that. I don't see it the the 1 silver lining that I see that's going to happen over the next five years and it's a region wide thing.
It's not a global wide thing is I think that of all places that can have a democratic trending upheaval and get rid of a tired regime, it's Iran. And Iran has 85 million people highly educated waiting to be unleashed into the global economy. And I think Iran is at the end of what will go down in Persian history is the most destructive tragic regime in, in, you know, in, in, in memory and that. And if Iran changes, the whole Middle East change.
Well, there's some speculation that that that might also be what Trump has in the mind as well. That's, you know, that sort of military action on Iran. Well, I'm not talking about a military action because of country of 85,000,000. You're not going to invade and dominate. I'm talking about an internally driven upheaval that is very possible. Remember, Iran is the land of demonstrations. They demonstrate all the. Demonstrations that have been
brutally. Suppressed, but it's But we haven't had a big wave of demonstrations since the Israelis attacked Iran, since Hezbollah has been virtually destroyed, since Hamas has been virtually destroyed, the the regime is perceived to be in a much weaker and more vulnerable position than it was before. At some point, demonstrations may topple. Robert, you're both simultaneously very positive and actually out glooming me on the
global economy. I mean, I, I, I think there is chance for Europe to collect itself. You know, these these are moments where big leaders, big thinkers can make a difference. Look at the German economy and the two big assumptions they made, which was that we will have US security forever and ever and we will be able to rely on Russian energy forever and ever. That was a mistake. That is not the new world. But we are in an environment where technology is changing.
Look at what's happening with AI. You know, US search is not necessarily dominant. Look at what DeepSeek is doing. It shows that there is a potential, the shift, the the kind of technological. I know you're saying this is all fairy and we haven't done it, Europe hasn't managed to do it yet, but that is because it was
only a political ambition. And what I'm saying is there is now an opportunity where you say if your back is against the wall, all these decisions suddenly become more attractive to investment. My fear is that it's all different levels of negative, you know, and, and, and that that none of this is really, you know, there are no winners here. This is all. Just Mark Carney might disagree with you. Well, he would, but I mean, he's
well, yeah. We'll look at the position they're in and you know, when it comes to do doing deals now with Trump, if that, you know, Britain's going to try and improve its position. There is no win. It's just different degrees of cost. We're going to either lose tax revenue by giving it back to the tech Bros. We're going to flood our markets with American agricultural goods. You know there is nothing good that comes out of this. What if it what if it's closer relation?
What if it is to catalyse us to have closer ties to Europe? And that, that I'm not, I'm not disagreeing with you, but the reality is that Trump is empowered. This is these are the actions he's taking. I think it's up to the world to respond in a way and think of
where are the opportunities. Just finally, I mean, you know, if you think that you know the these dips, you know, if this is a vimar period, the response will eventually be to turn around and rebuild institutions and rebuild democracy. Can that be done without, you know, a horrific dip first, You know, a terrible war, You know, a terrible calamity, terrible economic crisis? Well, one would hope.
But what often happens is things have to get worse before they get better until, until the, you know, America is a mass democracy still, even though Trump is taking a hatchet to institutions, but it is a mass democracy still. And until Americans feel the pain more, there's going to be no curtailing effect on Trump's on Trump's actions. Robert Kaplan, Helia, thank you very much indeed. That's it for this edition of the FORECAST. Until next time, bye bye.