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Hello and welcome to These Times, I'm Tom McTague and I'm Helen Thompson. This week Helen and I wanted to turn to what is fast emerging as one of the central issues of the Trump presidency and that is tariffs. Very quickly after his inauguration, Trump announced tariffs on all... Transcription by CastingWords
emerge that Trump has announced a whole new set of tariffs on the imports of steel and aluminium. The question then we're asking in this week's episode, what lies behind Donald Trump's turn to an aggressive trade war? The word tariff properly used is a beautiful word. One of the most beautiful words I've ever heard. It's music to my ears. Yeah, any steel coming into the United States is going to have a 25 percent air. What about aluminum, sir? Aluminum, too.
Thinking about this over the weekend and talking it through, we thought that the only way to understand what is going on here is to really look at the history and to try and place this in its context. Trump's tariff war, how do we think about it compared to previous... So what we want to do in this episode, we thought, was to, in the first half, tell the story right from the beginning of the founding of the United States up until...
roughly the sort of middle of the Cold War, and this moment that has so many parallels, which is the Nixon shock. That is where we're going to start the second half with the Nixon shock and take that story up until today. I mean, the Nixon story is remarkable for its sense of almost the feeling that we're back where we were then. But in the first half, I think it's really important because I think in some ways...
It's very easy to think of Donald Trump as an aberration. And if we were to tell this story from the end of the Cold War in the 1990s up until today, then I think that is reasonable to think of him as an aberration, because this is a moment of... america as the champion of global free trade at least theoretically i mean i think there is obviously some complicating factors there
But I think we can think about that and we could say, well, this is a break. This is a sharp break from recent history. But if we look at the bigger context, it's just not the case to think of America as a free trade power. And this use of... the tariff, the use of protection, the fact that that
plays into both geopolitics because of the size of the American economy, but also it is a domestic issue in American politics. It divides American politics, the question of the tariff, the question of free trade. That goes all the way back to the very founding of the United States. I mean, you've been doing quite a bit of digging around on this question of the foundation of the United States, which I hadn't quite appreciated the extent to which that mattered then.
I think it's really important to see that in some sense the United States as the Federal Republic of the United States, created by the Constitution that was ratified in 1789. both exists in itself for trade reasons, in the sense that... What it brought to an end were all the conflicts between the 13 states over their commercial relations with each other and their relations with the European powers in an economic sense. But also that...
In taking the decision to remove effectively the authority and power to tax away from the states and to... give it to the federal government and in that sense create a federal government by creating fiscal power for a central state. The mechanism by which that was done
the funding mechanism, if you like, was tariffs. So the United States was going to fund itself by tariffs. And if you look at the United States' history, you know for a very long time you could say really until the creation or decisively anyway until the creation of a federal income tax in in 1913 that the tariff
is the principal means by which the united states is is funding itself and that is really different than if you look at what's going on in european states and i think if you then look at the way in which this was presented It was presented as fiscally necessary, but also it was presented as making it possible for American manufacturing to develop. And this was particularly so for Alexander Hamilton, who was the first...
Secretary of the Treasury under George Washington's presidency. And he thought that the United States, if it was going to be a manufacturing power in a world in which you had manufacturers like Britain to some extent. like france and it had to develop its manufacturing sector behind tariff barriers and if you didn't do that then it wouldn't stand a chance
They wouldn't stand a chance of success. And that if the United States didn't become a manufacturing power, neither could it become a military power. Now, there's no doubt that although that there was a... general consensus that tariffs were the right way to finance the American state. There were also some quite deep divisions within the American or between the American states over the approach to trade.
Generally, I mean, this is a slight simplification, but the gist of it is, right, that the southern states with their plantation slave-based economies wanted lower tariffs and the northern states where there was manufacturing.
basis wanted higher tariffs and you can see quite a lot of the conflicts and the build-up to the the civil war being structured around that divide and there's a sort of a precursor if you like of the the civil war crisis itself called the nullification crisis when the south carolina state
Government says that the federal tariff does not apply in South Carolina, effectively trying to repudiate federal law and saying federal law doesn't hold. But I think it's also interesting to see that the outcome of the... the civil war very much puts the united states as a protectionist state and you can find these speeches by abraham lincoln who is positively eulogizing
About the tariff, in some sense, making the tariff part of American political identity. So just to give you a flavour of Lincoln's rhetoric on the trade issue. Give us a protective tariff and we shall have the greatest nation on earth. Another, the tariff is a cheaper system because the duties being collected in large parcels at a few commercial points will require comparatively few officers in their collection.
while by the direct tax system, the land must be literally covered with assessors and collectors. going forth like swarms of Egyptian locusts, devouring every blade of grass, another green thing. So you have the sense here that this is a more efficient way of financing the government. than taxing citizens. I mean, Helen, for me, it's hard not to listen to that Abraham Lincoln quote and think of the quotes that...
Trump is now saying about the American economy, that tariffs will make America great, that it will make us rich, all of those kind of things. You know, that's not anything new. What is interesting, I suppose, about this period that... you're talking about is that America itself is developing into the manufacturing industrial power that we know today, but it's not yet there. So the divides are still...
quite stark, I think, in the United States between the agrarian economy, the agrarian South and the industrialising North. But I think the key point, isn't it, that industrialisation in the North really starts to take off. after the end of the Civil War. Yeah, and I think that what's interesting then is that you can see that the...
The divide which has effectively led the Democrats to be in favour of like a lower tariff at least. And the Republican Party that has emerged under Lincoln and will continue into the post-Civil War era. is very much lined up as a protectionist party. So that divide that's established pre-Civil War continues into the post-Civil War era. So again, albeit now in rather different conditions because...
as you said, Tom, that American industrialization is now going to accelerate, that you have something of a party conflict about trade. I mean, there is one dominant party through the period. let's say from like the 1880s through to 1912, which is the Republican Party. So the protectionist party is dominant. But nonetheless, there is quite a fierce contest that is going on in this period.
brings out, I think, the reasons why trade is such a contested issue, not just actually in American politics, but more generally, and also the relationship of the trade questions to the broader world economy. And I've been reading this really fascinating book by... Karl Rove, the controversial advisor to George W. Bush, who wrote a book called The Triumph of William McKinley. And McKinley is this hero to Donald Trump. He's the president.
the Republican president who came in in 1896. And at the beginning of the book... Rove paints this story that we're trying to tell now about the sort of the bitter conflicts between the Democrats and the Republicans. And I think it's important just to stress this because it feels incongruous to us today that the Republican Party was... party of the tariff of protectionism. And the Democratic Party was the party of segregation.
of low tariffs, of something called free silver, as it would become to be known, and low taxes as well. And just some sort of startling statistics. During the Civil War, tariffs were raised five times. on the Union war effort, reaching an average of 47% on most items. And then they remained after the South's defeat. And I think just to give you a flavour of why these things remained politically divisive.
The tariff was then used to pay for the pensions of the Union veterans, but not for obviously for the veterans of on the Confederate side, the rebels. So that you can see how it plays in to into politics. and the sort of the geographical divide between the North and the South, between manufacturing and the agrarian South, and then between this sort of obviously the most divisive issue in American politics.
being the Civil War. So, Helen, I think what is interesting to me, at least, is there are so many threads that we can pull out from this particular moment in American history that are so resonant to today. They're resonant in many ways because Trump is making them resident, of course. So he has this particular obsession with William McKinley when his first day back in office, he signed an executive order.
renaming North America's highest peak Mount McKinley. He has talked about him directly. He was a strong believer in tariffs. This is Trump speaking of McKinley. And we were probably the wealthiest at any time, relatively speaking, in our history. So this is Trump. So Trump obviously has read or been told about McKinley. He understands the sort of essential dilemma of what was happening at the time. And the key election is 1896.
It's fascinating because it puts McKinley against this populist figure of Williams Jennings Bryan. And obviously when you read about William Jennings Bryan, I cannot help thinking of Trump himself in... in Bryant rather than McKinley because McKinley is this respectable Midwest figure who is standing for what is the status quo in some respects, for the tariff and protectionism. And Brian... is this fiery populist who is raging against that system.
And he is calling for the end of protectionism and he's calling for a move away from the gold standard. And this is a time of economic turmoil. So contrary to what Trump is saying, there were some recessions in the 1890s which were really... Really damaging. And Brian is coming into this. There is this famous speech called the Cross of Gold speech, which wins him the Democratic nomination in 1896. And it's appealing to farmers again, this divide.
And I think this will be interesting again today, who are being forced to pay more for their products. because of the tariff but it's benefiting industrial workers who are voting in the cities for the republican party and he's also this issue of free silver which is effectively trying to unpick the united states from what is a british dominated global financial order so you have these twin issues here one is the tariff and one is free silver one is money and one is trade policy and i think what
is important about this is that the established position that mckinley represents holds unlike today the the populist candidate does not manage to break the consensus. And I think that is what's interesting when we're thinking about 1896 and this election that clearly plays on the mind of Donald Trump.
McKinley actually starts acquiring his protectionist reputation when he's in Congress. He drives an increase in the average tariff by 50%, I think, in 1890. I think that there's something that really is interesting here. which is the way in which the United States is showing at this point, and this will continue into the first part of the 20th century, its economic potential, its industrial potential by the time, I think we said this an episode or two ago.
In the time we get to 1914, the United States' industrial capacity is going to be much greater than Britain's or Germany's. So on the one hand, there's an agrarian depression going on. But on the other hand, this is... is a period of american industrial success of america leaping forward if you like as an industrial power but it's integrated reluctantly to some extent
from the 1870s into an international financial system in which Britain dominates. And that's where you get what you're talking about, Tom, in terms of like the populist critique of gold, that that's... is a sacrifice of American workers to the financial interests. And the Republican position that McKinley and his successes will articulate is that actually these interests can all line up.
together that finance can benefit from the international financial system as it's constructed on british terms that american industrial can benefit from protection that are crucially from the republican argument that workers industrial workers will benefit from this and the democrat argument is look Actually, the people who are getting sacrificed in the system in this way of organising the economy are the farmers, and they're getting...
screwed over in jennings brian's turn both by the financiers who are benefiting from the system but also because they don't have sufficient markets to selling their goods and you can see that as the 20th century, you know. goes on and we get to 1910 1911 something interesting is happening to an issue on a country that is very pertinent to to trump's position now which is which is canada because you start getting a push
amongst the free traders in the United States to say, well, at the very least, let's have free trade with Canada. Let's have a bigger market for our agricultural producers. And then that... The Canada question raises a really profound question for the whole organisation in a way of the industrial world economy on the trade side as it's emerging because the United States is all part...
some people in the United States are wanting Canada to gravitate trade-wise towards the United States and therefore away from British Empire. Remember at this point, as we've said that... Canada as a self-governing colony of the British Empire. So I think that the fear in Britain, which is the one European power that hasn't moved in a protectionist direction in response.
to the united states's emergence as an industrial power is that actually now if you if you don't recognize the effect of tariffs on american economic success then you get left behind and that the only recourse that britain has in this situation is to begin to try to organize
its empire on a protectionist basis now the difficulty obviously is is that britain's empire is is flung around the world and what this crucial part of it canada in terms of the contest with the united states is a self-governing colony I mean, the British government in London cannot impose a solution on Canada. But what is then interesting is that in Canada itself, in the 1911 election, that the Conservative Party, the Conservatives there...
which is bitterly opposed to the idea of free trade with the United States, ends up winning. And this does have, I think, parallels with today. And the argument that they say is if we end up having free trade with... the united states we will stop being an independent state so this argument becomes actually the path of free trade leads de facto to political union. And if you want to defend your independence, which is really what the United States has been doing,
You don't want to go down the free trade path. Well, this is connecting trade and politics and geopolitics in a way that I guess the last 30 years, if I take us back to the beginning of this episode, where we were talking about...
the last 30 years since the end of the Cold War being an aberration historically, where you're trying to pull those two issues apart and you're saying you can have global free trade and then you have geopolitical power, which is separate to that. This is going back into a world where...
Those questions are playing on the minds of the leaders in these places, whether Canada, the United States or Britain. And they're trying to then say, OK, say if somebody like Joseph Chamberlain is saying, look, we need to turn the empire. into a trading bloc to rival the United States that's called Imperial.
preference, isn't it? And that becomes a very powerful movement within the United Kingdom at the time. I think at the time of the First World War, there were something like 250,000 members of the Tariff Reform League.
directly into British politics. But then it comes across these central questions of how do you organise something like the British Empire into a trading bloc? And I think it... finally comes to i mean it becomes conservative party policy we should say in the 20s under under stanley baldwin and then i think the key moment is the Ottawa conference in 1932, where Joseph Chamberlain's son, Neville Chamberlain, future prime minister, actually...
put some structure onto this idea of the imperial preference. It comes up with an idea which is empire-free trade based on a principle where home produces first, empire produces second, and then foreign produces. So it's a form of free trade within the empire. But it never manages to be the same as what the United States can have because it is not a simple state. It never exists on that form. But I think it is fascinating if we think of...
1930 there, and then we cast our mind through into the Second World War, how that changes, because that is a system that has been established. in imperial preference versus two competitors, I think, primarily, the Germans and the Americans. Yeah, if we just go back, Tom, to then the American thread in this, because I think that it is pretty significant, the British development in explaining the turn away or the relative turn away in the United States. from its protectionist.
history. So if we think about the beginning of Franklin Roosevelt's presidency, so he wins the election in 1932, he becomes president in March 1933. As we know, there's a depression in the... united states now as a a democrat you would have expected him to be in favor of freer trade because that is a structure of party competition that has held And you can see that within a year of Roosevelt coming into office,
that he pushes these what were called reciprocal trade agreements. I think actually the first of them, or one of them anyway, was agreed with the Soviet Union. And the idea behind the Roosevelt administration pushing... for freer let's just call it trade is that the domestic recovery of the American economy in the face of the agrarian and industrial depression depended
So it's this idea that actually it's now inflicting harm on the US economy itself to have high tariffs. At the same time, though, is the... that the Roosevelt administration becomes most interested in securing is with the British government in terms of getting a bilateral trade agreement because... They see, I think, by the middle of the 1930s, that actually it's becoming harder for the United States to get bilateral agreements to lower tariffs with other states when Britain is as...
as organized as it is as an imperial power engaging in strategic trade. And that's true, actually, not just in relation to empire countries, but even in relationship to a country like Argentina. So that looks like they're British.
commercial empire penetrating the western hemisphere to go back to the kind of concerns that yeah that trump has in relation to china and it's the second world war and the prospect of war coming even because you can begin to see it even in like 1938 like 1939 where the Roosevelt administration can see well Britain is going to make itself financially dependent upon us it's going to fight this war and this is where the
shift in the power in the international monetary and financial system like really matters and we will make our willingness to support Britain dependent upon support Britain financially, I mean by that, dependent on dismantling that imperial trade bloc. So it is a condition of the Lend-Lease Agreement by which the United States finances.
Britain for the war, that at the end of the war, that Britain will revert back to being a free trade state. And I think that this is a... I mean, it's complicated in one respect, which we'll come to in a moment, but this is a decisive turn in American trade policy because now the focus is on...
The idea that actually the very size of the American economy and the sheer industrial ambition of it in some respects requires it to have open... access to foreign markets you can see sort of little bits of that earlier so in the end of the 1890s in the beginning of the 20th century the open door policy to China which was essentially saying, look, as imperial China declines and the European powers, Russia, Japan are carving it up. American producers must have their share of it.
It's not been done in a systematic fashion before, but in dismantling or trying to dismantle the British imperial trade bloc, this is a turn, a decisive turn in American policy away from this idea that actually... to be American is to be protectionist. Is the way to understand that really, to think about it in terms of power, relative power? Because if you think prior to the Second World War, the United States would have... competitor trade blocks or economies or powers in the
the British Empire or Germany or others. It was happy to have free trade with China because China was so weak at that point. So it wanted a slice of the, you know, of China, like the European powers. And so... America's support for free trade after the Second World War is because it's so, so dominant that there is no threat. There is no threat to American power, industrially, economically.
militarily in anything it's just it's it's too dominant and it is essentially collapse the the british empire the british imperial preference as the price of its support Yeah, I think that there are always some caveats to the shift to freer trade and that the Roosevelt administration... It doesn't pursue an absolute free trade system. It pursues a multilateral trade system. That's what it wanted to.
establish via the Bretton Woods conference, although the trade part of it was kicked into touch and to be sorted out later.
I think though, even there, what's interesting is that the reason why there is no equivalent of the international monetary fund and the world bank on the trade side so there is not an international trade organization is actually because there is still sufficient support in the senate in particular for a tariff based approach to trade so what would have been the international trade organization is not ratified by the senate but what is then interesting is that once the cold war starts
really accelerates, let's say, from 1947, 1948, that the position that the Truman administration adopts is we will have to accept other states, particularly West European states in Japan, or Japan by 1950s anyway, be protectionist towards us. Because it has now become, as we've talked about before, a geopolitical necessity.
for these economies to recover and they will not be able to recover unless that they have accessed relatively open access to our markets and we won't be able to fuss too much. if they start discriminating against our goods. Indeed, as we talked about before, again, on the...
European question on the West European question actually it's the Truman administration that's pushing in 1947 1948 for the West European states to form a customs union which would discriminate against American So the impulse in this part, first couple of decades of the Cold War, is to say, actually, we will sacrifice American domestic producer interests for... are geopolitical purposes which are fundamentally about containment of the Soviet Union.
I think that's probably a good point to wrap up the first half, because in the second half, we're going to bring the story up and start it in the 1970s with the Nixon shock, which is the first real challenge to that system that you've just set out. Got a side hustle? Like making money from a hobby, selling stuff online or doing a bit of dog walking outside your day job? You might need to tell HMRC so you don't get any tax surprises.
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In fact, everything's Premier when your bank account is. Search HSBC Premier. HSBC UK. Opening up a world of opportunity. Apply with £100,000 annual income or £100,000 savings or investments with HSBC UK or Premier status abroad. Welcome back, everybody. So we're going to start this half thinking about this titanic figure of Richard Nixon because of the parallels in how his presidency and the decisions he took early in his presidency.
were felt at the time and how they were felt as a shock in a similar way to how many in the world are experiencing this second Trump presidency with his speed and the strength of which he's pursuing this trade war effectively. this time which feels very different to his first term as president at least. And Helen, just going back then into the 70s, what is so striking to me when I'm reading about this is that...
If you think of the United States coming out of the Second World War in this completely dominant position as a military power, as an economic industrial power, but also as the control or the center of the monetary system as well. This is something that they then, under Nixon, appear willing to change or to jeopardise in the 1970s.
And just from a sort of layman's perspective, that seems hard to understand. You have the Bretton Woods system. It is one of the central features of American power. And yet the United States... is willing to shock the world by unilaterally making decisions that unpick one of these central planks of its power. I think the thing here... Tom is that by the time of the late 1960s even really not even just the the summer of 1971 when
Nixon really delivers the core of this shock by ending dollar gold convertibility. The view in Washington has become that the Bretton Woods monetary system which requires the United States to maintain dollar gold convertibility at $35 an ounce, is actually a constraint on American macroeconomic options.
And they look at countries like West Germany and Japan and say, and this is where there's clear echo with Trump, look at their trade surpluses. And that is happening at a time when the United States... economy as a whole is moving into what might be called a structural trade deficit because it's about to go on a very rapid trajectory to becoming the world's largest oil.
importer and stop its relative self-sufficiency around oil and as that is happening you can see that Nixon once he's in the White House in 1969, is looking at a whole set of issues in terms of the United States' relations with its allies and saying, the system doesn't work for us, it works too well for them. and joining issues up.
Just to give an example is that in March 1969, Nixon wrote in a memo that his support for NATO would be seriously jeopardised if the European governments or the West European governments took action, discriminated. against American exports. Well, they kind of already are, because that's the nature of the European economy.
Similarly, he's in negotiations about returning Okinawa Island to Japan. He says that's not going to happen unless Japan sends fewer textile exports to the United States. And in that moment, in August 1971, when Nixon ends dollar gold convertibility, he also... puts an additional 10% tariffs on pretty much all the goods coming into the United States and saying they are going to stay there until you, meaning particularly the Japanese and the West Germans.
revalue your currencies against us the argument being that those two states in particular have gained their trade surplus in relation to the United States by having an unfair exchange rate advantage. Again, you can hear some echoes in some of the things that Trump says about.
china here so there is a parallel with trump because nixon's saying these tariffs stay until you do what i want yeah but the interesting thing then if we look a bit further is that once that is achieved and the other states do at the Smithsonian Conference in December 1971 agree effectively to revalue their currencies against the dollar. In the end, Nixon moves away from the international monetary system. He decides it's not to the United States' advantage.
And the world moves to floating exchange rates driven by the Nixon administration in March 1973. But the interesting thing here is it does not lead to a general turn towards protectionism in... the united states this is notice a republican president so in one sense the party of of tariffs being back in power he uses the tariffs aspect of this in a tactical
way to get something else which is on the international monetary financial system and the position of the dollar side of it so if you then look at the openness of the United States economy to trade through the rest of the 70s. It's actually the proportion of US GDP that's tied up with trade in 1980 is double that which it was in. 1970 and then if you continue into the reagan years again obviously in another republican that this is a pretty free trade approach yeah that comes under under reagan
Well, of course, because I think for a lot of listeners, I assume if they're like me, they would think of the Republican Party in those kind of Reagan-y terms as the party of free trade, as the party... of, you know, Reaganism and Thatcherism, that period in the 1980s, when it is driving that ideologically as well. And of course, that's got a history back into the 60s that we've talked about before with people like Barry Goldberg.
and the turn to conservative ideology that runs through Nixon to Reagan. And in some senses, you know, you can tell a story that ends then in the 90s with Bill Clinton and the end of the... Cold War, which is essentially the Democrats suing for peace with the Republicans and accepting the terms of both domestic and international policy. That is obviously a contested story, but that is certainly a narrative that you can tell. about this period. But as we've been discussing...
That is a bit of an aberration from the long history of the Republican Party as the party of tariffs. I mean, it feels quite hard in some senses to understand that move, other than just, is it just one of reacting to the circumstances? around them and the... At that particular moment, America did benefit from the move into the world that Nixon created and towards free trade because it was so strong at that period. Well, I think there's one caveat, actually, I should have put.
into the Nixon story itself on trade, which is that he does legislate to create this provision called Section 301, which is a provision in which... The United States can effectively take unilateral action against trading partners for any practices that the Americans themselves.
deem unfair and a lot of that section 301 action does take place and it takes place against east asian states and it doesn't really go away under the the Reagan era but what is interesting and and in terms of like what happens in the period in which you're talking about Tom is is that the the party contest over trade in the united states gets recast in the 1980s and it does because the effect of the
Volcker shock so the high interest rates in the United States from the late 1970s and through the the Reagan years is to create a very strong dollar all the way through to 1985 and that has a a really corrosive effect on industrial exports, particularly from the Rust Belt states. And that you get... Democrats now, particularly those in the Senate and the House of Representatives representing those states, becoming quite protectionist and saying that actually that the finance interests around...
the strong dollar policy are really hurting domestic American industry. And then what's interesting is, is that when Reagan gets to the point, which is sort of 85, 86, when he realises, or the people around him realise, that this is actually doing domestic political harm to the Republican Party. So the Democrats use the trade. issued quite effectively in the 1986 midterm elections to take back control of the Senate, that the response of Reagan administration is to try to force the dollar down.
rather than have a protectionist approach to it. But that leaves a legacy by the time we get into the 90s, that the bulk of protectionist sentiment... in american politics is in the democratic party and not in the republican party and that's a context for clinton's presidency that's pretty important because clinton has been bill clinton has been on the side
really, of the not strong protectionists, but protectionist sympathetic. So he runs against North American Free Trade Agreement ratification in 1992. But once we're in... past the 1994 midterm elections when the Democrats lose control of Congress, he does a really significant about turn. He gets NAFTA ratified on essentially Republican votes. And then also he embraces permanent normalization of trade with China. And then we're into the United States as the pusher of global.
trade or globalization, whatever one wants to call it. I always think it's remarkable covering American politics and seeing these changes in who the two parties represent and the ideologies that they represent and the people that they represent, you know, through history, if you're casting your mind back through the Democratic Party.
party, most obviously in terms of questions of segregation, to be in the party that elects the first black president. But also on this question, you know, it's just remarkable to tell this long story and to go from this sort of deep history of antagonism. to protection and the tariff to be the party that then starts to embrace it and then to reject it under Clinton, the sort of the changes of history there. I think the crucial thing here, Tom, which we need to bring out...
is that the geopolitics of the world economy and the United States position in relation to it is changing through this. And the fear in the 80s is obviously about Japan. and Japan's challenge to American industrial dominance. You could then say that the Clinton period through to... let's say, made in China 2025 announcement in 2015 is one when the presumption is that...
China can be integrated into a US-led world economy without really challenging the American industrial position within it. But as soon as that assumption crashes... which I think it does at the latest with Made in China 2025, is then you have a full-scale retreat. And it's interesting in this respect that although Trump leads the way in terms of his confront China...
about trade policies we've talked about before. It's the one thing in his first term in which there's a relative party consensus about. Yeah, I think you could almost then see Japan in this moment that you're talking about as a kind of pre-run for what American politics will, how it will react to the rise of China later on. I mean, I remember speaking to a few. Fiona Hill, who worked in the Trump administration in the first term, and she said,
this line about Trump being instinctively what she called a Paul Kennedy man. And that is a reference to Paul Kennedy who wrote The Rise and Fall of Great Powers, which came out, I think, in 1988. And that book is principally concerned with how nations rise. and fall. And the argument is that trade balances and industrial power are absolutely central to that. And the great kind of looming threat in that book is Japan.
And the argument is very clear that Japan is on the rise and is taking American power because of its industrial... It's industrial power. Now, that obviously then, I mean, pretty much immediately starts to fall away from that moment. But the thesis essentially remains with Donald Trump. It's just then transferred to China. What's interesting if we think about this story now is that...
China is different, always different, structurally and fundamentally different to Japan. Japan is an ally of the United States. It is built up from the beginning in 1945 as an ally. And as you set out, it is built up. because of its geopolitical importance for the United States. Well, certainly from 1950 anyway, from the Korean War.
Right. And the same we can think about, and we've talked about this in terms of the European Union, it is built up specifically because the United States needs it in its confrontation with the Soviet Union. We're into now the Cold War. The Soviet Union has... gone and America, this is the unipolar moment.
and bill clinton is embracing free trade again i think we can if we think about this story from this position of extraordinary strength isn't it that mean that's got to be one of the central elements here if the united states turn towards free trade under roosevelt happens at a moment of total American dominance, or not total because of the Soviet Union, but enormous American power in 1945. That is something similar in the 1990s. And then Clinton makes this decision, this turn towards...
free trade with China effectively. And he says it's a win-win. Everybody wins from this and the United States is clearly going to dominate even more as a result. And then we can see American politics shift because of the effect of that decision and then China the ways to manage that are completely different from Japan. But I think that what is interesting though is that you can actually see the domestic politics resisting.
The China turn already by like 2003 2004 and actually going across both parties so You have senior Republican senators and Democratic senators pushing for action to be taken against China if China does not revalue its currency. So that is, I mean, in a way what is different... is is that it there it's that look terrorists will come if you don't revalue your currency now the trump approach has been
and we'll come to a bit more of this in a moment, is being across a whole range of issues. It's not just currency. Senator, for instance, fentanyl is a pretty important part of Trump's objection to... He sees it the way that China conducts trade. But what's interesting is the point in which the protectionist argument against China... moves to the centre of US politics, so I'd say from 2017 onwards.
This applies to the Biden administration as well as the first Trump administration is because now it clearly seems to have security implications. And that's what distinguishes it from the discontent with the... domestic outcomes of trade that we can see in the the first decade of the the 2000s i mean even to the point where you have In 2008, Hillary Clinton and Barack Obama, when they're fighting for the Democratic nomination,
effectively conducting an argument about who is going to be toughest about NAFTA I mean I don't think either of them particularly mean it particularly like Obama's case but you can see protectionist rhetoric at that point But it doesn't translate into a reorientation. It translates into a reorientation once the American security establishment see China as a geopolitical problem for the...
United States and that that's the point in which the idea that trade can be thought of in an economic realm separate from geopolitical competition just breaks down and then the question is well is Trump too Just a continuation of that turn that took place at the beginning of Trump won, well, really from the moment when he started the trade war in January 2018 against China. Or is there something else now going on that... is either
different in itself or adding in a whole set of other considerations that aren't there to the fore between 2017 and 2020. I suppose one answer to that is, again, power. So if we think about why is the American turn in... 2017, roughly, as you were saying, why does it become a security concern, China's rise? Can we explain that just through, essentially, relative power of China, that China is just... You cannot ignore its economic development, its geopolitical power.
reaching europe through belton road and all and all of these other questions and then domestically if we think about power and we think of donald trump we can we can ideologically you can take the trump story back right to the 80s and he's going on american tv and saying pretty much the same thing as he's saying today he's just saying it about japan as i as i said earlier but in his first term he's just not powerful enough
or even perhaps organized enough to be able to implement his agenda. He doesn't have the right people in place. In fact, most people that he hires are kind of work as they consider themselves the kind of adults in the room that are trying to manage him and restrict him. him in some sense i don't think if you think about the figures that he hires in that immediately
They're not really Trumpists in any way, you know, people like Rex Tillerson and those kind of characters. And then if you cast your mind to today, what seems... sort of fundamentally different to me is that he seems more prepared to push his agenda and he seems...
to have the power to be able to do it. His control over the Republican Party in Congress allows him, in a sense, to bring in the characters that are then going to pursue his agenda more aggressively. Yeah, I think if you go back to the first term for a moment... We can see that he wants a reset of the terms of trade with China. That actually the moves that he makes...
are to try to get to an outcome in which China will buy more American goods. And the... tariffs war is escalated to that end depending on the progress and the negotiations and it and it does yield something which is what got called this phase one agreement that they finalized in December of 2019. And then he holds a big press conference about it in January 2020.
And what's interesting about that, this is the speech where he calls President Xi, quote, a very, very good friend of mine. And he says he's representing China, I'm representing the US, we've developed an incredible... relationship that this is going to be a great deal that we've got through i think he calls it yeah a really incredible breakthrough are the words that he uses um the agreement commits china to buying 200
billion dollars worth more american exports the the base level is 2017 and they're to do this over a two-year period and one way of reading then what has happened is is that that agreement effectively broke down in the face of the pandemic and a more general deterioration perhaps of US-China relations and that the effort this time where China is concerned.
is to resurrect that agreement. Is to say, look, that's what I was trying to do last time. It didn't work. Sort of blame the Biden administration, whatever about it. Get back to where? We were. But I think that it seems that the ambition this time goes further. In saying that, I think we perhaps should sort of throw in the difficulty there is of trying to make sense of all.
trying to find some underlying motivation of for Trump's ambitions generally in that one could interpret this as like the facts on the ground so to speak in terms of America's economic relationship with China in the context of the United States borders with Mexico and Canada is more fraught than it was at the end of the first Trump.
presidency and that the concerns about fentanyl and the chemical precursors for fentanyl coming over not just the Mexican border but the Canadian border, the growth of Chinese. economic influence in Mexico and to some extent, in fact, a considerable extent in Canada as well, is greater than it was in the second half of the 2000.
and that this is a strategic response to that issue. Although I can see a certain logic to that, I'm also a bit reluctant really to commit to that hypothesis because what we're getting from Trump this time... is generally so disruptive even compared to what there was last time and so just so much so quickly that I'm a little bit wary about trying to put an overly strategic rationale on what he's doing, even though I think it does make sense to say that if we think of this as...
the United States coming to terms with China's economic presence in the Western Hemisphere, then one would expect acceleration of the confrontation not just with China but with Mexico and Canada because that was there in Trump's first term after all he turned NAFTA renegotiated it and it became US Mexico Canada yeah and it wasn't that he wasn't putting pressure on Canada and Mexico but there was nothing like either the terrorists themselves that were put on
Mexico and Canada, and we should remember are still going to be imposed in 30 days time, 30 days time when the reprieve was given that Mexico and Canada haven't done those things that Trump demanded of them. If we look at the nature of the demands that are made on Canada and Mexico this time and the way in which the tariffs were announced and the fact that the rhetoric in relation to Canada is so extraordinary because it ties the tariff issue actually to Canada's continuing.
existence as a as a sovereign state as i say you can see well US political class is worried about Chinese influence in the Western Hemisphere. But that still doesn't seem quite a sufficient explanation for why Trump has taken such a dramatic turn. in terms of the way in which he's dealing with the, let's call it the US borderlands issue and the way in which he ties that.
to Chinese penetration of the Western Hemisphere. I think you said you're reluctant to come to any hypothesis or a conclusion on these questions. I mean... That's how I feel about Trump on virtually everything. I find it very difficult to reach a conclusion about what is he trying to achieve with any specific thing that he says, other than I have this sort of sense of that there are these kind of...
Incho 8. instincts that he has that sort of run back to his years growing up in New York in the 80s and these kind of sort of almost guttural instincts that he has about business, the world. how to wheel power, how to control people, all of those kind of things. And then he's applying them to geopolitics. And then... Feeding into that is the kind of realities of the world that have changed dramatically since the 80s, but the instincts remain.
The same, I mean, some of the thoughts that I have that when I think about this sort of longer history, Helen, and I don't know if this is right to think about it in this way, but you have sort of a number of... threads that we can pull through and thinking about America as protectionist power or free trade power. When it comes to Europe, for example, today, what some of the Silicon Valley types seem to want is American power used to...
smash open the European market for their products in a way. So it's to reduce protection, European protection against American power. And then if we think about... China or Canada or Mexico, as you say, then it's a different set of instincts and it's about using the threat of tariffs to achieve certain goals, particularly with, let's say, Canada or Mexico.
And then if you think about China, it seems to be, again, a different level. It's a different set of ambition. So I don't know if it's possible then to apply a kind of coherent... theory to each of those areas, whether you have the sort of North American question with Canada and Mexico, the borderlands question, as you've said, and Trump's instincts for American expansion in that region, the Greenland, as we've talked about.
and Panama. And then the European question, which just seems to be almost that Europe is... There is this instinctive understanding of Europe being weak and American power being able to get itself into a better position economically. And then that question of China and going back to that thread that we've talked about throughout this episode of relative America.
power and then the relationship that that has to its feelings towards free trade or protection. And that what we're seeing today is relative Chinese power threatening America's industrial leadership in the world. that is then fueling a reaction to that. But there's one other thought I had. When I think about the British reaction to the United States,
in the late 19th century and early 20th century, and this move towards imperial preference, trying to bind this empire that is hard to bind together. Could you think about the world? And the West, in a sense, as the American empire is trying to move towards some kind of imperial preference, if you like, of binding the West together in some way. to face off against China. And it's much more difficult than binding the United States together because it is a coherent...
sovereign state. But what he is inching towards is a block of some form with American power at its center, but is a bit harder to organize. But its fundamental goal... is to create a trade block to face off against China. I think there's lots of different things there. I mean, I think I'm pretty skeptical about any idea that there is a West in relation. I mean, I'm skeptical about the idea of the West in general, but particularly in relation to...
And I think you might say that one of the genuine risks that Trump is running in terms of the... What if your bank did more than just bank? With HSBC Premier, it's like carrying your own entourage in your wallet. Premier Wealth Management? Check. Premier Health Perks? All clear. Premier Travel Benefits? You're covered. And Premier International Banking? Si, oui, yo, ja.
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To take the hassle out of your side hustle, search HMRC Help for Hustles. Confrontation with the European Union that looks like it's coming and obviously the stealing. aluminium tariffs will hit the European Union, is that it will lead various EU governments to say, well, actually, we need to get closer to China. And in a way, the Biden administration approach... there had been to try to build European support for a unified approach to China, that Trump is moving away from it in that.
respect by being willing to be pretty directly confrontational with the European Union and the way in which the Biden administration wasn't. I think the crux of it... goes back to the Western hemisphere question that we've ended up talking about in quite a number of these more recent episodes since Trump's become president again. And this is where I think that...
And concentrating on the Western Hemisphere, one can really try to get to grips with, if you like, the analytical problem that Trump now poses is how much of it is to do with Trump and how much of it is structural. Because if you... look at the situation with canada as a starting like place clearly there was a set of concerns particularly about vancouver as a
as a port near the US border and the rise of Chinese influence in general in the city of Vancouver, but also in the port that pre-exist Trump. You can even find Canadian. Conservative politicians who are being astonishingly critical, really, about the way in which the issue of the Vancouver port and the activity through the Vancouver port, both criminal activity and Chinese activity, have come to the fore.
To give an example, in March of 2024, US officials said that they'd found undisclosed communications components in these cranes that had been exported there by Shanghai.
company and that they were like investigating that so i think if you said would you expect there to be an american president who was concerned having the fears that the United States political class does about China's industrial success with Canada's position in relation to China and the Vancouver port in particular yes you would expect and you can see it beyond Trump if you said on the other hand would you expect that an American president in
January, February 2025 was threatening to annex Canada and make it the 51st state of the United States. That seems utterly absurd. And this is where I think that why Trump poses such a difficulty for those of us who are trying on a weekly basis to make sense of it. Because you can understand something of like what is happening because...
China's industrial rise is such a momentous thing in terms of world history, I think, in some respect. But then having this person of Donald Trump being the American president... who is now making decisions about that that brings all kinds of things to the table that wouldn't be there if it wasn't this person with this
personality. Well, the one quote that I've come back to a few times is something from Henry Kissinger before he died, where he talked about Trump almost as an accidental figure in world history, not that Trump means everything that he goes on to. I don't know if accomplish is the right word necessarily, but the effect that he has is not always necessarily on purpose. But what he represents is a figure itself who shocks.
the world out of some of its assumptions that have broken down. That was the line that Kissinger came up with in relation to Trump, that he breaks down. the sense of your understanding of how the world was working before then. So perhaps that will become his role. So as we, you know, you and I, on a weekly basis, try and understand what's going on.
We're questioning some basic things because we don't know what exactly his purpose is. But then when you pull the camera back and you try to understand... what is going on in relation to Canada? Then you start thinking about that Vancouver question in a way that perhaps we weren't thinking about. Certainly we weren't here in the UK thinking about the Vancouver question. Then you start thinking about trade or you start thinking about...
Silicon Valley and its lead over China. Does it have a lead over China? Will the Silicon Valley need protecting in a kind of second industrial revolution or not? All of these questions, essentially the effect that he seems to have is it's sort of almost... discombobulating it makes you go back to first principles and and to figure out what is the basis of the power here the power dynamics between the united states europe and china in particular or russia what is the basics and who
then holds the power because i think those questions are sort of fundamental to these questions that we're talking about yeah i mean i think if you if you go back over this whole period that we've talked about like in this episode i think There are geopolitical junctures that go hand in hand with shifts in the American trade story. It's complicated by the fact that they go down this road at the beginning.
of using tariffs to finance themselves. It's not so clear that that is a, perhaps it is a geopolitical question, but it's not obvious that that's been shaped by their geopolitical choices. And so...
If you follow that through, then you would expect this to be a period of reordering and fairly disruptive reordering because the possibility of China... being an industrial challenger to the united states is in itself such a psychic shock i think that it's not like it's been something that's been well prepared for indeed to the contrary because if we go back to the Clinton period, the assumption was that China could be integrated into the world economy on American terms.
And the outcome would be at worst benign and at best good for the American economy. So that when that shatters, and it has shattered, we should expect something that... It is very different. I think that the difficulty is, and we'll obviously keep coming back to this in the episodes to come, is that this might be actually the one part of Trump that is easiest to put one's head around.
because it does in a way come from that change challenge that china poses but that it comes hand in hand with all this other stuff yeah which isn't so easy I'm not saying this is easy to explain, but this other stuff is even harder to explain. And in one sense, it's now the sheer pace of events.
It's making it hard to understand even the bits that are more comprehensible, let alone the bits that don't seem comprehensible at all. Yeah, absolutely. I mean, just as you were talking there, Helen, I was thinking even between the first term and the second term, to me at least. It feels as though the Chinese industrial power has shifted up a gear.
from the sort of manufacturing power to high-tech, high-end manufacturing power that we see today. You know, that seems to me, I mean, I don't know when you can date that to, perhaps, as we've discussed, Made in China. 2025 and that policy was in 2015 I think we've discussed on a few episodes now but it just seems the disruptive speed of Donald Trump
is matched by a sort of disruptive speed of world affairs as well so there's much for us to discuss over the coming episodes thank you very much for listening to that and please do tune in again next week thank you Saturday night. Tuesday morning. That summer. No matter what happened, you deserve support. If you've ever experienced sexual violence or abuse, free specialist and confidential support. Call 0808 500 2222 or visit 247sexualabusesupport.org.uk to chat online or find out more.
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