After Obama

America's Radical Reboot

  • Why it matters

    Why it matters

    Since World War II the U.S. has been the bedrock of the global world order, but for how much longer.

  • Facts

    Facts

    • Mr. Trump’s anti-globalization stance could make many of the people who voted for him the early victims of his protectionist policies.
    • Bank stocks have risen in anticipation that Mr. Trump will relax the strict liquidity rules for banks brought in as a response to the financial crisis.
    • The Paris agreement on climate change and the Dodd-Frank legislation on bank stability could be early targets for Mr. Trump.
    •  
  • Audio

    Audio

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Demonstrators Protest As Donald Trump Starts New Political Era And Republicans Claim Mandate
A protest against U.S. President-elect Donald Trump at Union Square in New York on Wednesday. Source: Bloomberg

Donald J. Trump appeared outwardly conciliatory as he gave his victory speech on Wednesday. But, since Mr. Trump’s shock election win, the U.S. is more divided than ever – as a look at the candidates jostling for the most important ministerial posts in the new administration shows.

It looks increasingly likely that much of Barack Obama’s legacy will be dismantled over the course of the following years by a resurgent Republican party which – in addition to having its man in the White House – also controls the House of Representatives as well as the Senate.

Within hours of the election result, protests broke out in the streets of Washington, New York, Chicago, Philadelphia, Los Angeles and Seattle. The defeated rainbow coalition of young voters, African Americans and Latinos vented their anger, chanting “Trump must go.”

Mr. Trump’s America will not be their America, they fear, and the Trump era will be one of turmoil. If the former reality television star keeps his election promises, illegal immigrants will soon start to be deported, a wall will be built on the U.S.’s southern border with Mexico, and Mr. Obama’s signature policy – dubbed Obamacare – which gave millions of previously uninsured Americans access to healthcare, will likely be unceremoniously dumped.

Likewise, Mr. Trump could attempt to resile from international commitments made during Mr. Obama’s presidency to combat climate change. Also under threat is the Dodd-Frank legislation on banking stability.

Since the end of World War II the U.S. has been the principal architect of the global world order. But for how much longer, many are now asking.

“America has guaranteed free world trade for decades and, along with its allies, has also provided global security,” said Michael Mandelbaum, professor of politics at Baltimore’s John Hopkins University. “But this era could come to an end under President Trump.”

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The Trump presidency is likely to overturn much carried out during the Obama presidency. Source: Reuters

On Thursday, Mr. Obama put a brave face on the Democrats’ defeat when he welcomed his successor to the White House. What Mr. Obama really thinks of the billionaire businessman was apparent shortly before the election when he said: “It’s not so good to be arrogant when you know what you are talking about. But it is even worse to be arrogant without having any idea what you are talking about.”

Mr. Obama also claimed that Mr. Trump was the least suitable and qualified person for the presidency in the history of the U.S. Nevertheless in just 10 weeks’ time, Mr. Obama will have to hand Mr. Trump the keys to the White House. Much of his political legacy will likely be erased.

Mr. Trump’s impact on foreign policy is likely to be just as radical as his impact on domestic policy. The deal with Iran on nuclear energy, concluded by Mr. Obama after years of painstaking negotiation, could be dismantled. Meanwhile, Mr. Trump has said he believes NATO is obsolete and has called for others in the military alliance to take a more pro-active stance in future, not least when it comes to funding.

Likewise Mr. Trump has signaled his wish to renegotiate trade deals such as the North America Free Trade Agreement as well as the Trans Pacific Partnership Agreement. Economists are already warning that this inward-looking policy could trigger a wave of protectionism around the globe.

Clemens Fuest, president of the Ifo Institute for Economic Research, said that Mr. Trump presents an enormous risk for the global economy. The irony is that Mr. Trump’s anti-globalization stance will ultimately make many of the people who voted for him – particularly low-income blue-collar Americans – the early victims of his protectionist policies.

Mr. Fuest said Mr. Trump is unlikely to be able to force American multi-national companies to repatriate jobs to the U.S. He also warned that protectionism threatened jobs in the export industry and will push up import prices.

For all these radical and potentially damaging policies, Mr. Trump did not even command a majority of the popular vote. Hillary Clinton got over 200,000 votes more than Mr. Trump but under the U.S.’s first-past-the-post electoral college system – whereby presidents are elected indirectly by the electorate according to the number of wins in individual states – Mr. Trump won.

“If Trump really wants to improve the lives of working families in this country, then I as well as others are willing to work with him. ”

Bernie Sanders, Former Democratic presidential candidate

In spite of the bitter defeat, Ms. Clinton in her concession speech said: “We owe him an open mind and the chance to lead.” Mr. Trump was similarly conciliatory saying: “We owe Hillary Clinton tremendous gratitude.”

The warm words after the election were in stark contrast to the insults that both candidates had hurled at each other in the campaign. Ms. Clinton had said her opponent was a threat to national security while he had called for her to be imprisoned. Now both of them are calling for unity, for the good of the country. But whether the country is listening is another matter.

And while Mr. Trump was telling the nation that it was time “to move together as a united nation,” Jason Chaffetz, the Republican chairman of the Permanent Committee of Inquiry in the House of Representatives, announced that a new investigation into Ms. Clinton’s use of private email servers was to get underway. Another sign, if one were needed, that – despite the post-election softening of rhetoric on both sides – the nation remains hopelessly divided.

Blue Democrat America is facing down red Republican America like boxers in the ring. If Mr. Trump can’t convincingly establish himself as a president of all Americans he will likely exacerbate the country’s social divisions that pit urban against rural residents, young versus old and multicultural against white.

The big question on everybody’s lips is: how will Mr. Trump rule? One certainty is that America has never had a president like him. He’s neither a Democrat nor a true Republican – he’s a nationalist who believes in strength and glory.

There is hardly a position in the political spectrum that Mr. Trump has not espoused at one time or other. He has variously declared himself for and against a liberal right to abortion, for and against tax increases and for and against an increase in the minimum wage. He was chosen as the protector of the white lower middle classes. Above all else, Trump’s America is a fortress that promises refuge from the hardships of globalization.

There are Democrats who think similarly about, for example, restricting free trade and would be prepared to co-operate with the new president on that agenda.

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“If Trump really wants to improve the lives of working families in this country, then I as well as others are willing to work with him,” said Bernie Sanders, the socialist senator from Vermont who stood against Ms. Clinton for the Democrat presidential nomination.

But Mr. Sanders added that if Mr. Trump presses ahead with any of his racist, sexist and environmentally-damaging policies, he would fight him tooth and nail.

Little of what Mr. Trump said during the election campaign suggests that reconciliation is one of his priorities. Meanwhile, the old guard of the American right are preparing themselves to take up the highest offices of state. And, so far, the possible ministerial line-up looks downright scary for blue, pluralist America.

Hardliner Jeff Sessions is already being talked about as a possible Secretary of Defense, while the sharpshooter Newt Gingrich is competing with senator Bob Corker to become the next Secretary of State. And Sarah Palin, not noted for her wisdom or knowledge, is tipped as the next Secretary of the Interior.

In addition, former New York mayor Rudy Giuliani, dubbed Mr. Law and Order, hopes to take over the Ministry of Justice while Steve Mnuchin, of Goldman Sachs, is positioned for the Treasury Secretary post.

Such as they are, Mr. Trump’s economy policy announcements have so far had more to do with hubris than logic. He said he plans to create 25 million new jobs over the next 10 years. In other words exactly three times the current number of unemployed folk in the U.S., according to the official statistics. So, to create 25 million new jobs would require Mr. Trump to bring a large number of people into the labor market who are not, according to the statistics, currently looking for work.

Mr. Trump’s fiscal policy proposals seem equally unrealistic with a massive drop in corporation tax from 35 percent to 15 percent penciled in. So far, he has been unable to explain how he would finance this commitment without massively increasing public debit, which now stands at 105 per cent of gross domestic produce.

When it comes to the role of the Federal Reserve, the country’s central bank, Mr. Trump is no less menacing. He has blasted Janet Yellen, the chair of the bank’s board of governors, as being “politically motivated”. Mr. Trump also believes that the bank is giving the U.S. an overdose of monetary policy incentives to “hypnotize the voters and make them believe that a recovery of the economy is in full swing”.

It looks increasingly likely that Ms. Yellen’s term of office will not be extended beyond 2018 and Mr. Trump has also suggested making other changes to the Fed’s board to enforce a change in monetary policy.

“Only America has the power to guarantee global security. Without our presence or support, all multilateral efforts would fail.”

Madeleine Albright, former U.S. Secretary of State

On a more positive note, Wall Street appeared – after the initial shock had subsided – to welcome the new president. Bank stocks, in particular, rose following the election win in anticipation that Mr. Trump will relax the strict liquidity rules for banks brought in by Mr. Obama as a response to the financial crisis.

Shares of coal producers also rose sharply because Mr. Trump indicated that he would not abide by the U.S.’s international commitments to reduce emissions of greenhouse gases. He denies the existence of climate change through global warming, which he claims is a concept invented by the Chinese with the aim of reducing the competitiveness of American industry.

Mr. Trump also wants to resile from the Paris climate protection agreement, which Mr. Obama signed up to. Although this could only be done formally in four years’ time, no-one would be able to stop the U.S. from simply ignoring the agreement in the interim.

The billionaire property tycoon, once he becomes president, has said he will slash development aid for distant countries. Meanwhile, Japan, South Korea and Europe will, he said, have to do more to ensure their own safety in the future and not rely on U.S. protection. Mr. Trump has also said the U.S. will withdraw from regions in crisis, such as the Middle East. With “America First” as his guiding principal, the world will in future have to manage without American protection.

Since the end of World War II, the world, particularly the Western world, has greatly benefited from America’s role as global policeman. After all, it was the Americans who with the Bretton Woods agreement ensured that a new world economic order could be created based on liberal market economics.

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Hillary Clinton the day after her defeat. She won the popular vote, but failed to win enough Electoral College votes. Source: DPA

The dismantling of trade barriers, the free exchange of goods and services and the ever-closer integration of the global economy – globalization in short, would not have happened without the United States.

“Only America has the power to guarantee global security,” said former Secretary of State Madeleine Albright. “Without our presence or support, all multilateral efforts would fail.”

Despite Mr. Trump’s oft-repeated call to “make America great again,” it appears that he means this only with regard to the power and prosperity of the U.S. and with little regard to conditions in the rest of the world.

“Trump is pursuing a unilateral foreign policy which we can expect to see a lot more of in future,” said Ian Bremmer, the president and founder of Eurasia Group, a global political risk consulting firm.

Mr. Bremmer warned of a “geopolitical recession” under Mr. Trump, who has no interest in defending shared values and has a purely transactional approach to foreign policy based on getting the best deal for America.

Such an approach bodes ill for the future of NATO, particularly following Mr. Trump’s comments that the U.S. would not automatically come to the defense of the Baltic States if Russia were to make incursions.

Mr. Trump believes that America is spending too much money on protecting other countries. “We cannot afford to do it anymore,” he said.

Unfortunately, many of the world’s most intractable problems from climate change to the fight against terrorism require more not less international co-operation.

Until now the U.S. has always been an example to the rest of the world, but the selfish nationalism of Mr. Trump’s America is a threat to the globe.

Moritz Koch is Handelsblatt’s Washington correspondent. Jens Münchrath heads the monetary policy coverage. Torsten Riecke is the paper’s international correspondent. To contact them: koch@handelsblatt.com, muenchrath@handelsblatt.com, riecke@handelsblatt.com.

 

 

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