December 12, 2024

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Will Trump 1.0 Be Trump 2.0? Critical Challenges Facing His Second Presidency

Key Issues and Global Shifts That Could Define Trump’s Next Chapter in the White House

A LOT IS being penned across the globe on the vices of Mr. Trump, all with cynical conclusions, notwithstanding a world that has dramatically changed after the pandemic, but remains a bashing field for critics. I will therefore try to address ten critical issues that America currently faces at home and overseas.

First, comes the US economy. The Fed today sits atop a volcano of public debt of about $35 tn. Three months back, the interest burden crossed its first trillion mark. Guesstimates peg this to rise at a phenomenal trillion dollars a month after some months, owing to fresh borrowing and accumulated interest on legacy borrowing.

Us EconomyThe usual Fed Reserve reaction is to print more new currency and then try to absorb liquidity by raising interest rates. Since the USD is still the world’s leading reserve currency, inflation gets spread across the globe; equally it also strikes at home. The Fed has grappled with rising inflation for early five years now but to limited avail.

Today, petrol sells at an average rate of $4/USG, an 800-gm loaf of bread at $3.50 while supermarkets have turned into massive safes keeping food, cosmetics, baby food and diapers, OTC drugs, detergents and soaps, etc. under lock and key and under superintendence of shop employees to minimize pilferage.

The average American therefore expects early succour from the Fed, reeling under massive budget deficits, public, credit card, student, homes, etc. debt. That is central to Mr. Trump’s “Make America Great Again” campaign slogan.

Second, Americans not only love their cars but outside of major cities, there is hardly much public transport available, that makes cars an inescapable condition of life. That is why Mr. Trump speaks of raising oil production in Alaska where he will come under fire owing to environment preservation lobbies, particularly when global warming has become a major threat to the rapidly melting Arctic polar cap.

Usa Oil

Mr. Trump also realizes that a few major states (like CA) have started generating alternative energy, outstripping conventional modes.
In turn, that puts pressure on the 4-5 major US oil producers that also are in the list of donors to the Trump campaign committee. Canadian oil too is freely available and with large reserves while Mexico too has limited reserves.

Given the steadily worsening political situation in West Asia that would invariably affect oil supplies across the globe, the transactional President elect realizes that US oil may be able to fill a large part of the resultant gap, at great profit to oil producers.

At the same time, oil prices affect mass road transport where higher freight costs add to landed costs of essentials. Therefore, Mr. Trump faces yet another major challenge in this sphere.

Third, is the issue of immigration, particularly illegal, with several lakh Indians alone overstaying in that country. In a recent election speech, Mr. Trump was clear that migrants were welcome; just that they would have to follow legal channels. He added, that he would deploy the army to locate illegal migrants and deport them en masse.

Illegal ImmigratsIllegal migrants perform the lowliest of jobs, ranging from food delivery to garbage disposal that do not attract Whites, again Mr. Trump’s primary voter base. The White would prefer to face an SSA officer once every quarter and proffer a lame excuse for not finding a job.

If Mr. Trump were to go ahead with his mass deportation threats, Americans would attain mental boiling temperatures; after all drones and robots cannot fulfill critical HR shortages. Caught between these two opposing ideas, Mr. Trump faces a major challenge to his Presidency in this area as well.

Fourth, while Ukraine and Israel pose a major challenge to US foreign policy, Mr. Trump, were he to suggest a 38th Parallel-like solution to Ukraine, is unlikely to find a receptive ear in Comrade Vladimir. The last named, knows he has successfully crushed the Ukrainians and will, in due course, re-annex Ukraine to Russia; after all Odessa was established as a Black Sea port by Empress Catherine (the Great in the late 1600s).

Such action is also a grim reminder to NATO and its allies in East Europe. If Mr. Trump claims to Make America Great Again, so does Mr. Putin for Russia. Already, US & NATO have all but abandoned Ukraine. With North Korea reportedly having committed 10000 troops on the Ukrainian border, this is an additional complication. Mr. Trump has said he wants a terrified South Korea to pay $10 bn/annum for US military protection, more like a mercenary army.

Trump Great Again

In his previous Presidency, Mr. Trump similarly threatened NATO allies and is likely to renew his threat, typically transactional of him. The fact is Russia is no longer the monolithic Soviet Union that can threaten Western Europe; it will have enough problems of its own, once its war economy (in Ukraine) ends.

For its part, Western Europe is rapidly degenerating to Third World status with Mr. Obama and onward having destroyed Germany, the largest country in Europe and the biggest bulwark against Russia (the latest being the destruction of the twin Nordstream undersea gas pipelines).

Likewise, Niger’s recent cancellation of uranium contracts with France spells disaster for the French nuclear power industry that generates 40% of that country’s energy but depends for 60% feedstock on Niger; the impact on the French economy awaits quantification, but is likely to be very substantial.

With coal plants shut down, owing to environmental considerations across Europe, the impact of the absence of cheap Russian gas and Nigerian uranium may well be a crippling blow for Europe’s largest economies. The bottom line is that Western Europe, since the pandemic, has never been more vulnerable than it is today.

Although Italy and Spain are the only European economies that have shown appreciable growth since the pandemic struck, the UK is into Fourth World status. In effect, not a single major NATO ally is in any financial condition either to exhibit their military and financial strength and mend fences with Russia today. This is another major foreign policy challenge for Mr. Trump. “Bring our boys home” as a populist slogan is attractive to voters but does not subserve America’s global policeman ambitions.

The fifth challenge is China, in particular the economic invasion of America. American soya and corn growers need the Chinese markets to stay alive while China needs these commodities to rear pigs for export to America. Import quotas and tariffs do not help; all they do is to force China to obtain supplies from Brazil and many other countries while corporate farmers in the US stare askance; these farmers are also GOP donors.

Us ChinaSimilarly, Chinese BYD cars made in Canada and Mexico qualify as local products covered under MFN arrangements with the US. The current Ford Motor Co. CEO drives a Xiaomi EV and wishes to remain glued to it! In coming months, China is negotiating with both Mexico and Canada to establish more manufacturing plants. How will Mr. Trump classify these as being of Chinese origin and exclude them from preferential import tariffs?

Jobs will be created but in Mexico and Canada alone, but not in the US; yet the US will find it near impossible to deny MFN status to Chinese products manufactured in Canada and Mexico. Therefore, Mr. Trump would have to draw the line somewhere where the shoe does not pinch China or the US, a compromise solution, to a vexatious issue.

Even imposing countervailing duties will not help the US since Chinese EV makers, backed by state subsidies, earn 25-30% profit on each EV, even after paying an additional import duty of 30% imposed by the EU very recently. Mr. Trump’s threat to impose 60% import duty on imports from China will hit American manufacturers far harder than Chinese ones, particularly when China produces more than a third of global manufacturing output.

Sixth, if Mr. Trump successfully deports several million illegal migrants, that will cause a rapidly greying American population to rise, without commensurate rise in birth rates, a demographic disaster that already afflicts all developed countries. As it is, economic distress is causing family sizes to shrink. In turn, that has a very major impact on consumer demand.

Old UsaFurther, greying Baby Boomers will cast greater pressure on social security, with SSA projected to run bankrupt by 2030 while Medicare and Medicaid do not fare far better. Smaller family sizes also invariably have an impact on R&D for new technology.

Today, far less full fee-paying Chinese students attend US universities and R&D institutions while senior faculty are being lured to China with fancy salaries and liberal perks. With immigration policies often favoring Whites, hordes of East Europeans and Ukrainians are flooding into the US than at any time in the recent past and nearly all suffer an English handicap. Owing to their limited professional and English skills, they are replacing Hispanics and other emigres from Asia and Africa, that is stoking a different type of social tension.

If this is going to remain the practice, Mr. Trump’s immigration policy would need very serious re-look and pose one of the most significant challenges of the new Presidency. Adverse demographics could, potentially, stymie Mr. Trump’s ambitions to make America Great Again.

Seventh, Mr. Trump is not spoilt for choice when it comes to America’s burgeoning defence budget that exceeds $ one tn in FY 2024. The country’s infrastructure is crumbling, there are deep cuts in funding of institutions of higher learning and R&D even as Dollar Stores are proliferating.

During his last Presidency, Trump’s slogan of ‘Bringing the Boys home” struck a sympathetic chord with Americans whose families were the worst affected by American military ground deployment and resultant body bags from Afghanistan, Iraq and Syria. The Biden Administration panicked and reduced an orderly withdrawal from Afghanistan making it reminiscent of Ambassador Ellsworth Bunker’s final escape by chopper from the roof of the US Embassy in Saigon in 1975.

Trump IllustrationUnless such massive defence budgets are appreciably cut, printing currency to fill gaping budget deficits would continue to cause very substantial inflation in the US and deprive all other critical sectors of much-needed funding. The transactional Mr. Trump realizes the impending disaster that has prompted him to threaten allies for paying for their defence by US forces.

The US would also have to look at major reductions in overseas ground deployment of forces and the might of the US Navy and Air Force. Somewhere, Mr. Trump will have to strike a major balance between the priorities of the State and those of arms manufacturers that overran the Biden Administration.

Eighth, is the issue of restoring relations with Russia. Ukraine is fighting its last existential battle. As adversity rises and Russian forces gain the upper hand, the West realizes that this country is doomed to lose its independent existence. Already Russia has occupied the Crimea, Donbass (that is Ukraine’s coal depository and home to its manufacturing sector) and most Black Sea ports, except Odessa that is being daily stricken by the Russians and is barely operational.

The war is into its third year now and may last another 9-12 months. This war has been the main reason for Germany’s economic collapse, the BRICS-sponsored proposal for cross-border settlements in local currencies (bypassing SWIFT), a thriving local drone and missile industry in Turkey and Iran, rising trade between China, Russia and their BRICS partners, the expansion of BRICS, the consolidation of the OBOR Initiative, open threat to NATO allies for embarking an Ukrainian-type misadventures, and much more.

Trump PutinHaving come this far and now on the offensive, Russia is least likely to settle for a cease fire; nor is Ukraine in any position to negotiate. Having actively aided and abetted Ukraine’s military effort, the West lacks any credibility to negotiate with Russia on Ukraine’s behalf. At the same time, America depends on critical minerals like titanium from Russia that has been banned, affecting high-tech industry in the US and West.

Moreover, the sequestering of $300 bn. of Russian overseas assets and using interest to fuel the Ukraine war has been strongly condemned by Russia. In retaliation, Russia banned the exit of Western banks from Russia and placed a freeze on their assets in Russia. These are complexities that have to be sorted out by Mr. Trump and Mr. Putin in a transparent manner; and that may well be the biggest single foreign policy challenge for the former.

Ninth, is the vexatious US sponsorship of Israel as it commits brazen genocide in Gaza and attacks Iran and the Levant. Israel survives solely on US military funding and support. Its economy is ruined and dual-nationality Israelis are leaving for Europe and America, as Hezbollah rockets rain down on its offshore natural gas installations in the Red Sea and the port of Haifa. Scared of Iran, the other Gulf states are pretending to be neutral, yet it is this scare that drove KSA to delay its BRICS membership very recently (while not renewing the petrodollar agreement with the US). Likewise, while UAE continues to host US bases on its soil, it is a full BRCIS member.

Gaza IsraelWith plummeting Suez Canal revenues, Egypt relies on cheap Israeli offshore natural gas to remain barely economically afloat. Iran is behaving very maturely and casting Israel as the aggressor. If Iran wins, the other Gulf states may flock to it; if the stalemate continues it will eventually threaten Israel’s existence. Yet, Iran may not be always inimically disposed to the West for economic reasons.

For four decades and more, Iran has been severely sanctioned that has had its adverse effects on its economy. If the Israeli irritant in its relations with the West ceases, the Suez Canal and Straits of Hormuz would return to normalcy and shipping and insurance would appreciably decline, with concomitant effect on global inflation.

Likewise, for Ukraine, restoring Europe’s Russian gas lifeline is not something Russia would be averse. For Mr. Trump, to sort this mess may well take his full second tenure. Again, central to America’s prosperity is reduced funding for overseas misadventures and wartime deployment of US forces.

The transactional Mr. Trump would have to set aside his short-term business gain perceptions that, by itself, poses significant challenges in peace and freer trade with both Russia and China. Above all, peace would ensure safe passage for freighters across the South China Sea, Straits of Hormuz and the Suez Canal and insulate the world from any further energy shocks, and divert scarce state finances to restoring public faith in national govts.

Last, but not the least, is the fact that the world has dramatically changed since Mr. Trump demitted his office in 2020. Russia, China and parts of BRICS have substantially gained in economic and military strength and use of technology, Western allies have become China’s major trade partners, Gulf countries have expanded militarily and are now looking to diversify away from their oil-based economies, the new BRICS Bank, pressures to reform the Bretton Woods Network, trading in local currencies, and myriad more. America is no longer the global policeman and the balance of power has started shifting eastward and to the Global South.

The American economy is in state of severe disrepair, it has to grapple with new social tensions and adverse demographics and above all, reduce its defence spending very substantially to repair America’s own infrastructure. Rising yields on US T-bonds is hardly a matter of credit; instead, stable income and expenditure based on freer trade flows is the way to go.

Trump WonMr. Trump has barely four years to grapple with these ten mega crises. He must adopt a longer and deeper world view that does not view everything through the narrow lens of business transactions; after all, humans are not numbers and the world is not a profit and loss account nor troop deployment a balance sheet figure. Americans have given Mr. Trump a decisive victory, something that even a powerful President like Ricard Nixon did not get. Today, Mr. Trump will be the world’s most powerful President. It would be good to grant him at least two years before passing judgement on him.

Also Read: Why Trump Won

I cannot bring myself to agree that Mr. Trump 1.0 will, invariably, be the same as Mr. Trump 2.0, based on two effective years (during which he worked a $200 bn trade deal with China and started withdrawing from Afghanistan and closed down several overseas US bases) and two ineffective ones of his tenure owing to the pandemic and the culminating Capitol Hill drama, unless I see him work for at least two full years.

Also Read: Trump’s White House Comeback: Global Shifts and Implications for South Asia

Four previous years in the White House and resultant legal challenges to him must have educated him in the wayward ways of Capitol Hill. The highlighted challenges are extraordinarily complex and require time to resolve or at least, start resolving. Finally, America has more to gain from peace and prosperity than the rest of the world, something Mr. Trump, hopefully, will realize. Pt Logo

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