If Donald Trump’s narrow win shook the United States in 2016, the scale of his victory now has amazed the country into silence. Equally amazing is how the US market reacted to his win now as compared to 2016. And how did the economists trash him in his first term and how silent are they now.
Unravelling these conundrums will bring out that the explosive pro- and anti-Trump campaigns are not just a battle between two economic or political ideas but a larger war. A war between two Americas – the America of its founding fathers and the America that breaks their statues. It calls for a deeper and at the same time a high helicopter view to demystify the forces at work in the US.
Villain becomes hero
In 2016, Trump was universally seen by liberal media and economists as a villain. No surprise therefore that when the news of his victory trickled in on 7th November night, US stock futures plummeted, Dow Jones dropped 800 points, markets went into a tailspin. But shockingly in the next 24 hours they rebounded to higher than 48 hours before. From November 9, the stocks began the famous “The Trump Rally” that lasted till early 2017.
Once a villain, Trump became a hero. The rally, said economists, was because the market was positive to Trump’s declared policies of tax cuts, infrastructure plans, and deregulation to spur economic growth. But Trump had declared all this ad nauseam during his long campaign. Why then did the stocks collapse on the 7th night? That was the blinding impact of the vicious political campaign of the entire US and Western media against Trump as one who had come to destroy America in the name of making it great again!
Market economics was fooled by ideological politics for 24 hours. But Trump’s victory this time saw the US stocks rise on the day he emerged winner and post “their best weekly performance all year”. Learning from its experience on 7th November, 2016, and refusing to be fooled by the anti-Trump poison, this time the market immediately celebrated his policies like they did after 24 hours in 2016.
Trump’s policies in 2024 are the same as they were in 2016. The whole world is in debate now on where the US economy is headed under Trump 2.0. Before answering this question, a look at the US economy shows that it performed as well or as badly under Trump 1.0 as it did under Obama earlier and under Biden later. Trump or no Trump, the US economy seems to do what it will anyway. Why? Look at the fundamental strengths of the US as a nation.
Strength – Geography and resources
The US economic power does not seem to depend on any President. The (deep) State in the US is stronger than the elected President. Its economy is stronger than the state. It is stronger because the US is a unique phenomenon in human history. Why? Just a look at its geography, history, demography and politics will provide the answer.
The US land mass is three-and-half times India’s with a fourth of the latter’s demography. It has expansive 95,000-km long coastlines, fertile land, fresh water, oil and coal. Its natural resources are matchless. It has 45% of the world’s water, over 22% of the world’s coal reserves, over 6% of the world’s land mass, over 10% of the world’s farmland with just a little over 4% of world’s population. It has 256 billion barrels of untapped oil — 20% more than Saudi Arabia.
The US, which was a net importer of oil till 2018, is now its net exporter. No nation has this kind and scale of strategic and economic resources. That is the greatest advantage of the US. And most importantly it has no enemies on the border who can take an inch of its territory or a gram of its resources. Its adversaries are far away — Iran 11,500 km away, China 5,900 km away. Russia is nearer in geography yet, as a physical threat, very far away. Surrounded by seas and bordered only by its surrogate Canada, the physical security of the US is its matchless strategic asset. No other country has this geopolitical luxury.
A US with a border with China or Pakistan like India has or with Russia like Europe, can’t afford the liberal politics and economics it is so proud of and preaches to all. But this advantage could be turned into economic power only by demographic expansion of America through immigration. It added to its economic power in the past; it is now dynamiting its polity. The increasing economic returns of the US from immigration are now equally increasing the political risk with its borrowed demographic strength tearing it apart. Unless that history is traced, the rise of Trump cannot be understood.
Weakness – Demography and polity
Now come to the US political history and demography. It is the only large country in the world which has no baggage of history. Contemporary America had wiped out all natives in its geography — over a 100 million — by the dawn of the 17th century. They are now just 0.8% – mere curios in their own land. In 1610, the non-native, colonist US population as recorded by the US Census Bureau was just 500. It rose to 2.78 million in 1780. Eight years later, a new nation, the United States of America was born in a clean state populated by only the white race from Europe with black slaves.
Within that, the homogenous Anglo Saxons constituted 80%. In 100 years, by 1900, the numbers rose to 76 million. Clearly intending to be White dominant, the US limited naturalised citizenship to only “free white persons” with property, not to women, non-whites. With white population hovering a couple of points below 90% from 1870 to 1950, the US rose as an integrated and powerful White nation.
Only after the civil rights movement (1960s), US immigration laws became multiracial. American economy prospered because of multiracial immigration. But that gradually first and expeditiously recently, began impacting on the White —the Anglo-Saxon — identity of the US. The share of the Non Hispanic White (NHW) population in the US crashed by almost 32% to 58% by 2020. Asian Hispanics and mixed races rose to 34% with Blacks down at 13%.
The sharp drop in the NHWs from 72% in 2000 to 58% in 2020 — 14% in 20 years — shook the US. Samuel Huntington foresaw this and warned the US of the loss of its core identity — White Anglo-Saxon-Protestant (WASP). With the projection that by 2030 NHWs will be down to 56% and by 2060 to 44%, the US risks becoming a non-White nation. The Hispanic White population will be 27% by 2060 — three-fold rise in six decades — blacks 15% and the Asians 9.1%. Demographic expansion by immigration that strengthened the US, thus eroded the US polity and turned it into a divided nation.
Added to that was the rise of anarchic Woke liberalism which is destroying the remains of the disintegrating US families and communities. In the background of the depressing domestic polity, the euphoric globalisation that wore off with the US financial meltdown in 2008. China’s rise as a challenger undermined the hegemonic economic and geopolitical status of the US. That set the compelling stage for the advent of the Trump phenomenon in the US with his slogan, Make America Great Again (MAGA).
Made a fool of detractors
As Trump unveiled his policies in the 2016 Presidential race, Obama’s chief economic adviser Larry Summers said, “Under Trump, I would expect a protracted recession to begin within 18 months. The damage would be felt far beyond the United States.” Citigroup warned that “A Trump victory could cause a global recession.” The Washington Post wrote, “President Trump could destroy the world economy.” Steve Rattner, an economics guru, said: “If Trump wins you will see a market crash of historic proportions.
The markets are terrified of him.” Simon Johnson, an MIT economics professor, wrote, “Trump would likely cause the stock market to crash and plunge the world into recession.” When Trump was seemingly winning and the markets were plunging the day after the poll, Nobel Laureate in economics Paul Krugman said, “We are very probably looking at a global recession, with no end in sight.”
Even after he won, a headline in the UK’s Independent in January 2017, read: “Donald Trump’s first gift to the world will be another financial crisis.” In the face of these catastrophic predictions, Trump, who had promised 3.5 per cent growth, delivered it along with the lowest unemployment rate few presidents after Ronald Reagan could achieve. Trump made his detractors look like fools as he rewrote the domestic rules of the US.
Rewrote US-Rest relations
Many haven’t noticed that Trump has also once and for all rewritten the relations of the US with the rest of the world. When the Berlin Wall collapsed, along with it the Soviet Union, the US became so euphoric that it concluded that the Western liberal democracy and market capitalism had finally won against the Rest. It clamped on the One-Size-Fits-All world order — globalisation — symbolised by WTO and its siblings that rested on the assumption of its financial, technological, systemic and military superiority over the Rest.
But the US did itself in by declaring and admitting the autocratic China as a market economy into its and global markets. In less than two decades, autocratic China exploited the transparent US and global markets and emerged to challenge the US itself. Even before Trump filed his nomination papers for the 2016 elections, the US and the EU had to file applications in the WTO, believe it, to declare China as not a market economy!
When Trump came, he launched an assault on China, levied tariffs on the EU and even India. If China were declared as a market economy, it would not be easy to levy the punitive anti-dumping duty on it. He threatened the WTO that if it did not declare China as a non-market economy, the US would leave the WTO.
He refused to appoint judges for the dispute settlement mechanism of WTO; so questionable US levies on China, EU and others could not be disputed. Trump declared that globalism was no more on the US agenda. It was America first. Result, after the pandemic and the Ukraine war, even the chief protagonist of globalisation and anti-Trump crusader, The Economist magazine, has declared globalisation as dead.
Biden followed Trump
Joe Biden who came to power after Trump, declaring him as the destroyer of the US and the global economy, did not change a line of core Trumpism but followed it. Trump invoked national security provisions to impose a 25% tariff on steel and 10% on aluminium from India and the EU, breaking the policy of not targeting friendly nations. Biden kept talking with India and the EU but would not lift the tariffs.
Trump disabled the WTO’s dispute settlement mechanism and castrated the WTO. Biden promised to revive it but did not during his entire tenure of four years. Trump’s protectionism grew, not eroded, under him. Trump waged his famous tariff war on China citing unfair trade practices. Biden followed him, increased the tariffs on Chinese electric vehicles (EVs) from 25% to 100% this year, and on certain steel and aluminium products from 0-7.5% to 25% citing the very theory enunciated by Trump. Why couldn’t Biden undo what Trump did? Why did he follow him instead? Trump or no Trump, Trumpism will last. That is the message of the US for the world.
What Trump symbolises is not just an electoral change but a paradigmatic shift that was brooding in the US for over a decade and has exploded as the Trump phenomenon. What is the consequence of it to the US and the world? Only the future can tell.
S Gurumurthy
Editor, Thuglak Tamil Magazine. Chairman, Vivekananda International Foundation Strategic Think Tank
