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Trump’s Great Retreat, the Road to War and Why Your Resistance Matters

By October 15, 2018Blog, Economics, Eddie Hobbs

President Trump is forcing a retreat into economic nationalism - Hobbs Financial

The USA didn’t set out to become the dominant global super force – militarily, economically or institutionally – but it is. Pax Americana has shaped recent global history since US isolationism first became unsustainable. Why this matters today is because President Trump is forcing a retreat into economic nationalism, a return to mercantilism which sees one nation’s gain as another’s loss and in doing so risks all that has been painstakingly interwoven by the generations that have gone before, many paying the ultimate sacrifice.

Trump is no strategist, that is evident from Bob Woodward’s forensically researched book Fear. That makes Trump everyone’s problem.  Like it or not, what happens in the United States of America and in many other countries over the course of the next few months and years could have dramatic, lasting effects for all of us, as a power struggle takes place between globalists and economic nationalists.

In this series of short essays, I hope to join the dots to explain what I think is happening, why it is happening and what may happen next.

US isolationism

Thousands of miles of ocean geographically separated the USA from conflicts in both Europe and Asia until advances in military technology made isolationism no longer possible. During the military conflict between the United States of America (USA) and the Confederate States of America (CSA), the great European powers, though quietly favouring the CSA despite the stench of slavery, did not intervene. The USA followed the same doctrine for European conflicts.

But 50 years after CSA General Robert E Lee surrendered the Army of Northern Virginia to future US President, Ulysses S Grant, at Appomattox, everything changed. On a bright afternoon on 7th May 1915, 11 nautical miles from the Old Head of Kinsale, a German torpedo sank the Lusitania, killing 1,198 people of whom 128 were American.

Still, US President Woodrow Wilson clung to the widely held American desire to maintain an isolationist stance. The US economy was booming, and its banks were lending vast sums to Britain and France to prosecute the war in Europe. But the Lusitania shook US isolationism and it eventually cracked when more US shipping went to the bottom of the North Atlantic. After a German plot to assist Mexico to recover lands lost during the American Mexican War was uncovered, the European war was brought to American shores. This was personal. An angry US Congress declared war on Germany in April 1917. The small US army, maintained up to then on a peacetime footing by Wilson, would go on to fight with distinction in France, propelling economic and social collapse in Germany and ending World War I on 11th November 1918.

After the war, the US returned pretty much to its preferred isolationism and did not enter World War II until two years into the conflict when a seething Congress declared war on Japan, the day after it launched a surprise attack on Pearl Harbour on 8th December 1941, killing 2,335 and wounding 1,143.

Baton passes from the Empire to the USA

In the winter of 1944, in my opinion, the baton of world superpower was passed to the USA on the snowy ground of the Ardennes when the US military single-handedly crushed Hitler’s last offensive. GI’s had hunted down Tiger tanks with the US-made M9 bazookas in a stubborn and skillful defense that cost the US nearly 90,000 casualties but planted its flag squarely in Britain’s front yard. What was left of the British Empire was exhausted, after which the old great power played a bit role. Empires die slowly, Britain’s last echoes can be dimly heard today in the ballyhoo of Brexiteer language.

The USA emerged from those two interconnected conflicts as the most powerful economic and military force in the western world and through its leadership at the Breton Woods Conference in the Summer of 1944, the USA laid the foundations of globalisation and secured its place as the issuer of the world reserve currency, the US dollar. The next major conflict between ideologies – communism and democracy – or command and control and free-market economics, ended with the collapse of the USSR, the reemergence of China as an outward-looking trading nation, the establishment of global trade agreements and in the deepening and widening of the union of European nation states.

These events dramatically reshaped the landscape in the last quarter of the 20th century; it gave us the world we have today. It is a world of international institutions and law that Trump loathes. He disdains the United Nations Framework Convention on Climate Change (UNFCCC) from whose Paris Agreement on Climate Change which he has withdrawn the world’s largest economy in favour of homegrown oil and gas industries. Trump has also derided the International Criminal Court (ICC) established in 2002 to deal with crimes against humanity, genocide and war crimes and that includes 124 signatories but not the USA, Israel or Sudan. He also threatens withdrawal from the World Trade Organisation (WTO) which he sees as offensive to his agenda.

Trump and the return of economic nationalism

The USA is by some stretch the most powerful economy in the world, one whose strategic advantages, built on a virtuous loop of economic and military power augmented by institutional, technological, research & development and educational strengths, is positioned to remain dominant, as long as the USA has the will to do so. It’s American willingness that is under threat because of Trump, the 45th President of the USA, who presents globalists as the enemies of the people and who is openly embarking upon a return to nationalist economics.

In the Summer of 1944, the Bretton Woods Conference in New Hampshire united the 44 Allied nations to establish the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD). In closing the conference against the backdrop of the horrendous body count of World War II (estimated to have killed 3% of the global population) the head of the US Treasury, Henry Morgenthau, identified the establishment of the new global institutions as marking the end of economic nationalism.

The intention of Bretton Woods was that nations would cease engaging in economic conflicts, including weaponised currencies and tariffs to beggar neighbours, and move instead towards lowering barriers to free trade and encourage free movement of capital.

With 60 million dead, the Allies gathered at Bretton Woods under US leadership grasping that the only way forward to avoid war was open markets, lower barriers and global trade, that these were the currencies of peace and prosperity and that, conversely, a retreat from global institutions to tit-for-tat protectionism and economic nationalism, would degrade into armed camps and war all over again. But some 74 years later, economic nationalism is back as the beating heart of Trump’s foreign policy.

What Trump wants

Ordinarily, it is impossible to see past the blizzard of partisan US media and politics to discern precisely what Trump wants and how far he plans to go to get it but, thanks to Bob Woodward’s book on Trump’s White House, the picture has become clearer. What makes Woodward’s journalism important is not his iconic reputation honed from investigating Watergate, but because he has crafted his work on Trump to let the actors tell the story themselves in their own words.

Woodward’s book is compelling reading. However, to fully grasp what Trump wants and how he behaves, to discern the deep cynicism that flows through Trump’s campaigning – a cynicism where anything goes – the 2017 Netflix documentary Get Me Roger Stone is required viewing. Watch it through your fingers.

Trump wants the USA to run a global extortion racket, a shakedown of allies and trading partners using the US military and economic muscle. Conditioned by Trump’s cynical campaigning, this is applauded by his core support. It is that simple.

Trump cannot and does not think strategically. He believes in just one type of relationship, win or lose. Winning is all important, nothing else matters. The end justifies the means, that is his creed.

Woodward, worryingly, concludes that Trump is a habitual liar, quoting directly from the unpleasant personal experiences of those once in his inner circle but now rejected for not sharing in his creed. He lies to everybody. It’s how he does business.

Trump’s myopia

Trump has tunnel vision. This is how he reaches his goals; collateral damage doesn’t count unless it retards his progress. When faced with contrary evidence from top experts, he bulldozes through to the only equation with which he’s familiar, how much is it costing in dollars and can we screw a better deal?

Trump, while engaging in a dangerous escalation in threats with North Korea, came within a whisker of ditching the US trade agreement with South Korea in a snot over their trade deficit of $18 billion which represents just 3% of the USA’s global trade deficit. The US $3.5 billion annual spend on US military on the Korean Peninsula is 0.6% of the US annual spend. But, to Trump, it’s all about the money and not about strategic reach.

Kim Jong-un’s intercontinental missile capacity means that, conceivably, the West Coast of America could be subject to nuclear attack within 38 minutes of launching. The US military presence at the 38th parallel gives a response time within seconds of a missile launch, affording the USA the opportunity to immediately deploy countermeasures.

Still, Trump playing to his core audience at home was determined to play chicken both ways, unilaterally ditching KORUS, the US-Korea Free Trade Agreement dating back to the Korean War in the 1950s, while threatening Kim Jong-un that he’d push his bigger button. His draft letter dated 5th September 2017 withdrawing from KORUS was left unsigned because it was removed from his desk before he could do so, the same month that Trump threatened North Korea with total destruction, describing the North Korean leader as ‘Rocket Man’.

Trump has fixated on the US international trade deficit but at $566 billion it represents just under 3% of USA GDP. His Chief Economic Advisor and former president of Goldman Sachs, Gary Cohn, resigned, blue in the face from trying to get Trump to grasp that because the USA is broadly 80% services and 20% manufacturing, cheap imports give US consumers more discretionary spending on American services. It is a virtuous loop. Consumer spending in the US is two-thirds of its $20.4 trillion economy with most of that on services, nearly 25 times the international trade deficit.

Trump has sold his core supporters the vision of a jobs-rich resurrection of traditional US manufacturing by hitting goods, especially Chinese goods, with import tariffs. But these, in turn, increase the costs of goods for consumers, reducing discretionary spending on services, the beating heart of the US economy.

Tariffs are thus not a one-way, but a two-way, street for the USA with its service-led economy. Instead of renegotiating trade agreements through the World Trade Organization (WTO) established in 1994, Trump’s fast action policies require the high drama of unilateral withdrawal, relying on US muscle to force the deal he wants from other nation states. According to Woodward’s research, he has withdrawal from the WTO firmly in his crosshairs, telling aides,

“We always get fucked by them. I don’t know why we are in it. The WTO is designed by the rest of the world to screw the United States.”

Trump’s vision of a rejuvenation of the rust belt, with hundreds of thousands of blue-collar workers turning up to clock in at old manufacturing behemoths, doesn’t tally. Firstly, manufacturing jobs are being rapidly replaced with automation and artificial intelligence, which means workers don’t gain from the return of heavy industry, instead Wall Street does as the owners of capital. Secondly, workers, given the choice, overwhelmingly prefer the tidier environment of services. After all, faced with the choice, where would you prefer to work: on a vast assembly line or near a blast furnace like your grandad did or in an air-conditioned office with Wi-Fi, a recreation area and a Starbucks?

The debt

The biggest issue facing the USA is its burgeoning national debt and unfunded liabilities. Its ownership of the world reserve currency means most world trade is conducted in US dollars, which in turn has given the US the privilege of being able to tap into a seemingly bottomless pool of liquidity for US Treasuries. Over the course of the Obama administration, US national debt doubled to $20 trillion, and its unfunded liabilities – internal undertakings to maintain social welfare, health benefits, public sector pensions and national debt held by the public – have risen to $114 trillion while total national assets are estimated to be $148 trillion.

Trump bypassed supply-side measures, favouring demand-side stimulus by delivering income tax and corporation tax cuts, but it adds to the annual deficit of what is becoming a pressure cooker economy. By October, Trump’s US Federal Budget Deficit for 2018 was running at $916 billion and is on track to reach $1 trillion by the end of the year. This has been added into the veins of the consumer-led economy, driving up US stock prices propped up by the technology majors.

With the US economy on sprint mode from Trump’s sugar rush, the Fed is keen to keep raising interest rates to stave off inflationary pressures. The impact of Trump’s measures has been to strengthen the dollar, which in turn is creating crises for emerging market national and corporate borrowings in dollars. Turkey, a NATO member, is the outlier on the verge of insolvency.

Despite his tariffs, Trump’s stronger dollar is widening its trade deficits because it is making exports from the USA more expensive. Unless Trump’s policy is reversed, perhaps by the next administration, the US national debt is projected to reach $33 trillion in ten years. Trump’s gamble is to add more debt to the economy in the expectation that it will bring economic growth in excess of the cost of borrowing. This is classic leveraging.

The billionaire has gone bankrupt several times, the US never has. Neither has it been forced into a technical default by restructuring its debts since Alexander Hamilton first invented US Treasuries in the shadow of the War of Independence.

At stake in Trump’s pressure cooker are the US dollar’s dominance and the appetite externally to continue to support US Treasuries, 30% of which are held by foreigners (some $6.2 trillion). But sitting in the long grass since the 1960s is Triffin’s warning that any nation attempting to liquify global markets with its currency eventually destroys it, that short-term foreign policy aims can run headlong into conflict with maintaining the currency world reserve status. Trump, by weaponising the US dollar, is accelerating a shift away from the dollar and, by treating his allies roughly, rebalancing global power from the West to the East.

Trump’s behaviour

Given the power of the President of the United States (POTUS) and notwithstanding the checks and balances carefully embedded by the founding fathers, it would be dishonest to dismiss Trump’s personal behaviour as a matter for petty political warfare. It is not. In our lifetime, no sitting US President has displayed behaviour that has given rise to such widespread concern that he is unhinged or unfit for office.

In January 2017, the Director of National Intelligence, James Clapper, briefed President Trump at Trump Tower on the US intelligence findings that, in keeping with Russia’s long-standing objective to undermine the US-led democratic order, Putin had instructed his Russian assets to harm Hilary Clinton’s electability. The assessment was quite emphatic that Putin had “developed a clear preference for President-elect Trump” and the intelligence chiefs told the President that disparate and unconnected resources within the Russian establishment had corroborated the findings.

Trump responded by telling the intelligence chiefs gathered for the briefing,

I don’t believe in human sources, these are people who have sold their souls and sold out their country. I don’t trust human intelligence and these spies.”

The following year, Trump would emerge from a one-to-one meeting with Putin openly rejecting his intelligence briefings on TV and ignoring the indictments against Russian officials by the US agencies, announcing emphatically that he believed Vladimir Putin’s denials.

In July 2017, Trump met his senior military chiefs to consider their reports and views on US areas of operation globally. It marked such a serious dressing down by the President, one that a senior White House official reported to Woodward,

The President proceeded to lecture and insult the entire group about how they didn’t know anything when it came to defense or national security. It seems clear that many of the President’s senior advisors, especially those in the national security realm, are extremely concerned with his erratic nature, his relative ignorance, his inability to learn, as well as what they consider to be his dangerous views.”

Mueller’s noose

Despite Trump’s media spin, US intelligence could not be ignored and on 17th May 2017 the US Department of Justice began an investigation led by Special Counsel Robert Mueller, a former FBI Director, tasked with looking into evidence of any collusion between Trump’s campaign and the Russian Government but also, crucially, extending into “any matters that may arise directly from the investigation”. This is the bedrock of gathering evidence strong enough to trigger a credible and sustainable impeachment process under Article One of the Constitution of the United States of America. Impeachment is only successful if both houses find in sufficient numbers that a President is unfit for office due to treason, bribery or other high crimes and misdemeanours. It is a high bar.

Sitting behind the probe are uncorroborated allegations that Trump’s enterprise may have received soft finance from Russian oligarchs linked to the Russian Government on the quid pro quo that, if elected, Trump would build a fresh relationship with Russia and reverse the damage caused by sanctions. It is why the Mueller investigation appears to be examining Jared Kushner’s finances and meetings that may have taken place in Trump Tower during the campaign involving a Russian lawyer, Paul Manafort, Don Trump Jnr, and Jared Kushner, President Trump’s Special Adviser and son-in-law. It may all yet prove to be smoke rather than fire, but, in the interim, Trump’s lawyers have pleaded with him not to give evidence, fearing that he will fall into a perjury trap. His legal team appear less concerned with Russian collusion – which Trump hotly denies – and much more concerned that Trump would be a poor witness because he lies a lot.

By October 2018, Mueller’s team, which took over the FBI investigation of Trump’s former campaign chairman, Paul Manafort, and former National Security Advisor, Michel Flynn, had recorded dozens of indictments. By December 2017, Flynn pleaded guilty to making false statements to the FBI and turned witness for Mueller.

In August 2018, Paul Manafort was found guilty of eight crimes in a Virginian District Court and in September in a Federal Court in Washington DC. He pleaded guilty to obstruction of justice and defrauding the United States in return for a plea bargain mitigating his sentence but contingent on full cooperation with Mueller’s probe. Although the crimes predate his involvement with Trump, it is clear that Mueller believes Manafort has important evidence, relevant to his investigation.

Guilty pleas have also been secured by Mueller from Rick Gates, a business partner of Manafort, lobbyists Samuel Patten and Richard Pinedo and former Trump advisor George Papadopoulos. This is in addition to Mueller’s indictment of 13 Russian passport holders, three Russian entities and a cyber espionage group attached to the Foreign Intelligence Service of the Russian Federation.

In April 2018, Trump’s personal lawyer and former Vice President of Trump Enterprises, Michael Cohen, came under investigation by the Attorney for the Southern District of New York which opened with an FBI raid on his offices looking for evidence of violations of campaign finance law and wire and bank fraud. Amongst the evidence seized by agents were records of payments to porn actress Stormy Daniels and recordings of conversations with Donald Trump.

On 21st August, Cohen surrendered to the FBI pleading guilty to eight charges one of which, in a clear reference to Trump, relates to making excessive campaign contributions at the request of the candidate for the “… principal purpose of influencing the election.” He is due to be sentenced in December 2018. Cohen’s lawyer, Lanny Davis, has stated that his client “will tell everything about the Donald Trump that he knows” furthermore adding that Cohen would “never accept a pardon from a man that he considers to be both corrupt and a dangerous person in the Oval Office.”


Trump, as POTUS, is committed to degrading Pax Americana. He sees globalism as the enemy and favours economic nationalism, deploying the US superpower to pursue the same view of trade as that which brought nations to war from the 17th to 20th centuries, a mercantilism that pursued win-lose outcomes, that weaponised economics and, if that failed, resorted to military confrontation and war.

The global institutions constructed out of the ashes of two world wars, Bretton Woods, IMF, WTO, UNFCCC and NATO are being undermined by Trump. In doing so, Trump is eschewing the considerable resources of US agencies and Joint Chiefs, in favour of flying by the seat of his pants in the firm belief that he is “a very stable genius.”

Hope isn’t enough. Trump isn’t just an American problem, he’s everybody’s problem because he is a global risk. It isn’t enough, in my opinion, to hope that American voters will come out in sufficient numbers to defeat Trump’s messianic support or to hope that impeachment proceedings may follow Mueller’s probe if Democrats dominate Congress after the midterm elections. Neither is it enough to stand quietly by, fearful of upsetting US relations, letting the next fellow carry the placard.

Trump’s, agenda is to sow division, distrust and discord, an agenda that undermines the very things that make us choose peaceful cooperation and trade, that incentivises us to find solutions to global problems, together.

I’m quite fed up with Trump, so should you be, and it’s time we told him.

Eddie Hobbs