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Trump -- losing Asia?

America First policies could be reversed if high costs hit US economy

| North America

When U.S. President Donald Trump speaks of the trade talks with China going "extremely well," I can't help but be reminded of the trenchant observation that "The Americans always do the right thing -- after exhausting all other alternatives."

It makes me wonder whether -- as the costs of Trump's economics-defying trade policies take their toll on American interests -- the U.S. may rethink its collision trajectory with China.

With the negotiations likely to be extended and rumors of a summit with Chinese leader Xi Jinping soon, there is even hope that the first signs of a policy shift may be just over the horizon.

Of course, everything still hangs in the balance but it is worth asking if the pendulum in an often-resilient America will swing back toward compromise?

At present, the toll of "America First" unilateralism has yet to be fully felt. But with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) -- and an EU-Japan trade pact moving forward, Europe and Asia increasing hedging against the uncertainty Trump has brought.

Pressure may build for the U.S. to abandon its unilateralist approach as the cost to U.S. interests of these and other trade pacts still under negotiation become more evident. U.S. farmers are already losing markets to those in Canada and Australia, while American manufacturers struggle to compete in the face of shifting supply chains.

Current trends suggest that the response to Trump's "America First" policies by major G-20 economies results is a creeping marginalization of the U.S. global role, with leading developed economies creating new structures to fill the vacuum left by Washington and to counter China's expanding influence.

For now, Trump and many in his administration remain in a bit of a 1970s time warp, with an exaggerated view of U.S. leverage and a disdain for the liberal order the U.S. helped create after World War II. Thus, the strong-arm tariffs, the denouncing of institutions from the United Nations to the World Trade Organization, and repeated threats to end alliances from NATO to the U.S.-South Korea pact.

The U.S. is throwing away a winning hand. In Asia, Trump's "America First" mindset already disadvantages the U.S. Consider Washington's absence from the region's multilateral trade arrangements, a hobbling emphasis on bilateral deals, and a singular hostility toward China which is the largest trading partner of Japan, South Korea and the ten-member Association of South East Asian Nations.

If present trends continue, intra-Asian economic integration will thicken, supply chains will become more regionalized, and the U.S. will increasingly be vacating the Indo-Pacific economic space, even as it touts a "Free and Open Indo-Pacific Strategy" which is undermined by Trump's rejection of the Trans Pacific Partnership.

If five of some 13 economies that have expressed interest in the TPP's successor, the CPTPP (Thailand, South Korea, Indonesia, Taiwan, U.K.) join over the coming two years or so, the CPTPP market will be almost as large as it would have been if the U.S. stayed in TPP.

And if China implements the market reforms it has been delaying, those reforms would make it easier for Japan to invite Beijing to begin a CPTPP accession process. That would produce an economic juggernaut with the U.S. left behind at the side of the road and a post-American Asia beginning to take shape.

Similar, though far less developed, trends in intra-Asian security cooperation are gaining momentum: Indian warships dock in Indonesia, Japan and India deepen security ties, and joint air and naval patrols are launched in new combinations including India-Vietnam, Japan- Australia-India, and Japan-Malaysia-Indonesia-Philippines.

Such unprecedented cooperation is a hedge against uncertainty about China's intentions and U.S. reliability in Asia, In the face of China's remarkable military modernization, Asian states can, without the U.S., expect only to dilute China's growing dominance.

But my point is that U.S. resilience is too often underestimated. Cassandras bemoaning America's decline have been heard before, after the Soviet Sputnik launch in 1957, for example, the ignominious 1975 defeat in Vietnam, and the 2008 global financial crisis.

America cannot ignore for long the fact that the center of gravity of the global economy is, and will continue to be, in Asia, with China, Japan, South Korea and Singapore at the leading edge of a new technological revolution involving data, robotics and Artificial Intelligence.

Washington's trajectory is therefore likely unsustainable. What could trigger a turnabout to these trends? It is not necessarily fanciful to imagine a near-term scenario. There could be a cascade of developments in which Trump is weakened by the start of impeachment proceedings; the fallout from Brexit has severe financial impact, China's growth slows further; and Trump imposes 25% auto tariffs on the EU and Japan disrupting global supply chains. Add to that the risk of the U.S. blundering into a military conflict (e.g. in Venezuela or Iran). Global markets could plunge and accelerate a recession if not a financial crisis.

In response to such a dire situation, we could easily see a renewed U.S. respect for multilateral institutions. Populist nationalism could recede and with it 'America First'. The U.S. midterm elections may already portend a backlash against Trump-style populism.

Granted this is only one scenario, and one fraught with danger.

But the current train of events is anything but comforting. It appears a bit like sleepwalking toward crisis, including a confrontation between the U.S. and China. not unlike the run-up to the First World War, which came unexpectedly for many observers.

Yet, the good news is that history is rarely linear. There is always scope for a change of direction.

Xi's own 19th Party Congress in 2017 pledged to allow "market forces" to play "the decisive role in the allocation of resources." Simply implementing its declared market-opening agenda would address many of China's economic problems as well as trade issues with the U.S. Stranger things have happened. That should enable China trade deal and an economic rebalancing. The U.S. business community's support has been a key pillar of U.S.-China relations. If they support a trade deal, that would likely help stabilize the overall relationship.

However, even if it takes China time to respond, an American return to multilateral policies and a rejuvenation of its alliances, especially in Asia, would bring its own political and economic benefits. Indeed, it would greatly strengthen Washington's chances of reaching a less confrontational long-term arrangement with Beijing.

But if things carry on as they are, following the logic of current Trumpian trade and foreign policies and China's responses, it is not difficult to conceive of an outcome that would be painfully similar to the tragic consequences of the ultra-nationalist, protectionist beggar-thy-neighbor policies produced in the 1930s.

Robert A. Manning is a senior fellow of the Brent Scowcroft Center for International Security at the Atlantic Council and its Foresight, Strategy and Risks Initiative. He served as a senior counselor to the Undersecretary of State for Global Affairs from 2001 to 2004, as a member of the U.S. Department of State Policy Planning Staff from 2004 to 2008, and on the National Intelligence Council (NIC) Strategic Futures Group, 2008-12. Tweet: @Rmanning4

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