Pax Americana | Trump’s First Year: ¿The Decline of the Liberal World Order?
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Trump’s First Year: ¿The Decline of the Liberal World Order?

Trump’s First Year: ¿The Decline of the Liberal World Order?

After a year of Trump’s Presidency, the US economy continues to grow at a 3.2% third quarter annualized rate, the same pace as in 2016. The unemployment rate has continued to fall down to 4.1%, from the 4.6% rate registered at the end of Obama’s second term. And what is more striking about this favorable economic situation, blue collar wages have begun to take off due to the revitalization of the energy sector and the low level of the unemployment rate. If this improvement continues and income inequalities diminish, America would be eliminating one of its worst threats ahead.

However, it’s still too early to announce that social inequality and frustration, which both helped Trump reaching the White House, are now a thing of the past, given that the technological revolution with its multiple side effects is still underway, and no specific solutions for it have yet been proposed. In addition, the main legislative piece approved by Congress in 2017 raises some questions about America’s macoeconomic stability in the medium term: Trump’s tax reform will generate, according to the the Congressional Budget Office, a cumulative deficit of 1.5 trillion dollars, equivalent to almost 8% of GDP, over the next decade. This will aggravate trade deficits, precisely an area where Trump wants improvement. Because if the budget deficit is not reduced with future public spending cuts, there will be a direct increase in demand for imports, in addition to the fact that the need for external financing to cover the budget deficit will push up interest rates and the dollar Forex value, which will in turn aggravate trade imbalances. This increase in the so-called twin deficits would damage both economic growth and employment. In any case, this process will not take place in the very short run, so its effects can be finally avoided with future appropriate spending cuts.

Another reason for 2017’s economic prosperity is that President Trump has not fulfilled his worst protectionist threats. It is true that Trump liquidated the Trans-Pacific free trade agreement, but this happened before it came into force. Neither have high tariffs been imposed on imports from China or Mexico, nor has there been a breakdown of the free trade agreement between the United States and South Korea. The US has not left the North American Free Trade Agreement (NAFTA) either, although negotiations are still going on and the result is still uncertain. All this paralysis may be partly due to the departure of Steve Bannon as Chief Strategist of the White House, at the time author of the first version of the drastic immigration veto. And also due to the hiring of John Kelly as Chief of Staff, replacing the less independent Reince Preibus.

In foreign policy, the Trump presidency has temporarily weakened collaboration at the highest level among Western nations, something unusual since the creation of the international liberal order in 1945; although common work still continues in the rest of the operational levels, and NATO remains intact. It is significant that Trump himself announced that he will finally not travel to London due, according to him, to the relocation of the embassy promoted by Bush and executed by the Obama Administration. A “terrible business” according to Trump, which was designed for diplomatic personnel security reasons. In any case, Trump will avoid the more than probable demonstrations against him there. Because Trump has continued with his nationalist rhetoric in the international arena, making decisions that have provoked the international community’s unanimous rejection. An illustrative example of this was Nicaragua and Syria’s final accesion to the flexible Paris Climate Treaty, leaving the United States as the only nation out of the UN’s 193 member states not to adhere.

Another controversial decision was the announcement of America’s withdrawal from the United Nations’ Organization for Education, Science and Culture, UNESCO, due to an alleged “anti-Israeli bias”. And perhaps also motivated by local political motivations, Trump announced the recognition of Jerusalem as the capital of Israel, and the future transfer of the US embassy from Tel Aviv. Trump argued that it was only a matter of recognizing a fact of life, and that it was also a decision approved by Congress in the 1990s. Certainly it was promoted by Presidential candidate Bob Dole in 1995 but, according to some analysts, Dole did so as a measure of local political strategy. In any case, Trump’s announcement once again provoked an almost unanimous rejection by the international community, because it supported one of the parties in delicate litigation without offering something equivalent to the other party.

The president’s attitude towards the events in Charlottesville was not understood either. After a time of silence and some lukewarm statements, Trump read an unequivocal condemnation of the white supremacist and neo nazi aggressors, but hours later he shocked many again while responding to the press in Trump Tower by assuring there were “very fine people on both sides”.

2018 will be a decisive year for America and the world. The first conclusions of Mueller’s special investigation are expected soon. It is still difficult to know how the process may end, but the guilty plea by former National Security Adviser Michael Flynn for having lied to the FBI, together with the arrest of former campaign manager Paul Manafort, make any outcome feasible.

Amidst an atmosphere of internal division in America, while Trump keeps his rhetoric assault on judges, legislators and the free press, November elections in the House and a third of the Senate will mark the president’s prospects for the rest of his mandate and for 2020’s presidential elections. Meanwhile, and even if Trump resists, the new presidential team and a divided Senate will hopefully guarantee that the United States does not abandon the nuclear agreement with Iran, or that it does not clash with North Korea. And if they also manage to keep at bay the protectionist impulses of the president and his hostility towards the current system of alliances and international institutions, the West will remain safe from the most direct threat registered to date against its liberal and inclusive outlook and global order, founded to maintain peace and expand prosperity among its people.

Manuel López-Linares  is author of Pax Americana. (@mlopezlinares)

SOURCE: Expansión, – print edition – Spain’s leading business newspaper, on January 19, 2018.