Trump has smashed the old world order. It won’t be missed
Telegraph, Sherelle Jacobs, 4/11/25
Donald Trump has just upended the global order. It is impossible to know with any certainty what lies ahead. But there is one thing of which we can be sure: this is a paradigm shift, not a populist flash in the pan.
The US president might be a geopolitical vandal, but it is vandalism with purpose. Globalisation is no longer working and, out of a mixture of frustration and necessity, America is remaking it. Though the means are reckless, the ends are rational, perhaps even inevitable. We should embrace rather than fear them.
A consensus is forming that Trump’s plan to disrupt the world order has already unravelled; that the markets have triumphed over populism, with bond turbulence forcing the president to row back from a trade war waged on multiple fronts.
The consensus is wrong. Trump may have “blinked first”, but he cannot abandon his trade war. To do so would spell disaster for the Republicans in the mid-terms. His plans to cut income tax also hinge on tariff revenues; if he U-turns now then his entire agenda risks crumbling.
Trade experts reckon that Trump will radically recalibrate rather than completely capitulate, and go hard against China while leveraging tariffs against other countries in a more selective manner. The hope is that the “herd will move” in his direction once the first trade deals trickle in.
There must be some recognition of the fact that there is an intellectual internal logic to Trump’s strategy even if it has proved problematic on several levels. His team believe that in order to compete with China, America must transition to an import-industrialisation model; the idea is that imposing tariffs on imported goods can generate revenue that can not only fund tax cuts but also be used to invest in new and innovative fields, for example in defence and AI. While this approach did not work very well for a number of developing countries that experimented with it up until the 1970s, Trumpist economists believe that this is due to the extraordinary circumstances of the oil and debt crisis in that decade, and it can be tried again. The Trump team also assumed that dollar supremacy – and the status of Treasury bonds as a safe haven even during chaotic times – could shield them as they revolted against the status quo. Perhaps this wasn’t a completely mindless gamble, even if it has blown up in their face, given that there remains no serious rival to the dollar as the world’s reserve currency.
As the financial expert Professor Photis Lysandrou told me: “For the dollar dominance to be truly undermined, there needs to a foreign withdrawal from US treasuries on a sufficiently large scale (in the region of $5-8 trillion), and this will only happen if there is an alternative supply of sovereign bonds that can accommodate these vast fund volumes.”
Of course the White House has learned the hard way that even if dollar supremacy is ultimately unthreatened, even tiny, unexpected convulsions in the bond market can spark panic and scupper the best laid political plans.
Even if Trump’s plan is proving reckless and flawed, he is correct to challenge the status quo. The fact remains that globalisation is failing, and has backfired on the world hegemon. America erected the current world trade regime thirty years ago, when its businesses were eager to constrain Japan through a multilateral regulated system and Washington was relaxed about shifting manufacturing jobs abroad. This system can no longer hold. Wage stagnation and the hollowing out of former industrial cities has plunged the country into crisis. Nor does the current trading system serve the interests of US corporations in the way that it used to. With China on the rise, the WTO is simply not equipped to make a non-market economy of its size play by the rules. American entrepreneurs have also run out of patience with mercantilist enclaves around the world — not least the EU — that refuse to roll back regulatory barriers to trade.
And for all the talk of populism being scuppered by Wall Street, we should not overlook the fact that influential business groups ultimately do want a systems change. Blue collar workers and crypto billionaires both stand to gain from the dollar devaluation against rival currencies that Trump seeks to negotiate through tariffs. This will not only make American exports more competitive but spell boom-time for Bitcoin. And while tariffs are a disaster for Big Tech supply chains, Silicon Valley has been undergoing a major “defence turn” since about 2020, amid the growing China threat and Ukraine war. An influential faction now favours industrial protectionism, on-shoring and a more aggressive stance on China.
The bottom line is that what is unfolding has deep underlying causes and is bigger than one man. There is also no going back. Even if the American Right wanted to bring a halt to all this now, Beijing’s reaction makes this impossible. As leading China expert Alice Han told me: “In abandoning universal global tariffs, Trump has signalled in no uncertain terms to China that it is being singled out. Unwittingly, he has created an escalatory dynamic that is going to be very hard to reverse.”
In any case, perhaps we should not grieve the demise of the old order. The bid to construct a borderless world has been good for consumers and bankers. But it has been catastrophic for ordinary workers, social cohesion, national security and the integrity of the nation state. It has left Western countries dangerously reliant on mass immigration, and saddled with debt.
The UK Government needs to prepare for the new era. This much has been clear ever since Andrew Bailey said, last November, that we needed to “rebuild” relations with the EU, in the same week that Trump advisers were cautioning against closer ties. For all Starmer’s talk that the “world is changing”, his policies remain remarkably constant. If the patient is dying, Labour are administering two Paracetamol and sending him on his way.
Deregulation could offer better medicine at very low cost. We need to stop fantasising about our role as a bridge between the EU and US, and accept our diminishing influence on the world stage.
Instead, we need to properly implement Brexit. We need self-reliance. If Starmer is as shrewd as his supporters claim, he will seize this chance to pull off a similar feat to Taiwan’s in the 1960s. He could ensure Britain’s place in global tech supply chains, whether that means chip design or components for drones.
Free from EU regulatory meddling, UK startups, not least in defence, could reach commanding heights. But this will only happen if we can crack the formula for helping them to scale up before they are snapped up by foreign competitors. It would be better for Labour to focus ruthlessly on this conundrum than chuck endless money at British Steel.
The world is profoundly changing. Britain must profoundly change too. Given the miserable state of the country, that may not be such a bad thing.