Distract, Survive and Plan - How the World is Responding to Trump
Dani Rodrik is disappointed with the way the world is responding to Mr. Trump’s wrecking-ball foreign and economic policy. Professor Rodrik opens with the argument that Trump’s policies are “misguided, erratic, and self-defeating,” lamenting that the rest of the world is only feebly resisting—failing to recognize that “imperialism must always be challenged – not accommodated – and that [this] requires both power and purpose.”
Europe, as usual, is at the forefront of the critique for its decision to acquiesce to Mr. Trump and accept a 15% blanket tariff without retaliating.
“Rarely has the EU’s structural weakness as a confederation of countries without a collective sense of identity been on starker display.”
This is standard comfort food for U.S. policy wonks: seizing the opportunity to highlight Europe’s weakness while subtly implying it is incapable of correcting its position precisely because of that weakness.
China, on the other hand, receives somewhat more praise for its willingness and ability to engage in a game of tariff-chicken with Mr. Trump. Mr. Rodrik concludes more broadly:
“Meanwhile, smaller countries and middle powers have mostly played the quiet game, pursuing independent bargains with Trump and hoping to limit the damage to their own economies.”
Rodrik’s dual argument—that the U.S. is acting out, and that it is the duty of the rest of the world to unite in opposing the belligerent hegemon while building a better, rules-based global system—neatly accommodates the idea that the U.S. is successfully monetizing its hegemony, while leaving open the question of whether the rest of the world is either able or willing to resist.
As interpretations of the current moment go, it isn’t a bad one, but it falls short on one critical dimension. It fails to consider that the world’s response to Trump’s seemingly indiscriminate policy scattergun operates on two levels: tactical and strategic. Applying this distinction helps make sense of the global reaction—at least to some extent.
Tactically, Trump is best treated as a bully whose attention must be diverted. And when he can’t be ignored, the next-best move is to distract him. When Tim Cook hands the President a ‘unique’ piece of glass with a 24-karat gold base in the Oval Office, or when the EU and Japan commit unrealistically large amounts in investment and purchases of U.S. goods, we are witnessing tactical responses to American belligerence. The goal is to appease Trump long enough for him to forget the threats he made in the first place—to arrive at a more benign equilibrium, however temporary. From this perspective, what might initially look like an exercise in groveling becomes a low-cost act of deflection.
Strategically, however, the medium- and long-term consequences of Trump’s economic and foreign policies are profound, if they continue in their current form. Apple and other firms may need to completely rethink supply chains, cost structures, and capital investment plans. At the national level, European countries may face a rupture in the post-WWII global order, in which integration with the U.S.—economically and militarily—has been a foundational pillar.
When U.S. firms shift resources into domestic investment at the expense of foreign ventures, or when Europe increases defense spending and pursues deeper economic integration, those are strategic responses to Trump. These two dimensions intersect—and contradict—each other. They intersect because it’s entirely reasonable to pursue both simultaneously: tactical moves to deflect Trump in the short term, and strategic preparations for a shifting global order in the long term. They’re also in contradiction with each other, meanwhile, because there is a trade-off between them.
A series of tactical responses implies a belief that Trump’s disruptions will not fundamentally reshape global economic and political structures. This view has become more appealing in light of the President’s persistent and increasingly embarrassing flip-flopping on tariffs, often in response to market reactions. But this might also miss the forest for the trees. The EU’s decision to keep its sword sheathed in the trade war may not be unwise in terms of short-term outcomes and the actual details of the trade deal itself. But it could represent a missed opportunity for Europe to assert itself in an increasingly anarchic world.
I suspect that firms and countries will continue to straddle the tactical–strategic spectrum, and that the most accurate understanding of their stance requires considering both dimensions—separately and in tandem.