The Economist: "Donald Trump will upend 80 years of American foreign policy"

DONALD TRUMP’S critics have often accused him of buffoonery and isolationism.  Yet even before taking office on January 20th he has shown how much those words fall short of what his second term is likely to bring.  As the inauguration approaches, he has helped secure a ceasefire and hostage deal in Gaza.  Busting taboos, he has bid for control over Greenland, with its minerals and strategic position in the Arctic.  Mr Trump’s second term will not only be more disruptive than his first; it will also supplant a vision of foreign policy that has dominated America since the second world war. 

For decades American leaders have argued that their power comes with the responsibility to be the indispensable defender of a world made more stable and benign by democracy, settled borders and universal values.  Mr Trump will ditch the values and focus on amassing and exploiting power.  His approach will be tested and defined in three conflicts: the Middle East, Ukraine and America’s cold war with China.  Each shows how Mr Trump is impelled to break with recent decades: in his unorthodox methods, his accumulation and opportunistic use of influence, and his belief that power alone creates peace.

~ "Donald Trump will upend 80 years of American foreign policy: A superpower’s approach to the world is about to be turned on its head," The Economist, January 18, 2025

The Economist: "America’s bullied allies need to toughen up"

For decades America has stood by its friends and deterred its enemies.  That steadfastness is being thrown upside down, as Donald Trump strong-arms allies and seeks deals with adversaries.  After freezing all aid to Ukraine on March 3rd, his administration restored it when Ukraine agreed in principle to a 30-day truce.  It is unclear how hard the White House will press Vladimir Putin to accept this.  On the same day, Mr Trump briefly slammed even more tariffs on Canada.  Its new prime minister, Mark Carney, warned that a predatory America wants “our water, our land, our country.”  And don’t forget Asia.  The president has just raised doubts about the value to America of the US-Japan defence treaty, which Eisenhower signed in 1960.  Around the world, allies fear that America First means they come second, third or even last. 

Mr Trump and his supporters believe his frenetic actions enhance American power, breaking deadlocks and shaking up deadbeat or parasitic allies.  The proposed ceasefire in Ukraine is evidence that he can change countries’ behaviour.  But at what cost?  His trade war is panicking financial markets.  The 40-odd countries that have put their security in America’s hands since 1945 are suffering a crisis of confidence.  They dread Team Trump’s inconsistency and short-termism: a ceasefire in Gaza that is rather like the Ukrainian one may soon collapse.  At home, Mr Trump faces checks and balances.  Abroad, much less so.  Allies are asking whether they are certain that Mr Trump or a President J.D. Vance would fight alongside them if the worst happens.  Unfortunately, the answer is: not certain enough. 

~ "America’s bullied allies need to toughen up: To avoid being crushed, they need a better plan than flattery and concessions," The Economist, March 15, 2025

The Economist on the Trump vision: "an ideology from the railroad era mixed with the ambition to plant the flag on Mars"

Historians talk about the long 19th century ending in 1914.  Precisely when the 20th century ended is, in this sense, debatable.  But it is over.  Mr Trump is still constrained by some of America’s oldest institutions, including federalism and the courts.  But he has thrown off many of the recent ones.  The governance reforms after Watergate no longer apply.  The consensus that America should be a benign superpower, born out of the ashes after 1945, has gone, too.  And Mr Trump wants more: to see America unleashed, freed from norms, from political correctness, from the bureaucracy and, in some cases, even from the law.  What’s left is something old and new, an ideology from the railroad era mixed with the ambition to plant the flag on Mars. 

Out of the 19th century comes the idea that the frontier should always be expanding, including by seizing other countries’ territory.  “We’re taking it back,” Mr Trump growled of the Panama Canal, in his inaugural speech.  America must be “a growing nation”, he added, one that “increases our wealth, expands our territory.”  Although this might reflect a passing enthusiasm, presidents have not talked like that for a century.  The only one of his predecessors Mr Trump spent any time on in the speech was that “great president” William McKinley, whose term began in 1897.  Mr Trump is not a reader of presidential biographies.  He is not about to make bimetallism the issue of the day (though both he and the first lady do now have their own competing currencies).  But it was a revealing choice.

McKinley was an imperialist, who added Hawaii, Guam, the Philippines and Puerto Rico to American territory.  McKinley also loved tariffs, at least at first.  Before he was president, he pressed Congress to pass a bill to raise them to 50%, a level exceeding even Mr Trump’s (admittedly hazy) plans.  He was also backed by the commercial titans of the time: J.P. Morgan and John D. Rockefeller both donated about $8m in today’s money to his campaign. 

The new “golden age” Mr Trump envisions thus resembles the Gilded Age, at least superficially. Mr Trump wants to be as unencumbered by 20th-century norms as McKinley was.  But the 21st-century presidency is much more powerful.  Project 1897 is combined with Project 2025. 

McKinley governed when the federal government had 150,000 employees, many fewer than the new Department of Government Efficiency could ever dream of.  By contrast Mr Trump’s executive branch directly employs 4.3m people, including 1.3m men and women in uniform.  The president has at his disposal the mightiest military force ever assembled.  As a share of GDP, the federal government spends nine times more than it did in the 1890s.  In order to fight two world wars and end racial segregation in the 20th century, the executive branch accumulated more and more power.  Writing about this in the 1970s, Arthur Schlesinger described this presidency as “imperial.”  It was meant as a slur: the modern America didn’t do empire.  Yet now it has an imperial president who spies enemies to conquer not only abroad, but at home, too. 

~ "America has an imperial presidency: And in Donald Trump, an imperialist president for the first time in over a century," The Economist, January 23, 2025

The Economist on Trump's reciprocal tariffs

What happens when you ditch the principles that underpinned global trade for three-quarters of a century?  Donald Trump hopes to find out.  He wants to levy “reciprocal” tariffs, which match the duties American exports face abroad, plus charges to offset any policy he deems unfair.  A stable multilateral trade system which has, for all its flaws, fostered miraculous rises in global prosperity would give way to arbitrary judgments made in the Oval Office.

~ "Reciprocal tariffs really mean chaos for global trade," The Economist, February 19, 2025

The Economist on the decline of active investing

The clearest casualty of passive funds has been active managers...  During the past decade the number of active funds has declined by 40%.  According to Bank of America, since 1990 the average number of analysts covering firms in the S&P 500 index has dropped by 15%.  Their decline means fewer value-focused soldiers guarding market fundamentals.

[...]

For the time being, at least, passive investors have the upper hand.  And unless the concentration of America's stockmarket decreases, it seems unlikely that the fortunes of active managers will truly reverse.

~ "Too efficient: Having killed off stockpickers, are passive funds behind market mania?," The Economist, March 2, 2024

The Economist: "the supposed decoupling between America and China is in fact illusory"

Last year The Economist argued that lots of the supposed decoupling between America and China is in fact illusory.  Look closer, we wrote, and the two countries' economic relationship is holding strong, even if this fact is masked by tricks on both sides.  Since then a growing body of evidence confirms, and strengthens, our original findings.  The economics of America and China are not coming apart.  Indeed, some changes to supply chains may be binding the two countries even closer together.

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A complete picture of Chinese-American trade would cover trade in services, including America's use of Chinese apps and China's love of American films.  But these are difficult to track, meaning that economists have focused their attention on trade of goods, which customs officials measure reasonably accurately.

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The headline [trade] figures do not tell the whole story, however.  To understand why, start with Mr Trump's tariffs, which Mr Biden has largely kept in place.  Before their introduction in 2018, American statistics suggested that America received many more imports from China than did Chinese statistics.  Now the opposite is true.  China reports that its exports to America rose by $30 bn between 2020 and 2023 whereas America says its Chinese imports fell by $100 bn.  If China's data are correct, the country's share of American imports still declined, but by much less.

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Other data provide additional reason for skepticism about decoupling.  "Input-output" tables, as published by the Asian Development Bank, show the share of a country's economic activity that can be traced back to others.  Examining 35 industries, we calculate that in 2017 the Chinese private sector contributed on average 0.41% of American firms' inputs.  That may not sound like much, but it beat the 0.38% that came from Germany and the 0.24% from Japan.  By 2022 China's share had more than doubled to 1.06%, a larger proportional increase than for either Germany or Japan.

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We estimate that since 2019 China's global exports of intermediate goods have risen by 32%, compared with a rise in other sorts of exports, such as finished goods, of only 2%.  The surge is driven by exports to countries such as India and Vietnam, which are two of the American government's preferred trading partners.  American trade with these countries is, in turn, increasing - from 4.1% of its goods imports in 2017 to 6.4% today.  In combination, these trends imply that the two countries often act as something akin to packaging hubs for goods made with Chinese inputs that are destined for America's shores...  Vietnam's trade with America is booming...  [T]he South-East Asia manufacturing high-flyer increasingly plays a role as a conduit, matching Chinese production to American demand.

~ "Still coupled: Why both Donald Trump and Joe Biden have failed to cut ties with China," The Economist, March 2, 2024

The Economist on Xi Jinping's "grip" on the economy

[The value of China's and Hong Kong's equities are down nearly $7 trillion since their peak in 2021, a fall of about 35%.  Since that time, the U.S. and India are up 14% and 60% respectively.]

On January 22 India briefly overtook [Hong Kong] to become the world's fourth-biggest stockmarket...  Most worrying of all is that investors on the mainland are losing confidence...  Investors trapped in the mainland may have little choice but to put some of their hard-earned cash into stocks.  Foreigners, by contrast, may be harder to tempt back.

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The implicit understanding was that, whatever China's politics, its officials could be trusted to steer the economy towards prosperity...  Mr Xi seems to know that something is going wrong.  In addition to sacking [top securities regulator] Mr Yi, the government has curbed short-selling, and state-owned asset managers have been ordered to buy stocks.  This may prop up stock prices for a time.  But such meddling only [belies] China's mistrust of markets, underlining why investors left.

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In January the central bank declined to cut interest rates, despite continued deflation, catching out markets.  All of this serves only to frighten investors...  The real obstacle to change is Mr Xi's firm belief that he and the Communist Party must be in total control.  Regaining investors' trust requires a rethink of the state's role in the economy.  But Mr Xi is unlikely to soften his grip.

~ "Who's in control? Why investors are losing faith in Xi Jinping," The Economist, February 10, 2024

The Economist conducts a 3-hour interview of Javier Milei

Mr Milei talks a good game.  He is steeped in neoliberal economics, as he displays in a three-hour interview with The Economist.  He wants to privatise all the sclerotic state companies, dollarise the economy and reduce the country’s deficit to zero in his first year.  His political and economic models, he says, are Australia, Israel, Ireland and New Zealand.  For years talk of free-market capitalism has been a guaranteed vote-loser in bloated, statist Argentina.  Past attempts to liberalise have all faltered.  Yet if Mr Milei wins the election next month the country could, in theory, become again a laboratory for exciting, dynamism-promoting ideas.

~ "Can Javier Milei’s radical libertarianism save Argentina? Our interview explores his wild economic ideas—and his authoritarian streak," The Economist, September 7, 2023

The Economist on the October 7 Hamas attack on Israel

In a static decades-long conflict that has rotted for the past 20 years, it can be hard to believe that real change is possible.  Be in no doubt, however, that Hamas’s murderous assault has blown up the status quo between Israel and the Palestinians.  The coming weeks will determine whether war in Gaza sinks the Middle East deeper into chaos or whether, despite Hamas’s atrocities, Israel can begin to create the foundations for regional stability—and, one day, peace. 

Change is inevitable because of the gravity of Hamas’s crimes.  More than 1,200 Israelis, most of them civilians, many of those women and children, were murdered in their homes, on the street, in kibbutzim, at a music festival. Perhaps 150 more have been dragged to Gaza and shut in makeshift dungeons.  Israel’s belief that it could indefinitely manage Palestinian hostility with money and air strikes crumpled early on October 7th, as the first Hamas bulldozer breached the security fence.  Hamas has chosen mass murder and there is no going back.

~ "Will Israel's agony end in chaos or stability?," The Economist, October 14, 2023

The Economist: "How Joe Biden manages the war between Israel and Hamas will define America's global role"

As massed israeli troops await the command to invade Gaza, two hulking us Navy aircraft-carriers have been sent to support Israel.  Their task is to deter Hizbullah and its sponsor Iran from opening a second front across the Lebanese border.  No other country could do this.  The carriers are a 200,000-tonne declaration of American power at a time when much of the world believes that American power is in decline. 

The coming months will test that view.  It is hard to exaggerate the stakes.  On October 20th President Joe Biden called this “an inflection point.”  He warned of the need to repulse Hamas’s terror as well as Russia’s aggression against Ukraine.  China’s threat to invade Taiwan lurked unspoken in the background.

~ "American power: indispensable or ineffective? How Joe Biden manages the war between Israel and Hamas will define America's global role," The Economist, October 28, 2023

The Economist: "Only America can save Israel and Gaza from greater catastrophe"

How rapidly things fall apart.  The deadly blast in Gaza at Ahli Arab hospital on the evening of October 17th killed many Palestinians who were taking shelter.  Despite strong evidence that their deaths were caused by the failure of a Palestinian rocket laden with fuel, Arab countries rushed to condemn Israel.  Hizbullah, a heavily armed Lebanese militia, is lurching closer to outright war with Israel.  Bridges built painstakingly between Israel and its Arab neighbours lie in ruins. 

How fragile are the forces trying to hold things together.  Fifteen hours after the blast, President Joe Biden landed in Israel, an old man with the weight of the world on his shoulders.  Mr Biden’s diplomacy is a geopolitical moment.  As well as signalling grief and support for Israel, it brings into focus how much this crisis matters to the Middle East and to America.

~ "Only America can save Israel and Gaza from greater catastrophe; Iran, Russia and China are profiting from the mayhem," The Economist, October 21, 2023

The Economist: "Ukraine faces a long war"

The war in Ukraine has repeatedly confounded expectations.  It is now doing so again.  The counter-offensive that began in June was based on the hope that Ukrainian soldiers, equipped with modern Western weapons and after training in Germany, would recapture enough territory to put their leaders in a strong position at any subsequent negotiations. 

This plan is not working.  Despite heroic efforts and breaches of Russian defences near Robotyne, Ukraine has liberated less than 0.25% of the territory that Russia occupied in June.  The 1,000km front line has barely shifted.  Ukraine’s army could still make a breakthrough in the coming weeks, triggering the collapse of brittle Russian forces.  But on the evidence of the past three months, it would be a mistake to bank on that. 

~ "Ukraine faces a long war. A change of course is needed; Its backers should pray for a speedy victory—but plan for a long struggle," The Economist, September 21, 2023

The Economist on booming Middle East economies and the prospect for peace

If you thought the Middle East was stagnant, think again.  The Gulf economies are among the richest and most vibrant on the planet, helped by a Brent crude oil price that rose back to over $90 per barrel this week.  A $3.5trn fossil-fuel bonanza is being spent on everything from home-grown artificial intelligence models and shiny new cities in the desert, to filling the coffers of giant sovereign-wealth funds that roam the world’s capital markets looking for deals. 

As the cash flows in, the chaos shows signs of receding, thanks to the biggest burst of diplomacy for decades.  Saudi Arabia and Iran have negotiated detente in a rivalry that has lasted since the Iranian revolution in 1979.  Civil wars in Syria and Yemen are killing fewer people, as their sponsors seek de-escalation.  Following the Abraham accords between Israel and some Arab governments, Saudi Arabia is considering recognising the Jewish state, 75 years after its creation.  The region’s global clout is rising—four countries are about to join the brics club of non-aligned powers that want a less Western-dominated world. 

~ "The Gulf’s boundless ambition to change the world: Now it wants to export its model. But the region faces grave dangers," The Economist, September 7, 2023

The Economist on the Israeli-Palestinian peace process

Have more time and effort ever been devoted to peace to so little effect?  America began overseeing talks between the Israelis and Palestinians three decades ago.  But the Holy Land remains contested by two peoples who cannot bring themselves to live together.  The fighting in May that left 242 Palestinians and ten Israelis dead accomplished nothing except to clear the field for the next round of fighting. 

The peace process set up in the Oslo accords in 1993 aims to create two states that agree to disagree—using land swaps, security guarantees, a deal to share Jerusalem and a limited “right of return” for Palestinians.  Israel’s prize was to be a thriving democracy and a sanctuary for Jews; for Palestinians it was the promise of self-rule.  At times, peace has been tantalisingly close, only to recede again amid mutual recrimination.

~ "Two states or one? The peace process has been an obstacle to progress," The Economist, May 27, 2021

The Economist: "Brazil takes off"

China may be leading the world economy out of recession but Brazil is also on a roll.  It did not avoid the downturn, but was among the last in and the first out.  Its economy is growing again at an annualised rate of 5%.  It should pick up more speed over the next few years as big new deep-sea oilfields come on stream, and as Asian countries still hunger for food and minerals from Brazil's vast and bountiful land.  Forecasts vary, but sometime in the decade after 2014—rather sooner than Goldman Sachs envisaged— Brazil is likely to become the world's fifth-largest economy, overtaking Britain and France.  By 2025 São Paulo will be its fifth-wealthiest city, according to PwC, a consultancy.

~ "Brazil takes off: Now the risk for Latin America’s big success story is hubris," The Economist, November 12, 2009

The Economist on the 2020-21 government borrowing binge

In recent years government debt appeared to matter less and less even as countries borrowed more and more.  Falling interest rates made debts cheap to service, even as they grew to levels that would have seemed dangerous a generation before.  The pandemic put both trends into overdrive: the rich world borrowed 10.5% of its gdp in 2020 and another 7.3% in 2021, even as long-term bond yields plunged.  Now central banks are raising interest rates to fight inflation and public debt is becoming more burdensome.  Our calculations show that government budgets will feel a squeeze far more quickly than is commonly understood.

~ The Economist, "How higher interest rates will squeeze government budgetsRising borrowing costs will hit taxpayers sooner than you think," July 12, 2022

The Economist on the COP26 meeting on climate

As diplomats, scientists, lobbyists, activists, artists, the media, politicians and businesspeople gather in Glasgow for COP26, which begins on October 31st, it is therefore easy to dismiss the entire affair.  That would be a mistake.  The UNFCCC and its COPs, for all their flaws, play a crucial part in a process that is historic and vital: the removal of the fundamental limit on human flourishing imposed by dependence on fossil fuels.

~ The Economist, "Why the COP26 climate summit will be both crucial and disappointing," October 31, 2021

(COP stands for Conference of the Parties.  The 2021 Glasgow meeting will be the 26th meeting, which is why it's called COP26.  It will be attended by countries that signed the United Nations Framework Convention on Climate Change (UNFCCC) - a treaty agreed in 1994.)

The Economist on China's tech giants and the government crackdown

Of all china’s achievements in the past two decades, one of the most impressive is the rise of its technology industry.  Alibaba hosts twice as much e-commerce activity as Amazon does.  Tencent runs the world’s most popular super-app, with 1.2bn users.  China’s tech revolution has also helped transform its long-run economic prospects at home, by allowing it to leap beyond manufacturing into new fields such as digital health care and artificial intelligence (ai).  As well as propelling China’s prosperity, a dazzling tech industry could also be the foundation for a challenge to American supremacy. 

That is why President Xi Jinping’s assault on his country’s $4trn tech industry is so startling.  There have been over 50 regulatory actions against scores of firms for a dizzying array of alleged offences, from antitrust abuses to data violations.  The threat of government bans and fines has weighed on share prices, costing investors around $1trn.

~ The Economist, "Xi Jinping’s assault on tech will change China’s trajectory," August 14, 2021

The Economist on Reddit traders and GameStop frenzy

Events on Wall Street have become so strange that Netflix is said to be planning a show to immortalise them. But what should be the plot?  One story is of an anti-establishment movement causing chaos in high finance, just as it has in politics.  Another is how volatile shares, strutting online traders and cash-crunches at brokerage firms signal that a toppy market is poised to crash.  Both gloss over what is really going on. Information technology is being used to make trading free, shift information flows and catalyse new business models, transforming how markets work.  And, despite the clamour of recent weeks, this promises to bring big long-term benefits.

~ The Economist, "The real revolution on Wall Street," February 6, 2021

The Economist on Big Tech censorship

The first reaction of many people was one of relief.  On January 6th, with 14 days remaining of his term, the social-media president was suspended from Twitter after years of pumping abuse, lies and nonsense into the public sphere.  Soon after, many of his cronies and supporters were shut down online by Silicon Valley, too.  The end of their cacophony was blissful.  But the peace belies a limiting of free speech that is chilling for America—and all democracies.

~ The Economist, "Big tech and censorship," The Economist, January 16, 2021