Latest news with #PaxAmericana
Straits Times
2 days ago
- Business
- Straits Times
Is the US' economic exceptionalism truly over?
With rising government debt, growing political risks and a shifting geoeconomic order, investors are asking: is it time to 'Sell America'? PHOTO: REUTERS SINGAPORE – Historians have described the era since the end of World War II as Pax Americana – a period defined by US dominance in geopolitics, innovation and finance. For investors, this translated into fertile ground for wealth accumulation on an unprecedented scale, underwritten by the US' economic primacy, technological leadership, and respect for the rule of law. Join ST's Telegram channel and get the latest breaking news delivered to you.
Mint
5 days ago
- Business
- Mint
Europe cannot fathom what Trumpian America wants from it
Carl von Clausewitz, a 19th-century Prussian general, described warfare as 'the realm of uncertainty'. The fellow never had to deal with an American administration run by Donald Trump. Forget the fog of war Clausewitz posited; Europe is discovering the perils of wading through the haze of Pax Americana, MAGA edition. Wish it luck. Being the biggest trading partner of a country that seeks 'liberation' through tariffs, or a decades-long military ally of a superpower now parroting Kremlin talking points, is akin to inching through a geopolitical pea-souper. Europe is hardly alone in being flummoxed by Mr Trump (many Americans are, too). But it faces a unique problem: Europe cannot fathom what it should do to fix its already broken relationship with the new administration. Even if Europeans wanted to help their historical partner—a big 'if' these days—disagreements abound as to what that partner wants. The alliance with America has never been entirely straightforward. Yankee gripes about anaemic European military spending go back decades. A continent striving for ever-closer union was occasionally splintered into factions for American convenience, as when George W. Bush's lot tried to pit 'old Europe' against 'new Europe' during the Gulf war. American regulators clobbered French and German firms with billion-dollar fines while decrying any constraints on their own tech giants doing business in the European Union. Even pro-European administrations wound up blindsiding the continent's policymakers. In 2022 Joe Biden announced generous green-industry subsidies (Bravo!) which turned out to be closed to market-leading firms in Europe (Zut alors!). But this time is different. The Trumpian top brass making decisions of great import to Europe—not least over the fate of Ukraine—hold America's historical allies in startling contempt. In a recent leak from a not-so-secret Signal group of top officials, Europe was decried as 'PATHETIC' by Pete Hegseth, the defence secretary. J.D. Vance was just as critical, though this was predictable after the vice-president had blasted Europeans at a conference in Munich in February. Mr Trump had himself set the tone, imagining that the EU had been set up with the sole intent to 'screw' America. On April 2nd he whacked European imports with a tariff rate of 20%. Ursula von der Leyen, president of the European Commission, said she felt 'let down by our oldest ally'. Speaking to diplomats in Brussels and beyond, Charlemagne has heard three theories to explain MAGA hatred of Europe. Understanding which is correct matters, because each comes with its own set of remedies to assuage the Euro-bashers. The first possibility is that Mr Trump simply shares his predecessors' desire that Europeans bear the burden for their own defence, and feels unconstrained by diplomatic niceties in making the case. Barack Obama warned over a decade ago that America would 'pivot to Asia' (ie, away from Europe and the Middle East) to address a Chinese threat that has since grown more acute. That did little to motivate Europe into spending more. By contrast, Trumpian goading—insulting as it might seem—has been effective at getting allies to step up. If scrimping on defence is indeed what troubles America, the solution is on its way: Europe will promise to spend much more on defence at a NATO summit in June. The second theory of MAGA Euro-hostility is more worrying. According to this school, the invective directed at Europe is about more than freeloading on defence. After all, America's Asian allies also underspend on their armed forces but are facing no such abuse. Rather, Europe is being punished for its crime of lèse-Amérique. By banging on about global norms, Europeans are an irritant to might-makes-right Trumpians. How dare the EU regulate Big Tech? How dare Denmark think Greenland would not be better off in American hands? Europe's role should be to play second fiddle, or, better yet, pipe down. On this reading, to be a better ally, Europe would have to bend the knee, for example by helping constrain China at Washington's behest. This may be humiliating, if not downright unrealistic in the case of ceding Greenland, which is not Denmark's to give away. But seasoned EU diplomats think it may provide the basis for a fraught but workable relationship. Yet some European officials perceive a third kind of MAGA animosity, one they are powerless to do anything about. For this contempt is aimed at a continent that exists only in the imagination of Fox News presenters (as Mr Hegseth once was). Europhobes of this type see it as a flailing continent on the economic skids, one bent on demographic suicide, where the only people who enjoy free speech are Muslim extremists imposing sharia on a woke populace. For them, Europe is a cautionary tale: what America might degenerate into without Mr Trump's 'help'. This fantastical vision offers Europe no way to indulge America, short of handing over power to the likes of Alternative for Germany, a Nazi-adjacent party bafflingly admired by Mr Vance. To be fair to the MAGA Euro-bashers, their spite towards Europe is reciprocated—as any leak of European leaders' candid Signal chats about Mr Trump and his team would probably attest. Without any certainty as to why they are loathed in Washington, Europeans are falling back on their old diplomatic instincts: keep engaging and don't despair. Sometimes it works. On March 29th Alexander Stubb, Finland's president, spent hours playing golf with Mr Trump at Mar-a-Lago. Soon after, Mr Trump declared himself 'pissed off' with Russia's Vladimir Putin for failing to agree to a ceasefire in Ukraine—a useful win for Europe. Many hope America might still give concrete support to a Europe-led 'reassurance force' in Ukraine. Occasionally, the two old allies still manage to find one another, through the bitter mist. Subscribers to The Economist can sign up to our Opinion newsletter, which brings together the best of our leaders, columns, guest essays and reader correspondence.
Japan Times
03-06-2025
- Business
- Japan Times
The problem with Asia's ‘sell America' moment
It's been a tough few months for believers in the currency market version of Pax Americana. Dollar critics confidently proclaim that its reign is over. In Asia, this is a "sell America' moment. Any sane investor is scouring the planet for an alternative — one that offers all the advantages of the incumbent but none of the downside. Europeans also want in, extolling the virtues of the euro. Good luck with that. One of my reservations about this bearishness isn't that the upheavals induced by U.S. President Donald Trump — tariffs, an assault on the rule of law — don't warrant a weaker dollar. They do, especially given the greenback's resilience the past few years. Rallies in the yen, the Taiwan dollar, South Korean won and Thai baht look justified from this perspective. Even the Malaysian ringgit, the subject of jarring capital controls imposed by Kuala Lumpur in the 1990s, is having a good run. The challenge to the prevailing narrative is the confidence with which it's prosecuted. Given the plethora of references to Richard Nixon's FX policy, it's worth remembering what was on his mind. Though his team reckoned that the shock of abandoning the Gold Standard would induce a devaluation of the dollar, which they didn't mind, they couldn't be sure. The U.S. dollar did have a rough few years, but easily retained its place at the pinnacle of the financial system. Present times call for some nuance, which was provided at a conference in Singapore late last month. Trump had few fans at the Asian Monetary Policy Forum. The city state, which accumulated great wealth as barriers to trade, capital and talent were rolled back, rightly frets about the long-term impact of tariffs. But the gathering also skipped apocalyptic pronouncements. The dollar and Treasury securities are still safe assets with few — or any — rivals. They have, though, become less safe. We are witnessing a "step down in the centrality of the dollar,' Adam Posen, president of the Peterson Institute for International Economics, told the audience. "This isn't yes or no.' There is one reserve currency; the issue is the weight that should be accorded to the greenback. Among the questions that hung over the forum was whether the euro is ready to seize the moment. After all, it trades freely. The euro zone is a large market. If Germany can follow through on pledges to dramatically rev up spending, the region's capital markets can become deeper. And the European Central Bank's autonomy is enshrined in a treaty. The single currency has fared well under Trump, gaining around 8% this year. Does that make it ready to replace the greenback? ECB chief Christine Lagarde made her pitch in a Berlin speech recently. The changes create an opening for the euro, an opportunity for the continent to control its destiny. She was prudent enough to emphasize this privilege had to be earned. Lagarde said that the U.S. is prone to bouts of unilateralism that call into question its role as the issuer of the leading reserve currency. And yet the dollar remained unrivaled, she said, because there wasn't anything ready to take its place, save perhaps gold. True enough, but the reaction to the 1971 bombshell at the time wasn't exactly measured. Press commentary concluded it as the demise of dollar primacy. An excellent book on Nixon's deliberations by Jeffrey E. Garten includes some reactions: German media spoke of the greenback's "collapse,' while the Sunday Times of London referred to "the formal dethronement of the Almighty Dollar.' Proclamations that things are now different need to account not just for what happened during past currency agonies, but how they looked at the time. Asia gets attention because the greenback has been particularly strong in the region. Countries have benefited from having hard and soft pegs over years. The shortcomings of such arrangements became apparent during the Asian financial crisis. Currencies now fluctuate far more freely. But interventions do occur when swings become worrisome and its values versus the dollar that authorities look at most. Southeast Asian leaders recently called out Trump's tariff plans as causing uncertainties in commerce with their region's largest export customer. There's also little harm in their call for an "urgency of diversifying trade beyond traditional markets.' Whether these alternatives offer the scale equivalent to America remains to be seen. Shifting currency reserves en masse is a riskier proposition. And to what? China doesn't seem ready to step up, and itself distrusts markets. The yuan is less constrained than it was before 2005, when Beijing moved away from a fixed rate versus the dollar, but the People's Bank of China is frequently nudging it around and providing daily guidance. The dollar has taken some hits and that is fine. In trying to find a way to pithily nail the current period, a little less doom-saying would be constructive. When Nixon's Treasury secretary, John Connally, briefed reporters the evening of Nixon's speech, he referred to a little-known official by the name of Paul Volcker, who was to leave shortly on a trip to world capitals. The same man was later lionized for slaying inflation and entrenching the Federal Reserve as a huge asset for America — and the world. Until another authority has the scope to throw its balance sheet around the global economy in times of difficulty, it's imprudent to shout too confidently that the time of reckoning has arrived. Daniel Moss is a Bloomberg Opinion columnist covering Asian economies.
Bloomberg
29-05-2025
- Business
- Bloomberg
The Problem With Asia's ‘Sell America' Moment
It's been a tough few months for believers in the currency market version of Pax Americana. Dollar critics confidently proclaim that its reign is over. In Asia, this is a ' sell America ' moment. Any sane investor is scouring the planet for an alternative — one that offers all the advantages of the incumbent but none of the downside. Europeans also want in, extolling the virtues of the euro. Good luck with that. One of my reservations about this bearishness isn't that the upheavals induced by President Donald Trump — tariffs, an assault on the rule of law — don't warrant a weaker dollar. They do, especially given the greenback's resilience the past few years. Rallies in the yen, the Taiwan dollar, South Korean won and Thai baht look justified from this perspective. Even the Malaysian ringgit, the subject of jarring capital controls imposed by Kuala Lumpur in the 1990s, is having a good run.
New European
27-05-2025
- Politics
- New European
Welcome to the New Europe
It is an odd reflection that the respective presidents of Russia and the US should be the founding fathers, albeit inadvertently, of the new European coalition that is arising before our eyes. But it is so. To Vladimir and Donald, a child: a new Europe, to be named formally in due course. Both parents doing well (or think that they are, at least). Baby getting stronger by the day. As Vladimir Putin and Donald Trump have taken a wrecking ball to the postwar world order, democratic nations on this side of the Atlantic have been forced to rejuvenate their alliance, embrace fresh ambitions and work at pace to build a strategic bloc that can truly hold its own. Success is very far from certain; the task is dauntingly complex. But the price of failure would be colossal. What we now call the European Union was created by the signing of the Treaty of Rome on March 25, 1957. Twelve years after the end of the war, its formation reflected the powerful, cross-border impulse to make economic cooperation the engine of reconstruction and a guarantor of peace. The new Europe is no less the product of upheaval and a shared sense of necessity. On February 24, 2022, Putin's invasion of Ukraine dashed the dream that land war in Europe could never happen again. The re-election of Trump on November 5 ended an era that began on December 8, 1941, when Franklin D Roosevelt committed his nation's forces to the second world war. For more than 80 years, Europe knew that it could rely on American protection. Yes, there were speed bumps along the way – the Suez crisis, the UK's refusal to send troops to Vietnam, the US invasion of Grenada. But the Pax Americana survived these temporary setbacks; until now, that is. Trump regards Europe as a museum, a historical theme park, with some charming, if antiquated institutions, and a few world-class golf courses. He is happy to fly over for the reopening of Notre Dame, Pope Francis's funeral and – in due course – his second state visit to the UK. But he would much rather be in the Gulf, cosying up to tyrants and grifting to his heart's content. Indeed, contempt for Europe is integral to the psyche of MAGA. 'The European Union was formed in order to screw the United States, that's the purpose of it,' said Trump at his first cabinet meeting in February. 'And they've done a good job of it. But now I'm president.' In the same month, Pete Hegseth, the US defense secretary, told the Ukraine Defence Contact Group in Brussels that the US would no longer be 'primarily focused on the security of Europe'. Meanwhile, at the Munich Security Conference, JD Vance claimed that the greatest peril facing Europe is 'the threat from within' – the alleged decline of free speech, religious liberty and border control. In what they thought was a private Signal exchange (which actually included Atlantic editor Jeffrey Goldberg) about plans to attack the Houthis in March, the two men were even more disdainful. Vance wrote that 'I just hate bailing Europe out again' – on the spurious grounds that it was predominantly European shipping that was being targeted by the terrorist group. Hegseth replied: 'I fully share your loathing of European free-loading. It's PATHETIC'. On May 16, furthermore, Matthew Whitaker, the US ambassador to Nato, confirmed that, after the alliance's summit in The Hague next month, talks would begin in earnest about the withdrawal of American troops from Europe. The best he could offer by way of reassurance was that 'nothing has been determined'. But the direction of travel is perfectly clear. No less important is the dangerously capricious character of Trump's tariffs. In his threat to impose a 50% levy on all goods from the EU he has revealed not only his vindictiveness – 'Our discussions with them are going nowhere!' he complained on Truth Social – but the unpredictability that makes him a completely unreliable economic partner. 'It's time that we play the game the way I know how to play the game,' he said in the Oval Office last Friday. 'I'm not looking for a deal. I mean, we've set the deal. It's at 50%'. Not for the first time, Scott Bessent, the US treasury secretary, sought to present his boss's outburst as just another negotiating tactic. 'I think this is in response just to the EU's pace,' he told Fox News. 'I would hope that this would light a fire under the EU'. Well, maybe. On Sunday, the date of imposition for the new tariffs was pushed back from June 1 to July 9. But this is no way to conduct commercial diplomacy. Whatever spin the president's acolytes put upon his infantile methods, the only rational conclusion to be drawn is that the US is spinning off into its own private orbit of recklessness. Pincered by Trump and Putin, Europe has to think afresh. And it is starting to do so. Keir Starmer's deal with the EU, announced on May 19 alongside the European Commission president, Ursula von der Leyen, and António Costa, the president of the European Council, may not be a far-reaching treaty. But it is unquestionably, as von der Leyen noted at Lancaster House, a 'roadmap', establishing a series of strategies and frameworks for future action. Yes, the agreement marks a significant step away from what Starmer called the 'stale old debates' of Brexit. But, in its sharper focus upon defence, law and order, border control and economic innovation, it also reflects the shifting priorities of the EU. Gradually, but unmistakably, Europe is morphing into something new. All-important to this shift was Emmanuel Macron's proposal in May 2022 that a new 'European Political Community' be formed to address the geostrategic consequences of the Ukraine conflict. Initially dismissed by some as a Gallic talking shop, the EPC has, in practice, been an important symbol of European resolve in the face of Russian aggression and of a collective determination to defend European values. It has also brought non-EU member states to the table: only 13 days after he became prime minister, Starmer played host at Blenheim Palace to its fourth summit, which was attended by Volodymyr Zelensky. Labour may not formally have shifted from its (meaningless) manifesto pledge to 'make Brexit work'. But Starmer's commitment to European defence has been impeccable. After the disgraceful humiliation of the Ukrainian president in the Oval Office in February, he arranged a snap summit in London on March 2 to show solidarity with Zelensky, alongside Nato secretary-general Mark Rutte, von der Leyen, Macron, the then German chancellor Olaf Scholz, Polish prime minister Donald Tusk and – to show that transatlantic partnership comes in more than one form – the outgoing prime minister of Canada, Justin Trudeau. After the gathering, Zelensky was granted an audience by King Charles at Sandringham. More controversial was the PM's announcement on February 25 that UK defence spending will rise to 2.5% as a share of GDP by 2027 and 3% in the next parliament. It is deeply regrettable that this extra cash is being taken from the international development budget – instead of from a new, hypothecated tax. In the first place, reducing expenditure on aid is not only morally wrong but a false economy: as any diplomat will tell you, the strategic return on investment from overseas aid – spent on health care, education, agriculture or democracy – is immense. Secondly, this fiscal raid will not come close to covering the defence bill in this new era; nothing like. What remains welcome is the sense of the European giant awakening from a long slumber. Again, Macron has been the principal agent of change. 'We must be lucid about the fact that our Europe is mortal,' Mr Macron declared in April 2024 at the Sorbonne. 'It can die. It can die and whether it does depends entirely on our choices' In this respect, Angela Merkel – whose reputation is at a low ebb at present – also deserves credit for warning of what was to come. 'It is no longer such that the United States simply protects us, but Europe must take its destiny in its own hands, that's the task of the future,' she said in May 2018. On election night in Germany, the chancellor-elect, Friedrich Merz, went even further, asking 'whether we will still be able to speak about Nato in its current form'. On May 10, as Trump's boredom with the Ukrainian conflict became ever more apparent, Merz, Starmer, Macron and Tusk went to Kyiv in a remarkable display of European solidarity. One of the reasons that I favour the case for the UK joining rather than rejoining Europe is that I think the European entity of which (I fervently hope) we will become a leading member will be very different to the one that we left at 11pm on January 21, 2020. For a start, very few restorationist projects are successful. True, the Stuart monarchy was reinstated in 1660; US prohibition was repealed in 1933; the nations of eastern Europe regained their sovereignty at the end of the cold war. But the clock is rarely, if ever, turned back. Our liberation from Brexit will not be a time-jump to the day before the 2016 referendum. Its form will be new, non-linear and unexpected. Necessity is usually a better engine of progress than virtue. It may feel good to call Boris Johnson and Nigel Farage idiots for wrecking the international, commercial and diplomatic status of the UK. But – in itself – self-righteous indignation is an analgesic rather than a solution. What is happening now, partly organically, partly by overt diplomacy, is the basis of a quite novel pan-European identity. Unlike the institutions formed by the agreement of 1957 and subsequent treaties, it will have security and the rule of law rather than economic and social collaboration at its heart. The European idea must now migrate from Venus to Mars. That said, the binding commitment to security should be broad in its remit: it should include economic resilience, pandemic strategy, action on climate change, swift and compassionate border management and social integration. There are tough decisions ahead on expenditure: satellites, fighter jets and state-of-the-art cyber-weapons do not come cheap. But we need them all. As a matter of urgency, the new Europe will also have to reassess the balance between regulation and economic dynamism. Trump's tariffs are scaring off investors. But, to attract those trillions of dollars, Europe must convince a sceptical world that its love of rules offers stability rather than intolerable bureaucracy and red tape. If this continent – including the UK – is truly to compete with the US and China, it must ask with brutal honesty why it has failed so miserably to nurture tech start-ups. Europe's fatal flaw is self-congratulation, especially in contrast to the supposed vulgarities and Darwinian social policies of America. But our energies should be focused on more practical issues now. We need the vigour of Sparta, as much as the wisdom of Athens. Why, for instance, is it so hard to imagine a European version of Meta being founded in London, Berlin or Madrid? And, if the US really is off the pitch when it comes to strategic defence, how quickly can Europe muster a regional barrier against further Russian aggression? How soon before European forces could pull off – for example – an operation as bold as SEAL Team Six's assassination of Osama bin Laden in 2011? There will be moments when dormant Nato springs back into life and America joins in. But we can no longer depend upon that. Will the new Europe be capable of fighting a kinetic war unaided by the US; or a decisive response to the next iteration of state-sponsored Islamist terrorism, or to the far-right militias that are rising across the continent? These are uncomfortable questions, and they are meant to be. If the Old World is to become the New New World, it must practise the most searching self-scrutiny. Winston Churchill was right in 1949, as the Council of Europe was being developed, to observe that purpose and ethos count for more than the nuts and bolts of structures. 'I hope we should not put our trust in formulae or in machinery,' he said, adding that it was 'the growth and gathering of the united sentiment of Europeanism' that mattered. So: what form will the new Europe take? An EU+? An EPC with legal and military power? An evolving but informal coalition of the willing across sectors? It is too early to say. What is certain is that the work ahead will be extremely difficult and involve a doctrinal and practical agility that has not been the EU's strongest suit. But the alternative is a supine slide to oblivion unworthy of our history and of our hopes for the future. As Gramsci wrote in 1930: 'The old world is dying, and the new world struggles to be born: now is the time of monsters'. How we fend off the monsters of today, and shape the new Europe, is the greatest question of our times.
