US President Donald Trump has been in office for less than 200 days but his major decisions could erode US hegemony in the global economy.
Recently, he announced that the US will step away from the Paris climate accord, following his withdrawal from the Trans-Pacific Partnership trade deal.
The agreement for environmental action has been signed by 195 nations. The decision might benefit US oil firms but it may bring more harm to the US economy in the long run.
In response to the US move, the leaders of France, Germany and Italy issued a joint statement saying that the Paris climate accord was “irreversible” and could not be renegotiated. The UK and Canada both expressed “disappointment”, while Japan said it was “angry”. At least 61 mayors in the US have pledged to uphold the global climate commitment.
The US started to actively intervene in global affairs after World War II. It has smartly leveraged its alliance with European nations, Japan and Saudi Arabia to become a world leader.
However, as Trump keeps pulling US out of global organizations and agreements, he is undermining US influence over the long run.
Also, speaking at the dedication for a NATO monument to September 11, Trump blamed member states for letting in refugees and not paying their “fair share” toward defense spending.
In fact, the US is the biggest beneficiary of NATO. For example, by launching the massive Marshall Plan after World War II and rebuilding Europe, the US put up a strong shield against the further advance of the former Soviet Union.
China will benefit the most from the US’s withdrawal from major global affairs. The eurozone nations won’t turn to Russia as they are worried about its military intervention in Ukraine. Japan is too small as an ally. Therefore, China is the only candidate to fill the void.
The US signed the TPP deal last year after years of negotiations. However, Trump decided to abandon it. Among 11 other signatories, eastern Asian nations and Mexico are key competitors to Chinese exporters. The US withdrawal is definitely good news for China.
The US dollar index fell to 97 from 103 early this year. The markets project three rate hikes this year in the US. Does that mean global big money is bearish on the US market and are pulling money out of the US?
Master investors like Warren Buffett, George Soros and Ray Dalio usually move ahead of the trend six or 12 months earlier because of their massive portfolios.
Soros said earlier he was very optimistic about Europe. That could be a warning signal, too.
This article appeared in the Hong Kong Economic Journal on June 7
Translation by Julie Zhu
[Chinese version 中文版]
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