Tag Archive for: Donald Trump

Trump’s trade war is about more than trade

The opening salvos of US President Donald Trump’s trade war have sent shockwaves around the world. Over the past three weeks, his administration has broken with decades of free-trade orthodoxy, threatening to impose tariffs not only on strategic adversaries such as China but also on longstanding allies such as Canada and Mexico. Even Denmark—a NATO member and steadfast US ally during and after the Cold War—has found itself in Trump’s crosshairs.

Trump’s actions have made many in the United States and around the world wonder: what exactly are tariffs, and how do they affect global trade? Simply put, tariffs are taxes on imported goods. If a Chinese manufacturer wants to sell shoes in the US, the American government can impose a tariff. If a US retailer pays $100 for a pair, then a 10 percent tariff, like the one that Trump recently imposed on goods from China, means that the retailer must pay the US government $10.

Those $100 shoes now cost $110. Who pays the extra $10? When Trump raised tariffs on Chinese imports during his first term, US importers bore most of the cost, particularly when they could not find alternative suppliers. Consequently, retail prices remained relatively stable, at least in the first year.

But the picture becomes more complicated when tariffs remain in place for an extended period. US importers cannot absorb the added costs indefinitely and may go out of business unless they find new suppliers or pass those costs to consumers, who may then need to cut back on spending.

When one country uses tariffs or other sanctions to damage another country’s economy, the result is often retaliation and trade war. China, for example, responded to Trump’s tariffs by imposing its own tariffs on US imports. Yet, although Chinese and US tariffs are based on similar reasoning, their impact will not necessarily be the same.

During the first US-China trade war, most of the burden of China’s retaliatory tariffs was borne by American exporters rather than Chinese importers. This was because China quickly found alternative suppliers for the goods it had previously sourced from the US. Oil and food—two of the top US exports to China—were readily supplied by Russia and other countries. Meanwhile, the US struggled to replace Chinese imports, forcing US businesses and consumers to bear the brunt of Trump’s tariffs.

These consequences have not gone unnoticed. Under both Trump and former President Joe Biden, the US has taken steps to incentivise domestic production and encourage firms to reduce their dependence on Chinese supply chains. But the extent to which such efforts will enable the US to shift more of the tariff burden onto China remains unclear.

To be sure, the vast size of the US market gives it a significant advantage. While Chinese importers can find alternative suppliers, Chinese exporters will have a hard time finding a market that can fully replace the US. The combined GDP of Russia, India, Africa and South America amounts to $13 trillion—just over one-third of US GDP, which is projected to rise to $30 trillion in 2025. And if the US convinces its Organisation for Economic Co-operation and Development allies to join the trade war, China could face tariffs from countries representing 46 percent of the global economy.

The Trump administration is betting that because the US is the world’s largest economy, China and other foreign exporters will struggle to find viable alternatives. This, in turn, would give the US decisive leverage in the trade war between the two countries. Early signs suggest that Trump’s strategy may deliver at least symbolic victories, with Mexico and Canada seemingly acquiescing to his demands by promising to do what they were already doing.

That said, tariffs are often a double-edged sword. On one hand, winning the trade war with China would allow the US to negotiate better trade terms. But US households could pay a heavy price. Fewer goods would be produced and sold to US consumers. While reduced imports could boost the competitiveness of domestic manufacturers, higher production costs and the absence of foreign alternatives would likely drive up consumer prices.

The potential geopolitical benefits of Trump’s trade war are less ambiguous, as his administration has decided to use economic pressure to achieve broader strategic objectives. It seeks to pressure Mexico and Central American countries to stem the flow of migrants to the US southern border and accept deported immigrants, and to counter China’s growing influence in the Asia-Pacific region and rein in Chinese expansionism, especially in the South China Sea. Moreover, Trump has vowed to take back the Panama Canal, and he seems serious about buying Greenland for its strategic location and natural resources—a US ambition going back to 1868.

Consumers and manufacturers in the US, China and beyond must brace for price increases and escalating geopolitical tensions. If Democrats regain control of Congress in the 2026 midterm elections, in which one-third of the US Senate and the entire House of Representatives will be on the ballot, they could curb Trump’s ability to impose tariffs. This gives Trump two years to win his trade war with China and the rest of the world—or at least convince Americans it was worth the cost.

Neither Atlanticist nor isolationist: recognise Trump as an imperial nationalist

Like people in other regions, Europeans face the challenge of discerning what motives underlie US President Donald Trump’s verbal provocations. After all, what Trump really wants is often unclear, which makes it difficult to devise a strategically effective response.

Traditionally, Europeans have interpreted US foreign policy through a binary lens: either a US administration is Atlanticist, in which case all is well (for the most part); or it is isolationist, which spells trouble. But Trump fits neither category.

He is certainly no Atlanticist, because he is convinced that NATO offers insufficient benefits for what it costs the United States, and that Europeans are all free riders. But he is hardly the first US leader to make this criticism. US complaints about European free-riding date to at least to the early 1950s, when NATO was just taking shape. The difference between Trump and his predecessors is that he puts a much higher price tag on protection by the United States and views it as something that Europeans do not really deserve.

But nor is Trump an isolationist, though many commentators describe him in these terms. Trump does not think only in crude transactional terms. He believes that the US is owed all the perks of hegemony, but with none of the costs. Rather than an isolationist, he is an imperial nationalist, like many 19th-century US leaders. Even his preferred policy instruments for ushering in a golden age—tariffs and territorial expansion—recall that era.

For Europeans, both seem absurd today. But from a US point of view, they have a historical resonance. The US’s war for independence began with a conflict over tariffs, which have since been seen as an instrument of sovereignty. The US is one of the few countries in the world whose constitution explicitly mentions trade. Even if tariffs tend to harm domestic consumers, they serve a political function.

This is reflected in Trump’s proposal to create a new External Revenue Service which would centralise tariff administration and serve as a depository for tariff revenues. With such an agency, Trump would have the means to redistribute revenues among states and political clients as he wished. He pursued a similar strategy during his first term when he established a fund within the Department of Agriculture to compensate those harmed by China’s retaliatory measures against US soybean exporters.

But the most important objective, of course, is to use tariffs to exert pressure on partners that are particularly dependent on the US market: Mexico, Canada and Europe. In the case of Canada and Greenland (an autonomous Danish territory), Trump has also expressed territorial ambitions, wishing to ‘get Greenland’ and make Canada the ‘51st state.’ Commercial pressure is thus a means of achieving territorial expansion, just as it was for the US in the 19th century.

In pining for a US geostrategic fortress stretching from Greenland to Mexico, Trump is unwittingly echoing a US State Department document from the middle of the 19th century which stated that the acquisition of Greenland would ‘flank British North America for thousands of miles on the north and west, and greatly increase her inducements, peacefully and cheerfully, to become a part of the American Union.’

Europe has understandably been left in a state of shock by Trump’s decidedly non-Atlanticist, non-isolationist geopolitical project. What can be done? Should we simply pray that it will not happen? That, more or less, has been the response from the European Union’s new high representative for foreign affairs and security policy, Kaja Kallas. In one of her first public statements, she said little about the threat from the US, because she is primarily concerned with just one issue: maintaining transatlantic solidarity to confront Russia in Ukraine. But laudable though this objective may be, it takes two to tango.

Meanwhile, no European official has bothered to mention the EU’s Anti-Coercion Instrument, which permits retaliatory tariffs to be imposed against any state that would use trade restrictions for geopolitical purposes. If Trump decides to intensify his pressure on Denmark through high tariffs, the EU will have no choice but to trigger this mechanism. To do otherwise would be to confirm—and exacerbate—its own geopolitical weakness.

For the same reason, the Danish government is wrong to play the appeasement card. Obviously, the balance of power is not in its favour. But by making no secret of its fear, it is inviting Trump to be even more aggressive.

While it does not make sense for Europe to deploy troops to Greenland—which would either look ridiculous or create the possibility of a war with the US—nor does it make sense to grovel. Whatever happens, Russia is the biggest winner for now. While Europeans hem and haw, no one should be surprised if the White House and the Kremlin negotiate the future of Ukraine behind closed doors.

With US funding freeze, China nonprofits are facing extinction. They need emergency assistance

An entire ecosystem of vital China-related work is now in crisis. When the Trump administration froze foreign funding and USAID programs last week, dozens of scrappy nonprofits in Hong Kong, Taiwan, and the United States were immediately affected. Staff are losing their jobs; some organisations face imminent closure due to lack of funding; others are paring back their programming.

In many cases, these organisations provide our last window into what is actually happening in China. They do the painstaking and often personally risky work of tracking Chinese media censorship, tallying local protests, uncovering human rights violations, documenting the Uyghur genocide, and supporting what remains of civil society in China. They provide platforms for Chinese people to speak freely; they help keep the dream of democracy in China alive. I’m not listing the names of any specific organisations at this time, because some prefer not to disclose that they receive foreign funding. Beijing believes funding that supports free speech and human rights is interference by ‘hostile foreign forces’.

As China’s President Xi Jinping has squeezed Chinese civil society and expelled journalists, information from inside China has gotten harder and harder to access. The 2017 Chinese foreign NGO law crushed US and other foreign nonprofits based in China. Some moved to Hong Kong or elsewhere. The spending freeze may deal them a death blow.

The research and other work done by these nonprofits is invaluable. It largely isn’t replicated by think tanks, universities, private firms, or journalists. If it disappears, nothing will replace it, and Beijing’s work to crush it will be complete.

As a journalist who covered China for more than 10 years, I took for granted the numerous organisations I could turn to when I needed certain kinds of information. But Donald Trump’s foreign spending freeze has revealed how dependent these organisations are on a single government for their survival—and, by extension, how fragile our sources of information about China really are.

The US must immediately grant emergency waivers to China-focussed nonprofits. If the US is not able to do this, governments around the world that value democracy, human rights and truth must step in and find a way to restore funding to these organisations now. It wouldn’t take much; a few million dollars spread across a handful of donor nations would be enough to preserve the research, expertise and networks these organisations represent.

Regardless of whether the US continues funding this work, this crisis should serve as a wake-up call for democracies everywhere. Funding from a single government should not be the only thing standing between us and an information blackout on Chinese civil society. That is not a model of international democratic resilience.

Providing funding for China nonprofits operating outside of China is directly aligned with the core interests of democratic nations. We base our security on the idea that democratic systems are the best way to guarantee the long-term stability, prosperity and wellbeing of citizens. Government budgets exist to preserve the democratic systems that make these goals possible; we don’t sacrifice these ideals to shave off a few numbers on a budget.

A key part of China’s agenda is to persuade its own citizens and the world, falsely and through deception and coercion, that democratic systems are not better. Beijing claims its system is the best way to guarantee economic prosperity and stability. It claims its one-party system is a meritocracy.

It is difficult and time-consuming—though not particularly expensive—to do the work that proves Beijing is lying, and that what it offers is smoke and mirrors. Tools that allow us to uncover the flaws of China’s own system and the actual struggles Chinese people face, directly support the goals, security and resilience of democratic governments.

Without the work that China nonprofits do, it will be much harder to show that China’s domestic model of economic and political governance is deeply flawed. If we can no longer prove that, it becomes much harder to understand why democracies are worth fighting for in the first place.

To deal with Russia, first understand what Putin wants

President Donald Trump has said he wants to end the fighting in Ukraine quickly. But it’s far from clear whether this is achievable, not least because the war in Ukraine has become a proxy for Putin’s wider confrontation with the West.

Trump’s campaign pledge that he would end the fighting within 24 hours has already been modified, with the new president and his advisers more recently discussing a period of three to six months. Trump has signalled plans for an early meeting with Vladimir Putin, while the United States’s special adviser to Ukraine is expected to visit Kyiv soon.

Putin will likely welcome a meeting with his US counterpart, not least because it will put him where he always wanted to be: talking directly to Washington, one great power to another, disposing of world affairs. This appeals to the Russian president’s concern for his, and Russia’s, appropriate standing in global affairs.

Moreover, Putin will likely fancy that he can play the incoming president, much as reports claim he did at their Helsinki summit in 2018. He will also consider himself to be in a strong position to drive a hard bargain on Ukraine.

He thinks he’s winning and that time is on his side. To some extent, he has a point.

Russia has the upper hand in what has become a brutal war of attrition. Russian forces have been making slow, costly yet inexorable progress, pushing the outmanned and outgunned Ukrainian defenders onto the backfoot. Meanwhile, relentless missile and drone attacks have taken a high toll on Ukrainian energy and civilian infrastructure.

Western countries are facing domestic political and economic pressures and distractions. Putin calculates that this, coupled with uncertainty over Trump’s approach to the US’s European allies, will lead the West to tire of supporting Kyiv and to welcome a deal.

To date, Putin has shown no real interest in a negotiated settlement—except on his own terms. These terms would effectively amount to capitulation by Kyiv and are by no means in the West’s interests.

Putin has not resiled from his core objective to bring Ukraine to heel, install a more pliable government in Kyiv, and draw Ukraine back firmly within Russia’s sphere of influence.

He won’t therefore be satisfied with just a ceasefire. Rather, he’ll want recognition of Russia’s annexed territories and a pledge of permanent Ukrainian neutrality and disarmament.

This relates to Putin’s wider objectives. As the war has continued, he has increasingly described Ukraine as a proxy for what he portrays as a wider existential conflict between Russia and the West. Resisting purported Western hostility towards Russia is now crucial in legitimising Putin’s continued rule.

Putin also wants to revise the post-Cold War security settlement in Europe and restore Russia’s global standing and influence. This was the essence of treaties that Moscow proposed in December 2021 on the eve of its invasion of Ukraine.

How the Trump administration deals with Moscow will be crucial not only for Ukraine’s future, but also for wider European and global security.

A quick, partial deal now would eventually come back to bite the US and its European allies.

If Trump wants a quick deal, he will press Ukraine to accept a ceasefire along the current lines of fighting. Kyiv may indeed have to accept a loss of territory as part of a settlement. But unless this is accompanied by robust Western (above all, US) security guarantees, such an agreement is unlikely to last, giving Russia the opportunity to rebuild its forces. Once it senses that Western attention has shifted elsewhere, Moscow will be emboldened to resume its subjugation of Ukraine.

The smarter approach for Washington would instead be to try and even up the scales by intensifying pressure on Putin to nudge him into negotiations while strengthening Ukraine’s hand ahead of any talks.

For example, Putin is keen to secure a relaxation of Western economic and technology sanctions so the Russian economy can recover and Moscow can reduce its stark dependence on China. Western states should give no such relief. Sanctions should instead be stepped up to increase pressure on the already-weakened Russian economy.

Washington should also pledge to increase military and economic support for Kyiv, signalling to Putin that he’s unlikely to achieve his aims in eastern Ukraine.

These measures would push Moscow to agree to talks to end the fighting and would strengthen Kyiv’s hand (and that of its Western backers) ahead of any such negotiations.

Early signals from the new administration are encouraging. Trump has urged Putin to agree to end the fighting in Ukraine, threatening otherwise to increase pressure substantially on Moscow, including through expanded sanctions.

Even so, securing a long-term, durable settlement in Ukraine involves more than this. It will also require Washington and its European allies to face up squarely to Moscow’s more confrontational and expansive ambitions.

The question is whether the new US administration will do this.

Australia can’t easily lift defence spending to a Trump-satisfying level

US President Donald Trump has called on NATO members to lift their defence spending from the current target of 2 percent of GDP to 5 percent.

‘They could all afford it,’ he said, warning that the United States would withdraw its guarantees of protection to Europe unless they paid up.

Trump has not opined on Australia’s defence spending, but, when he gets to consider AUKUS, he is unlikely to be satisfied. And there’s no easy way for Australia to lift its spending to a level that would satisfy him.

Australian defence spending was $53.3 billion in 2023–24, which was 2 percent of GDP. The Treasury expects it will reach 2.4 percent of GDP in 2027–28.

Russia, Ukraine, Israel and some Middle Eastern states are the only nations currently spending at least 5 percent of GDP on defence. (China’s data is too opaque to know.) In Europe, Poland comes closest, spending 4.7 percent of GDP this year. US defence spending is 3.4 percent of its GDP.

Trump’s 5 percent figure may be an ambit claim—a Financial Times report suggested he would settle for 3.5 percent. NATO will debate raising its target at its June summit.

For Australia, 3.5 percent of GDP would be $97 billion, about 75 percent more than was actually provided for defence in the budget.

Any increase in defence spending can be funded in three ways: increased taxation, reallocating money from other uses, or debt.

To get an additional $40 billion a year from taxation looks politically painful. To meet that target would require either a 12 percent increase in personal tax collections, a lift in the GST rate from 10 percent to 14 percent, or raising the company tax rate from 30 percent to 40 percent.

The federal government has in fact received an income boost of these dimensions, with total tax collections averaging 23.2 percent of GDP over the past five years, up from 21.6 percent in the previous five. However, this mostly flowed from the extraordinary profitability of resource companies, which will not be repeated.

It is more likely that company tax payments will fall short of treasury forecasts over the next few years as China’s appetite for iron ore and coal fades.

Australia is a low-taxing country—the US, Switzerland and Ireland are the only advanced nations taxing less—so an increase in taxation would not be ruinous to the economy.

It has been suggested Europe impose a defence tax to pay for military preparedness. Denmark scrapped a public holiday to help finance a higher defence budget. Without the immediate threat of Russia at war with a near neighbour, it would be hard to build the political support for such moves in Australia.

Reallocating existing spending looks just as difficult. Cutting social programs carries a high political cost, as the Abbott government learned with its ill-fated 2014–15 budget.

Most of the budget is locked in. There are 412 administered programs with payments governed by indexation. Many programs are driven by legislated entitlements, such as unemployment benefits, Medicare and the National Disability Insurance Scheme (NDIS).

The NDIS is an interesting example: it elbowed its way into a constrained budget on the false assumption costs would be held to $13 billion a year. Instead, it is at $46 billion this year—1.7 percent of GDP—and is forecast to rise to $93 billion, or 2.1 percent of GDP, by 2033–34.

Strong company tax revenue helped fund the NDIS without resorting to debt until this year. Deficits will increase as resource prices soften and the cost of the NDIS continues to rise three times faster than inflation.

Australia is a low-debt country. Its net debt of 29 percent of GDP compares with an advanced country average of 91 percent, so it could afford to borrow more. Poland has funded its expanded military with debt: its deficit is expected to reach a perilous 12.5 percent of GDP this year. There is pressure to ease the European Union’s debt rules to help lift defence spending.

There is an argument for borrowing to purchase assets, including defence equipment, the benefits of which will be derived long into the future. In extreme circumstances, debt forms part of the national security equation through the issue of war bonds.

But with the IMF warning that global government debt is becoming a financial powder keg, surpassing US$100 trillion this year, this may be the wrong time to seek the indulgence of financial markets.

The sorry conclusion is that there is no easy way to achieve the sort of increase in the defence budget that President Trump has in mind for US allies, including Australia.

Trump at Davos

It is Donald Trump’s world now. Nowhere was this more obvious than at the World Economic Forum’s latest annual gathering in Davos. Since the 1970s, the WEF has been an integral part of the liberal international order that emerged from the ashes of World War II. It is where the world’s political and economic elites come together to discuss global risks and explore solutions to collective challenges such as climate change, rising inequality and the rise of artificial intelligence. In this sense, the 55th Davos summit was a continuation of a longer-running tradition.

And yet, nothing about this year’s gathering was normal, because it coincided exactly with Trump’s second inauguration as president of the United States. Trump’s return to the White House marks the start of an anti-Davos age. Gone is any sense of a global order in which countries pursue joint solutions to shared problems. We are entering a ‘polyworld’ governed by polycentrism, polycrisis and polysemy (when a word or symbol has multiple meanings).

A polycentric world lacks not only a single order but also any desire to create one. The US’s new secretary of state, Marco Rubio, made the administration’s position clear in his confirmation hearing: ‘The postwar global order is not just obsolete; it is now a weapon being used against us.’ And notwithstanding what Chinese leaders tell global gatherings, they are not in the order-building business either. When Chinese President Xi Jinping speaks of ‘great changes unseen in a century’, he is not referring to the emergence of a Chinese-led world. Rather, he is instructing Chinese society to prepare for a long period of chaos and disruption.

Moreover, Trump’s desire to upend the global order is surprisingly popular around the world. The European Council on Foreign Relations has just conducted a poll showing that most people around the world welcome Trump with open arms. They believe he will be good for the US, good for their own countries and conducive to world peace. They like the idea of the US becoming a normal power.

No longer can we expect middle powers such as India, Brazil, Turkey, Indonesia or South Africa to shore up a single US-centred order. In the polycentric world, each of them thinks of itself as a serious power—as a centre, rather than as part of the periphery. The only countries that are nervous about Trump are the US’s closest allies in Europe and Asia, since they have long based their own security and prosperity on the notion of US exceptionalism.

The second feature of the moment is the polycrisis. Climate change, new technologies, demographic trends and the shifting nature of capitalism will create continuous disruptions. But unlike single acute crises (like a financial collapse), the polycrisis will not foster unity or a desire for common rules. Instead, the multitude of simultaneous challenges will generate competition for attention; climate will have to compete with migration, Gaza with Ukraine and so forth.

The upshot is a fragmented world of different tribes with different priorities. As the crises worsen, each will inevitably be weaponised in ways that lead to further fragmentation. Since the first thing that happens in a crisis is a suspension of rules, the rule-based order will give way to a perpetual state of exception.

The third feature is polysemy. The new crises are taking us into unknown territory, not least because they are interacting with one another in complex and unpredictable ways. Everyone will believe what they want to believe. How can we agree on rules and norms when we no longer agree on basic facts?

The defining global challenge is no longer to combat disorder, because a state of disorder implies some common agreement on what order should look like. What we have instead is unorder: the very idea of order has been overtaken by events.

In a private meeting at Davos, I heard one political leader advise others to chill out and not feel obliged to respond to all of Trump’s talk of tariffs and territorial expansion. Rather than organising the global resistance to Trump, most are looking for ways to advance the WEF’s globalist goals in the context of the new polycentric world. But now that Trump is starting to implement his policies in earnest, we will see if the Global South’s enthusiasm for his presidency lasts.

Trump won’t mean the end of Davos. Business and political leaders will continue to gather there long after he has gone. But the liberal international order of which the WEF was a pillar is unlikely ever to return to its postwar form. The agenda there—and at the United Nations, the International Monetary Fund, the World Bank and other institutions—will need to be revised accordingly.

Trump’s trade and economic security agenda: what we know so far

President Donald Trump’s trade and economic security team is united and ready to use tariffs, export controls and enhanced sanctions to strengthen the US economy and achieve geostrategic outcomes against US adversaries. Those objectives range from preserving the US technology edge over China to stemming the flow of fentanyl pre-cursors into the United States and forcing a Russia-Ukraine peace.

The team also stands ready to use these tools against US allies and partners for what the administration considers to be the greater good and for addressing trade imbalances, building up US industries, pushing up allies’ defence spending or managing immigration. Australia can take nothing for granted and must take every chance not only to demonstrate how the alliance benefits US security and prosperity but to show that hindering the Australian economy with trade measures would damage US security.

Of the slew of presidential actions and executive orders already issued, the America First Trade Policy memorandum has been one of the more detailed, with stated objectives of promoting investment, productivity, US industrial and technological advantages, defending economic and national security and benefiting US workers. It initiated more than 20 possible trade and economic security measures to address unfair and unbalanced trade.

The only surprise was that decisions on tariffs and other measures, including those relating to China, were delayed until after 1 April, to allow for detailed reviews by the Treasury, Commerce Department and the Office of the US Trade Representative. Detailed reviews are required for the use of some trade measures, those under section 232 of the 1962 Trade Expansion Act and Section 301 of the 1974 Trade Act. But others, such as those under the International Emergency Economic Powers Act of 1974 and section 122 of the 1974 Trade Act, can be imposed by presidential declaration, though sometimes only temporarily.

Trump’s trade and economic security team

For the main roles in the economic and trade team, Trump nominated Scott Bessent, a billionaire hedge fund manager, as treasury secretary; Howard Lutnick, a Wall Street trader and chief executive, as secretary of commerce; and Jamieson Greer as US Trade Representative (USTR). Greer was chief of staff to Robert Lighthizer, Trump’s first-term USTR. The Senate confirmed Bessent’s appointment on 27 January and is likely to approve the other two within days or weeks.

They appear to be in lockstep with Trump on use of tariffs, export controls and sanctions, though the degree and breadth of such measures is not settled. This contrasts with a diversity of views in Trump’s first term.

In his testimony to the Senate Finance Committee on 16 January, Bessent said the administration could raise tariffs for three reasons: to remedy unfair trade practices in a particular sector or exercised by a specific country; to raise revenue; or as a negotiating tool. Bessent strongly defended tariffs, particularly as tools for achieving deals, and emphasised that he expected the Treasury, Commerce Department and the Office of the USTR would deliver a coherent economic security agenda.

Lutnick, whose confirmation hearing before the Senate Commerce Committee is scheduled for 29 January, has actively promoted Trump’s use of tariffs as a tool to force other countries to reduce their tariffs on US goods or to generate revenue for widening domestic manufacturing.

In his testimony in May 2024 to the Congressional US-China Economic and Security Review Commission, Greer advocated expanding economic security policies implemented under the first Trump administration and the administration of president Joe Biden. That included calling for the extension of tariffs on China to include Chinese companies operating in other countries.

Also awaiting confirmation are key members of Trump’s first-term trade team. These including Kevin Hassett, former head of the White House Council of Economic Advisers, nominated as director of the National Economic Council; Russell Vought, former White House budget director and lead in the Heritage Foundation’s Project 2025, nominated to again be Trump’s director of the Office of Management and Budget; Stephen Miran, a former senior economic policy adviser at Treasury, nominated as chair of the Council of Economic Advisers; and Peter Navarro, a former trade adviser and avowed China hawk, nominated as Senior counselor for Trade and Manufacturing. This group will constitute the upper middle management of Treasury, Commerce and the Office of USTR, responsible for executing the agenda.

The America First Trade Policy in detail

According to the memorandum, the Treasury by 1 April must review US trade partners’ exchange rates and recommend ways to counter currency manipulation and other unfair trade practices. In the same time limit, it must assess risks associated with continuing exemption of imports worth less than US$ 800 from duties (currently allowed under de minimis exemption), and it must consider strengthening limits on US investment in national security technologies and products in China. Biden’s Executive Order 14105 of 9 August 2023 imposed those limits.

Also by 1 April, the Commerce Department must investigate the US deficit in merchandise (goods) trade and associated economic and national security implications, and it must recommend remedies, potentially including a global tariff and other section 232 tariffs. The department must also review and improve US anti-dumping and countervailing laws, consider revocation of US-China Permanent Normal Trade Relations and improve US-China reciprocity on intellectual property rights. To improve US economic security, the department will lead a full review of the US industrial and manufacturing base and export control system to assess whether additional barriers are needed to protect the US’s technological edge. The steel and aluminum sectors are listed.

The Office of the United States Trade Representative will have the biggest task. By 1 April, it must complete a wholesale review of countries’ trade practices, US trade agreements and sectoral agreements and propose ways to remedy unfair practices and improve market access and job outcomes for US workers and businesses.

Unsurprisingly, US trade with China is a particular focus. Foreshadowing application of tariffs and other measures, the USTR must review the US-China trade agreement to determine whether China is abiding by the agreement (it’s not, but the US isn’t fully complying, either), consider further section 301 tariffs based on an investigation started during the first Trump Administration and address any unreasonable Chinese actions that burden or restrict US commerce.

Also unsurprising is that there is no reference to consultation with US allies and partners in the America First Trade Policy memorandum. Friends get no free pass—but they never do in US trade policy. Even longtime and trusted US allies such as Australia, which has a trade imbalance that favours the US and is in the US’s primary strategic theatre, must advocate strongly to minimise the impact of foreshadowed measures.

Showing just how turbulent US trade and economic security policy could be until 2029, Trump on 26 January threatened a tariff of 25 percent and later 50 percent on Colombian imports to the US in retaliation for the US ally’s refusal to accept planeloads of its deported nationals. Colombia backed down within hours.

Since his inauguration, Trump has said that Mexico and Canada must do more before 1 February to stop fentanyl and unauthorised migrants entering the US to avoid a 25 percent tariff. China must do more to stop fentanyl to the US, via Mexico and Canada, to avoid a 10 percent import tariff, Trump has said.

In the latest development, on 27 January, Trump told House of Representatives Republicans in Miami he would add tariffs on foreign-produced ‘computer chips, semiconductors and pharmaceuticals to return production’ to the US. He also said he would be ‘placing tariffs on steel, aluminum and copper’.

This is where we are after only seven days. It will be a wild ride.

In Pacific island countries, Trump should pursue embassy transformation

The Biden administration struggled with adequately advancing US national security and foreign policy interests in the Pacific islands. The problem was that the White House failed to select the right business concept to pursue.

What is needed is not simply a strategic pivot. What is needed is a business transformation. That requires more than reform and modernisation. It requires a radical rethinking and restructuring of the core business processes of the US embassies and consulates to the Pacific island countries.

Until that happens, Washington’s foreign policy establishment will be unable to afford to compete with revisionist authoritarian powers seeking to displace US influence in the Pacific islands.

Unfortunately, such organisational change cannot be achieved overnight. Among other things, it will require new executive leadership teams, and ambassadorial confirmations for Pacific island countries are notoriously slow. However, that does not mean that the new Trump administration cannot change the status quo at US diplomatic missions in the region by the end of the first 100 days. Here are four suggestions that could help to get the ball rolling.

First, the administration should systematically assess the strategic planning of the State Department in the Pacific. As a matter of policy, each mission is supposed to create a multi-year strategic plan that declare the United States’ whole-of-government priorities in ‘a given country’.

The plain meaning of the phrase ‘in a given country’ suggests that the requirement is to produce an integrated country strategy for every independent state of concurrent accreditation. In practice, that does not always happen. For example, the US embassy to Fiji, Kiribati, Nauru, Tonga, and Tuvalu produced a single integrated country strategy for what it refers to as ‘five diverse and geographically distant Pacific Island nations’.

The Trump administration should consider providing different guidance and instructions to missions that cover multiple countries. That revision might stipulate that the mission is to produce separate integrated country strategies for each of the countries, followed by an integrated mission strategy that synthesises the individual country plans.

Second, Trump should re-evaluate the concurrent accreditation of the diplomatic staff at the US embassy in Fiji to Kiribati, Nauru, Tonga and Tuvalu. These countries span the Pacific’s cultural subregions, Fiji being part of Melanesia, Nauru and Kiribati within Micronesia and Tonga and Tuvalu forming part of Polynesia.

The Trump administration should consider restructuring the US diplomatic footprint across the region. While current arrangements may reflect logistical and resource constraints, a more strategic approach would create three subregional complexes of US embassies, consulates and consular agencies. Within each of these complexes, key business functions would be centralised to promote efficiency and thereby reduce costs.

Under this strategic approach, the Melanesian complex would be composed of the US embassies in Fiji, Papua New Guinea, Solomon Islands and Vanuatu. The Micronesian complex would be composed of the US embassies in Marshall Islands, Federated States of Micronesia and Palau. And the Polynesian complex would be composed of the US embassies in Samoa and Tonga and the US Consular Agency in French Polynesia.

Under this structure, it would make sense for the concurrent accreditation for Kiribati and Nauru to shift to the US embassy in Marshall Islands until the US embassy in Kiribati is established. Similarly, it would make sense for the concurrent accreditation for Tuvalu to switch to the US embassy in Samoa.

Third, the White House should re-evaluate the regional diplomatic posture of the US in foreign dependencies and areas of special sovereignty. In the Caribbean, the US has an independent mission for Aruba, Curacao and Sint Maarten, which are constituent countries of the Kingdom of the Netherlands. In East Asia, the US has an independent mission for Hong Kong and Macau, which are special administrative regions of the People’s Republic of China.

In the Pacific, the US recently established diplomatic relations with the Cook Islands and Niue, self-governing states in free association with New Zealand. Following these precedents, the Trump administration should re-evaluate the diplomatic terminology used to describe other foreign dependencies, areas of special sovereignty and sovereign independence movement territories across the region.

Fourth, the Office of the Inspector General of the Department of State should address the gap that exists in inspections of the US embassies in Fiji, Tonga and Samoa. Under the Foreign Service Act of 1980, the office is required to inspect every US diplomatic post at least once every five years.

Unfortunately, that requirement is rarely met in practice, thanks to waivers from the United States Congress. The most recent inspection reports for the US embassies in Fiji and Samoa were a decade and a half ago. Shockingly, that was before the US pivot to Asia ever really started in earnest.

Australia enters the America First era: an analysis of the executive orders

The litany of executive orders that have dropped on the White House website tell us plenty about what Australia can expect from a second Trump term’s foreign policies.

And there are plenty of implications of the America First agenda for Canberra.

Let’s begin with Unleashing Alaska’s Extraordinary Resource Potential. Trump’s intent to unlock Alaska’s ‘bounty of natural wealth’ by opening offshore drilling and greenlighting dormant liquified natural gas (LNG) export projects is a boon for the US economy and energy security.

But plans to ‘prioritize … the sale and transportation of Alaskan LNG to … allied nations within the Pacific region’ potentially cuts Australia’s grass. Our fractured LNG export ‘strategy’ is going to have to compete with likely cheaper LNG flooding the Asian market.

Trump’s America First Policy Directive on foreign policy is rather literal, simply stating that it will always put ‘America and its interests first’. Australian policymakers must now frame commitments, agreements, and policies regarding the US around this mandate.

Understanding that this is the way decisions will be taken in this new era will save time and public servants’ energy.

We can already apply the America First policy to one case study: AUKUS pillar one. Trump’s US can be expected to continue supporting the optimal pathway for several national interest reasons. First, Australia has already paid cash. Second, the rotation of US and British nuclear submarines through HMAS Stirling in Western Australia affords a ‘beachhead’ for US strategic depth in the Indo-Pacific. Third, Australia will give billions of dollars more to the US for Virginia class submarines.

America First? Tick.

Central to the America First era is Trump’s plan to block Chinese overreach into strategic regions of American interest. It’s not clear how the US might secure control of Greenland and the Panama Canal, but it’s quite clear why Trump wants to do it.

Canberra shares with Washington common interests and challenges posed by Beijing’s creeping territorialisation efforts in Antarctica. Antarctica is a strategic continent that needs much more work through the US-Australia alliance to protect it.

One obvious point of divergence is commitment to multilateralism. There appears to be zero reversal of this trend—Trump has signed an order to withdraw the US from the World Health Organization, and has signalled an intention to pull out of the Paris Agreement on climate change.

Further Trump presidential action is aimed at multilateralism. Significantly for Australia given the amount of US and other multilateral companies that have operations in our key industries, Washington is also ditching the OECD Global Tax Deal, which was negotiated by the Biden administration though never approved by Congress.

Representing 90 percent of global GDP, and signed by 136 countries and jurisdictions, it seeks to ensure big firms ‘pay a fair share of tax wherever they operate and generate profits’. Australia remains a fervent advocate for it, along with the remnants of most multilateral bodies, while Trump’s memorandum prioritises ‘sovereignty and economic competitiveness by clarifying that the Global Tax Deal has no force or effect in the United States’. This will be a problem for Australia.

An area of little divergence appears to be foreign aid. Australian efforts in this sector are dismal at best—roughly $4.7 billion in foreign aid was distributed in 2023-24, placing Canberra 26th out of 31 wealthy countries ranked for how much foreign aid they provide. Trump’s Reevaluating and Realigning United States Foreign Aid order might put pressure on Australia to ‘do more’—that is, spend more—in our region. The order freezes US aid while a review is undertaken and frames foreign aid to be ‘destabili(sing) world peace by promoting ideas in foreign countries that are directly inverse to harmonious and stable relations internal to and among countries’.

Trump’s declaration of a ‘national energy emergency’ might trigger a much-needed national debate in Australia about our persistent energy insecurity. Our nation sits on immense resource wealth yet has gone from being a global LNG export superpower to importing gas to meet domestic needs in less than a decade.

Trump’s memorandum on Restoring Accountability for Career Senior Executives needs little explanation as to how it could provide lessons for Canberra. Group-think and risk-adverse career public servants have hollowed out our public service’s ability to ‘faithfully fulfill … duties to advance the needs, policies, and goals’ of Australia.

The TikTok saga continues into the Trump 2.0 era. Never fear, watchers of MomTok—a group of Mormon ‘yummy mummies’ who post on TikTok, for the uninitiated— Trump’s attempt to find a compromise on an outright ban of TikTok gives the US government 75 days to get to the bottom of Beijing’s reach afforded by the popular app being used by 170 million Americans.

NSW Premier Chris Minns finds a ‘return to work’ ally in Trump, whose Return to In-Person Work mandate notes ‘all departments and agencies in the executive branch of Government shall, as soon as practicable, take all necessary steps to terminate remote work arrangements’. Again, this could energise debate here in Australia for similar measures.

Trade remains a concern for Australia. Will we, or wont we, be slapped with the tariff stick? Will Trump be able to separate bilateral trade relations from Australia’s lacklustre defence spending? Trump’s America First Trade Policy provides no clear answers. But the Albanese government needs to recognise that simply pointing to a healthy American trade surplus with Australia—saying ‘smile and wave boys’—might no longer pass Trump’s pub test.

Australia must be clear-eyed and pragmatic about Donald Trump

Australia must be clear-eyed and pragmatic about Donald Trump’s return to the White House, looking past the rhetoric to focus on advancing our strategic interests in an increasingly competitive Indo-Pacific region.  

His ‘America First’ declarations may unsettle traditional diplomatic sensibilities, but they mask a crucial reality: the United States isn’t withdrawing from global leadership; it’s redefining how that leadership works. While it is a rejection of the idea the US can, and should, continue to underwrite security and stability to the world alone, critics are wrong to call it isolationist. 

In fact, one of the first executive orders signed on day one was to require American foreign policy to be guided by domestic interests. That isn’t withdrawal from the world or in fact radical. One of Joe Biden’s stated foreign policy priorities was always to ask: ‘What will our foreign policy mean for American workers and their families?’ 

For Australia, Trump’s second term presents both challenges and opportunities, but only if we can distinguish between his style and the substance of American strategic objectives. 

The key for Australia will be to focus on actions, not words. Trump’s inauguration speech, while light on foreign policy specifics, revealed an approach grounded in peace through strength—suggesting that US superiority means fewer conflicts through deterrence. This aligns with Australia’s interests in three crucial areas: maintaining a stable Middle East with a secure Israel, preventing Russian victory in Ukraine, and most importantly, ensuring China cannot use its economic power to impose its military, technological and diplomatic might on the rest of us. 

US involvement will, however, come with a requirement that allies make an equal or meaningful contribution. In this way, Trump’s modern-day America First movement differs from the first incarnation in 1940 of those Americans who did not want to enter World War II regardless of Britain doing more than its fair share to save the world from fascist authoritarianism. 

It is likely that the Trump administration will challenge China’s behaviour early in the term. This includes by calling out cyber attacks, and by demanding fair and equitable trade. Secretary of State Marco Rubio’s congressional testimony as part of confirmation hearings provides the most recent, and clearest, indicator.  

The Quad foreign ministers’ meeting has provided a further early indication, producing a joint statement that was brief but heavily security focussed. The fact that the Quad was effectively the first international meeting of the new administration also highlights the US will look to continue leading on regional stability. 

And the Quad’s pre-eminence shows the need to see global affairs as far more than just US-China rivalry.

As the European Union’s President, Ursula von der Leyen, notes, we’re entering an era of ‘harsh’ strategic competition. While US-China rivalry dominates headlines, the reality is more nuanced. Multiple nations are engaged in a sophisticated contest for influence, with Australia positioned at the epicentre of this competition in the Indo-Pacific. Our success will depend on our ability to deploy both hard and soft power effectively.

Australia holds unique advantages in this environment. Our democratic credentials, commitment to the rule of law, and long history of regional engagement provide a strong foundation for leadership. The challenge is to build on these strengths while working in partnership with our neighbours and allies. This means maintaining our strategic alignment with the US while speaking with our own voice on regional issues.

The AUKUS partnership exemplifies how Australia can successfully navigate this new era. It represents more than just a submarine deal—it’s a blueprint, as Rubio has called it, for modern alliance-building that delivers tangible benefits to the broader Indo-Pacific region. This kind of innovative thinking shows how like-minded nations can work together to maintain a free and open regional order while sharing the burden of regional security. 

The path forward requires sophisticated diplomacy that can work with Trump’s unorthodox style while advancing our regional interests. We must judge both the US and China by their actions, not their words—particularly given Beijing’s history of breaching international agreements while claiming to uphold them.  

As we prepare for this new era of strategic competition, Australia must be bold in its vision while pragmatic in its execution. We need political leadership that can see past rhetorical flourishes to identify and pursue our core strategic interests. The foundations are there in our democratic values, our regional relationships, and our strategic partnerships. The challenge now is to build upon them with the creativity and courage that these complex times demand. 

The success of this approach will depend on our ability to look beyond Trump’s unconventional diplomatic style to the underlying strategic alignment between Australian and US interests. By focusing on actions over rhetoric, strengthening our regional partnerships, and maintaining our independent voice while working closely with allies, Australia can effectively navigate the challenges and opportunities of this new era in global politics. 

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