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Stephen Roach

And so, the blame game begins. Predictably, it didn’t take long for the second guessers of the hindsight machine to throw grenades at Kamala Harris and the Democrats. The media is hyperventilating over what quickly has been dubbed another American seismic political shock. Note, however, that Donald Trump’s apparent 2.5 percentage point margin of popular vote victory is far from historic.
It is time to move on. Acceptance, as they say, is the first step on the road to healing. That’s true not only of the 48 per cent of American voters on the losing side of this election, but true for all citizens in a sharply polarised nation.
But letting go does not mean ignoring the consequences of what happened on November 5. For me, it’s important to think about what Trump 2.0 portends for the global economic outlook, in general, and for the US-China conflict, in particular.
Notwithstanding consensus forecasts for a global soft landing over the next several years, my sense is that the risks on the downside far outweigh those on the upside for three reasons: a sticky disinflation that would prove problematic for monetary policy and interest rates, mounting disparities in the mix of global output, and the political and social repercussions of a world in conflict.
That latter concern seems especially important in the aftermath of this election. Trump is a man of conflict – the ultimate political disrupter. His use of provocative messaging is unparalleled for a major figure in the annals of modern US politics. That’s true not only of the vicious personal attacks he directs at political opponents but also of the extreme positions he takes on domestic and foreign policy.
However, it is important that we don’t get misled and distracted by his rhetoric. That could well be the clever trap he set for the US body politic. By exhausting ourselves through indignation and fact-checking, we risk missing the basic point of his approach – using provocation to dominate the political and policy discourse.


That key lesson of Trump 1.0 is likely to be even more prominent in his second term. He not only has experience to draw on but also a carefully scripted game plan, Project 2025, prepared by a long sympathetic pro-Trump think tank, the Heritage Foundation. Candidate Trump disavowed any knowledge of this effort. Unsurprisingly, soon after the election, the “Make America great again” cult was quick to soften that view.
It is never easy to decipher the implications of “Trumpspeak” for policy. He often says one thing and then, as in the case of North Korea where his threats gave way to “love”, does the opposite. But as an agent of conflict, Donald Trump spells trouble for a vulnerable global economy.
Trump’s fixation on tariffs – his support of up to 20 per cent tariffs on all US imports – introduces the distinct possibility of retaliatory actions from America’s trading partners that could well spark a global trade war. In addition, Trump’s “America first” approach to foreign policy raises equally disturbing concerns of geopolitical instability.
The same goes for the likely impacts of Trump 2.0 on the US-China conflict. It was Trump who fired the first shot in an increasingly ominous trade war in 2018. His latest tariff proposal has a special feature aimed at China – increasing the current US tariff rate to 60 per cent on all imports from China.

I doubt if Trump will go all the way with this extreme proposal but I don’t doubt that he will once again take a misdirected bilateral approach to addressing a multilateral problem by penalising China more than America’s other trading partners.
And that action will have consequences. We know from the experience of 2018-19 that China will not only retaliate but that the Chinese piece of America’s outsize multilateral trade deficit will be diverted to other predominantly higher-cost US trading partners. By singling China out for special treatment, the trade policies of Trump 2.0 are distinct negatives for both nations, separately, as well as for the conflict between them.
Moreover, Trump 2.0 poses additional risks to the US-China conflict that can be found in the 887 pages of Project 2025. For example, the chapter on defence policy calls for aggressive sabre-rattling over Taiwan. The State Department chapter elevates China as America’s greatest threat. The chapter on development aid calls for Washington to “end the climate policy fanaticism that advantages Beijing”.
The Department of Justice chapter calls for a reinstatement of the disbanded China Initiative, which could gravely harm people-to-people engagement between the two countries. The Commerce Department chapter prioritises strategic decoupling with China. The tariff manifesto in the chapter on trade was written by the veteran China basher of Trump 1.0, the until recently incarcerated Peter Navarro.
In looking out over the next four years of Trump 2.0, we obviously need to make the critical distinction between bluster and substance. Only then, can we arrive at objective assessments of the US-China conflict and risks to the global economy.
Unfortunately, there is good reason to sound the alarm on both counts. True to his role as the ultimate disrupter, the conflict man thrives on making extreme threats of instability and volatility.
That is where Trump 2.0 is likely to be very different than Trump 1.0: given that he is now seasoned by eight years of battle, and has no re-election concerns, I would be far more inclined to take him literally today than I did in the past. That spells heightened peril to the US, China and a vulnerable global economy.


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While Trump’s rhetoric and policy sometimes diverge, this time around there may be more reason to take him literally


While Trump’s rhetoric and policy sometimes diverge, this time around there may be more reason to take him literally.


US presidential election 2024

Donald Trump

US-China trade war

US-China decoupling

China tariffs

China trade

Trade

Diplomacy

Defence

War and conflict

United States

Expresses the views, ideas and conclusions of the author. (Eg. Enough of Crazy Rich Asians, think of crazy poor Hongkongers.)


Trump 2.0 is likely to be worse for China and the global economy

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}While Trump’s rhetoric and policy sometimes diverge, this time around there may be more reason to take him literally

While Trump’s rhetoric and policy sometimes diverge, this time around there may be more reason to take him literally