Presidential elections often represent uncertainty for American businesses. Donald Trump’s victory is no exception. Trump’s restless Twitter fingers and free-trade-bashing bravura, combined with global turmoil, have given many businesses a muddy view of the future. Ian Bremmer, founder of risk-assessment firm Eurasia Group, consults for hundreds of businesses and governments. He recently discussed the dawning Age of Trump with Inc. editor James Ledbetter:
Ledbetter: In your 2015 book, Superpower, you describe three paths for America: Moneyball America, Independent America, and Indispensable America. Where do you see Trump taking us?
Bremmer: Very clearly, Independent. Obama’s big problem was that he kept talking like this Indispensable America guy: “We can do it; Assad must go; Russia must leave Ukraine; we’re going to drive the global-trade order with TPP and the TTIP,” and all this. And he just did not have the ability to follow through and execute on any of this. The worst thing you can do is create high expectations and consistently fail. Vastly better to say, “We’re really going to focus a lot more on the domestic environment. We still have global interests, but they’re narrower.”
Independent America is not the same as Isolationist America?
Isolationism is really not in any way feasible in a world where we’re all economically connected and interdependent. Any business person understands that. Unilateralism implies that we’re really focusing, in a much more transactional way, on what we do and don’t do. It’s the way a lot of countries work. America was always kind of exceptionalist. With Iraq and Afghanistan, where we spent trillions of dollars on failed wars, it’s easy to see why maybe you don’t want to be so exceptional, that you’re not going to create democracy all over the world. The United States has interests. It’s the world’s largest economy; it’s the world’s largest military. It’s less clear to a lot of Americans who have not benefited from Nafta or other trade deals or from anything that the U.S. has done globally that they want the United States to continue to be the indispensable power.
So, in that sense, does the Trump victory represent a kind of honesty, a truth-telling about American capabilities?
On that front, I think it does. When Trump said, “Look, if NATO allies don’t want to spend the 2 percent on defense, why should Americans be doing it?” a lot of Americans replied with “Yeah, he’s right.” A lot of American policy in the past has been like getting ready to kick a field goal, and then being pushed back 20, 30, or 40 yards, and refusing to recognize that we’re out of field-goal range.
Is there a risk in the U.S. pulling back expectations and erasing ideas of exceptionalism on the global stage?
Will the American brand be damaged abroad? Here’s where Trump could become a big problem. You want the Chinese to be so convinced that the American market model is the one that works that they have to buy our Treasuries, be educated at our universities, buy New York City real estate–it would be inane for them to do anything else. And that will in turn give us an awful lot of branding power. In 1991, you went to Eastern Europe and the former Soviet Union and you met people who truly believed that the American rule of law, independent judiciary, free market economy, and political system were to be admired. They don’t believe that anymore. And Trump’s view is “Yup, you’re right–completely hypocritical. We shouldn’t be trying to promote our values, because they’re no different from anybody else’s.” That absolutely damages the American brand.
I take it that you think the Chinese-American relationship could get pretty bad. What are the business implications?
Maintaining a functional trade relationship with China is really important. I’m worried that Trump sees China as a villain. To play hardball with them on both security and economic issues implies that Trump believes that by taking a tougher tone, the Chinese are going to just back down. And that is not true on a whole host of fronts. If you’re going to take a tough line on China, get your allies on board first–he hasn’t done that. Second, the Chinese are in a considerably stronger position these days than Trump thinks. Third, Xi Jinping’s major political transition is coming up in the fall, and in the run-up to that, he will absolutely not tolerate the potential of looking weak. He will overreact from a security perspective and also from an economic perspective. Not to be too melodramatic, but, a year ago, if you had asked me what the possibility was of major armed confrontation between the United States and another big country, I would have said functionally zero. I still think it’s low. But it ain’t functionally zero.
What would economic retaliation look like?
We’ve already seen some of it. The Chinese government has taken steps against an American automotive manufacturer. I could see the Americans expanding what’s considered “national security relevance,” so the Chinese would not be allowed to invest in a broader part of the U.S. economy, and in return they would do the same thing to us. I could see measures being taken by the Chinese that would be directed and specified, particularly in areas in which the Chinese have their own national champions. The broader question would be, could we start to get into a tit-for-tat tariff escalation? That would directly hit the bottom line of U.S. growth.
When you talk to businesses, what are they worried about?
They’re worried about how different life could become under Trump. They saw Carrier, they saw Lockheed, they saw Boeing–what happens if we’re on the wrong side, as a global corporation, of this guy? What do we need to do to make sure that we’re not the ones targeted? Tech firms are particularly worried, because Silicon Valley is not, generally speaking, friendly with Trump. Businesses are worried about protectionism, global trade, what happens when the U.S. seems to be moving in this more populist direction.
If you’re concerned about being on the wrong side, what do you do as a company?
You may not want the China exposure you have. You may want at least an exit plan, if you don’t already have one. Second, if Washington is becoming a place where things don’t get done for you, you need to be thinking more locally–how you’re working with state and municipal governments. You used to think about the United States market. Maybe you need to think about the New York market, the California market. If inequality is going to grow, you might need to have different products and different strategies for different parts of the country.
Do you factor in some really wacky but plausible scenario tied to Trump?
The one that’s more exotic is Trump’s conflict of interest issues, with this multibillion-dollar organization that will only be worth a lot more once he’s president. That implies we need to think about the United States a little more like South Korea. It’s not going to become Russia or China. But if you want to understand how other governments are going to react to [us], you need to look at two sets of policy mechanisms: the official, formal channel; and then the unofficial and informal channels, one of which will be a kind of industrial-policy, state-capitalist system and the other the family. And that’s really wild. You look around in 2017 and you realize that the major driver of political risk in the world is this new U.S. government–not doing things that historically were done, and doing things that historically were not done. We may not want to have the leadership role that we once had, but we’re still the world’s only superpower. The outsize impact of all this stuff on the global economy and businesses is extraordinary.