Shownotes Transcript
We have before us the opportunity to forge for ourselves and for future generations a new world order. This is Multipolarity, charting the rise of the new multipolar world order.
Welcome everybody to Multipolarity. This week we'll take on a slightly different format as is befitting of the gravity of a single news story that has emerged in the last week. Listeners will hardly have failed to have noticed that US President Donald Trump imposed sweeping tariffs on every single country in the world and
in the last 10 days or so, as you'll be listening to this. Of course, there have been tariffs before. Multipolarity spoke extensively about the tariffs that previous President Joseph Biden imposed on China, especially on the EV and the solar and one or two other industries. But the scale and breadth and depth of these tariffs that Donald Trump has imposed
imposed are of an entirely different order and I think it's fair to say all hell has broken loose. The market reaction has been something close to what's the word? The animal spirits of the market are going in one direction. I think it's fair to say there is a huge amount of volatility across various markets from equities to currencies to commodities and bonds as well.
In addition to that, there have been strategic ramifications because, of course, these tariffs do also affect allies, including the United Kingdom, who got away with only a 10% tariff, but also the European Union, which was higher, and perhaps most importantly, countries in Southeast Asia, including Vietnam, Japan, the Philippines, and others in that strategic theater too.
Finally, of course, China has in fact responded to these tariffs. It has imposed tariffs on the importation of US goods in return. I believe I'm right in saying that it's also cancelled, banned even. I need to get a grip on this new story. LNG has been stopped mid-Pacific en route from the United States to China. China is looking at redirecting some of that to the European Union.
So perhaps Philip Pilkington, our resident economist, you can give us a brief overview of what's happened so far with the tariffs, with the markets, some of the likely economic outcomes, and then we can take this show from there. Yeah, I think the first thing to say is, well, you've already said it, this is a whole different game. This reminds me of the old Marx phrase, I think that quantity has equality all of its own. Maybe it was angles, I'm not sure. But
That's the nature of the game here. Obviously, we've been talking about tariffs and sanctions and so on that were imposed by the first Trump administration. And then, as you say, by the Biden administration, he tended to be more aggressive than the first Trump administration. And we've been broadly critical of them as being ineffectual and speeding up American decline in a sense, speeding up lack of competition in the economy and so on. And all of that's completely valid. But
Doing those kind of piecemeal tariffs on certain sectors is a whole different game from engaging in a full on trade war. Not quite, but that's the direction we're heading in.
So it's a completely different order of magnitude. And comparing the two things is like comparing apples and oranges. It's not to say that some of the criticisms that we had of the Biden or the Trump Mark I tariffs don't apply to the full-on economic nuclear war, as Bill Ackman, the hedge fund manager, called it, which is pretty apropos, to be honest. It's not that some of those criticisms don't apply, but we're just dealing with a different entity here. We're dealing with a completely different entity. The analogy that you might draw is...
The difference between a street gang member using an AK-47 to shoot up some rival drug dealers versus arming an army with AK-47s to fight an actual war. Like, the two things are functionally the same tool, but you're talking about something completely different, obviously. And that's what we're dealing with here. It is as dramatic as people are saying it is. We can talk about it further, but the headline ramifications of it is, well, number one...
Globalization's probably finished. Even if Trump takes this as a point of negotiation to talk about further trade issues or whatever, they've made a pretty firm commitment, which we might talk about in the so-called equation gate, as I've called it online, with this equation that the White House has put out to rebalance trade. So the new target is rebalancing trade. So even if they engage in negotiations and so on, the new target is not autarky per se, but...
full balanced trade, which is kind of a theoretical autarky in a sense, given where we are now. The other big thing that stands out is Wall Street is probably finished. I think the Trump administration has just thrown Wall Street under the bus. Again, we can unpack that a little bit, but the TLDR version of that is Wall Street largely exists to recycle the dollar surpluses that trade deficits create.
And although the stock market meltdown isn't a conscious recognition of that by every trader on Wall Street, it will be read retrospectively as that. This is probably the end of the Wall Street model. I mean, I've been saying Wall Street probably has to shrink back to a simple banking sector in a world of trade balance, maybe 20% of its size or something like that. And then the third big headline thing that stands out is...
China's basically put itself on a war footing. I don't mean that they're going to invade Taiwan or they're going to attack American ships, but they are currently engaged in very heated nationalist rhetoric. There may or may not be an army of bots unleashed on Twitter that attacked me yesterday for trying to be reasonable.
Hello to my Chinese listeners. Please don't send the bots after us. We're friendly. They've put that in place. Reminds me of NAFO. And Xi Jinping is going out and saying in a speech that, you know, we're not a pond, we're an ocean. And a wind can't impact an ocean. It can only impact a pond. And he's clearly digging in for a fight. The Chinese have interpreted what's happening as an act of war, not in terms of people. They're going to exchange fire. They're going to exchange nukes or anything like that.
But they've taken it as a sign that the United States is engaged in a very strong hybrid war against China. And the implications of that are going to be absolutely profound. Because if people want to underestimate China's capacity to wage hybrid war, the Chinese have plenty of tricks in the bag, I'm sure, some of them economic and some of them otherwise. So those are the three things that stand out as the three big changes that we're probably going to see in the coming years.
I think to start, Philip, you mentioned that we on Multipolarity have or did indeed criticize the tariffs that Biden placed on China. And we said that they would be counterproductive. We said that not only would they fail to achieve what Washington or what the Washington elites had hoped,
But in addition to that, they would create a monster. They would create a golem. They would create a very powerful Chinese chip sector because, you know, the tariffs were focused on all the trade restrictions were focused on chips. In addition to that, tariffs were placed on things like electric vehicles, solar panels, pharmaceuticals, etc.,
And what we argued was that not only would they fail to protect the US market or fail to encourage reindustrialization in the US, but in addition to that, what they would do is they would encourage and supercharge the ongoing efforts within China, first of all, to develop an indigenous chip industry, an integrated chip industry.
In addition to that, it would hand China large potential markets for their EVs and their solar panels elsewhere in the world. The second way that we criticized the tariffs and trade restrictions that were placed on China by the Biden administration was
was we said that they would end up playing a game of whack-a-mole as the Chinese redirected some of these goods that were bound for the US through third countries and eventually sent them to the US anyway. Places like Mexico, Vietnam, Colombia, wherever it was.
And every time the U.S. Treasury or the U.S. Trade Department discovered that this was happening and placed restrictions on those third-party countries, the Chinese would just reroute them elsewhere. And it would, as I said, be a game of whack-a-mole. So I would make two points about the Trump tariffs. The first would be that because they're so sweeping, rerouting goods through third-party countries is probably no longer viable.
Vietnam, for instance, which as far as I understand, has been a hub for these kind of third-party exports and certainly is a hub for the assembly of Chinese fabricated goods. You know, the Chinese will design them and fabricate them and then the Vietnamese will kind of lock them all together and then export them. But Vietnam, I think I'm right in saying, has a 46% tariff. And although they're negotiating on that point at the moment...
it's certainly going to restrict their ability to be a third-party country. And you could say the same about a great many of the countries that had been these kind of third-party export countries for China insofar as its exports to the ultimate exports to the United States. So is it not the case that in that sense, at least, the Trump administration
tariffs have a much greater chance of success in terms of protecting the US market from inexpensive Chinese competitors. And the second question would be, because they're blanket across all Chinese goods, it's not like you're allowing the Chinese economy to flourish, but at the same time targeting one industry so that they can redirect resources into generating their own vertically integrated industry in that sector.
But you're targeting the whole economy. So you are, to a certain degree, squeezing the Chinese economy and making things tougher for them. And because China is a surplus country, it doesn't hold as many cards as the US, which is the deficit country. If they keep increasing tariffs on each other in an endless cycle of tit-for-tat and eventually get to a point where no trade is viable between the two countries, it's surely the United States, which...
Although it would suffer greatly, it would benefit more. So those are the two initial questions I've got. First of all, it gets around some of the problems that the previous administration had in terms of truly restricting trade between China and the US by hammering all countries and therefore making third-party transactions more difficult. And secondly, it does indeed squeeze the Chinese economy further
While at the same time giving the US the upper hand given it's a surplus country Yeah, I mean it definitely avoids the made in Vietnam scam in a sense made in Mexico scam Because a new targets been set and the target is closing trade deficits And so if you reduce the trade deficit that the US is running with China by rerouting products through Mexico or Vietnam the
the formula, in a sense, the equation will automatically cause you to just try and close the trade deficit there. So we're in a completely different world. I guess we didn't expect this or I didn't expect this. I'll speak for myself because it's a bit of, you know, tacitus. They make a desert and call it peace. I just did not believe it.
believe that they'd do something this radical because it's so risky and could cause such an enormous amount of damage to the United States in the short term.
In the long term, could it promote American industry? Well, I mean, if tariffs are 100% or whatever they're talking about on China, at a certain point, you will get a return of domestic industry. We don't really know how long it would take to get the skills and so on. So that's what I mean by it's an extremely high risk strategy. But anyway,
In terms of making tariffs work, if you're like an ideological tariffist, this is certainly how you do it. This is the kind of communism in one country of tariffs, in a sense. And so if you impose them in this way, they will choke off imports, almost certainly. They might have an impact on your exports as well through currency revaluations or counter-tariffs. But of course, I mean, we can talk about that down the line. That's another issue.
But yeah, I mean, the short answer to your question is it does get around the quote unquote made in Vietnam issue, the whack-a-mole issue. But it gets around the whack-a-mole issue by launching strategic nuclear weapons in trade terms. You know, you can always crack the nut by launching a nuke. Second point on China.
So I said already that China's gone into almost a war footing, which is actually really scary. Again, not because there's going to be a war where they're going to launch nuclear weapons, but provoking a country like China into hardcore nationalism and potential hybrid war mode is just kind of terrifying in and of itself. I don't really know what to expect from that. I can't imagine it's anything good. I'm kind of glad I don't live in the United States, to be honest.
But, you know, provoking them into that mode is kind of, you know, not great in and of itself. But I've been kind of trying to say on Twitter, because the Chinese party line, Xi came out and said, a storm, I think he said, can only affect a pond, but not a sea.
And China's a seed. That's what he's getting at. And I think he's alluding to the fact that the US may be increasingly a pond in economic terms, which is also probably not unfair, terribly unfair. The issue is that the tariffs will impact China. China are not the trade surplus mercantilist economy that was running 8% or 7% current account surpluses relative to their GDP as they were in the 2000s, in the George W. Bush period, the post 9-11 period.
At that point, if you'd imposed these types of tariffs, the Chinese economy would have effectively been brought to a halt to a very large extent. That's not the Chinese economy anymore. First of all, because it's not running as large trade surpluses. It relies more on domestic investment and to a certain extent consumption too now than it did back then.
So doing a massive tariff nuclear war only has a certain limited amount of impact on them. The second issue is of that trade surplus, significantly less of it is currently going to the United States.
Nor is it going to Europe, for example, which in theory, although I don't think they will, could, again, in theory, be convinced to kind of do secondary tariffs or something like that so that America doesn't tariff them or something. We'll see how it goes.
But actually, a good deal of the trade surplus that China's currently running is with the global south, which probably trades at this point more with China than it does with the United States. Any pressures that the Americans try to put on the global south or the developing world, emerging markets, call it what you want.
will just be a simple ledger calculation done by these countries and they'll realize that they're better off going with China. Also, China's not imposing aggressive terms on them, makes China more popular. But in saying all that, and what I've just said is basically the line that the Chinese government is taking as far as I can tell,
It's 80% true, maybe 75% true. The other 20-25% is it will hurt China. It will actually disrupt their trade model. And it introduces a major amount of uncertainty into their strategies moving forward because tariff fever could catch on. And if tariff fever catches on around the world, that's a big threat to the Chinese business model.
China have already come out, as far as I understand it, at least in their domestic press, which I have been watching, and have said that they're going to finally start rebalancing to domestic consumption. They've been talking about it for years. This has been the trigger to make them do it. And I think no matter what happens in the trade war, they'll just realize the time has come.
So I think even though the Chinese public face is hardcore nationalist holding an AK-47 and marching in effect, and we should take that seriously, please take that seriously if you're listening. You have any influence over these events? They are not kidding.
But behind the scenes, the rational calculators are like, okay, we've pushed those trade surpluses as far as they go. It's time to boost up domestic growth. But there is a risk that for the Chinese that this introduces a great deal of uncertainty into their model, which the Chinese don't like.
And it also probably would, without counterbalancing effects, shave a few points off their GDP, like 2% growth maybe in a year, which would make them miss their growth target, which is very important for the Chinese government to hit. In fact, I think part of the reason that we're seeing an explosion of Chinese nationalism at the moment is that the Chinese government are preparing their population in case some of those growth targets aren't hit.
In which case they can say, okay, economic growth hasn't been great this year, but, you know, the Americans are at war with us in effect. Again, if you're listening to this and you don't understand what has just been triggered in China and you have any influence over these events, please pay close attention. This is incredibly dangerous stuff. It's not a joke and it's not being taken as a joke by the Chinese.
But even without that, if they miss by a point or two, I mean, one to two percent of GDP growth a year, they'll have to reflate the economy through their kind of big investment tops or whatever. And I think most of the Chinese government know that they don't really want to do that. It does tend to create kind of overinvestment and so on. And actually, Xi Jinping has made it a hallmark of his new economic and social policy to not do those things.
big ticket stimulus programs. He was the one that ran the anti-corruption campaigns that cleaned up a lot of the mess that the previous stimulus created. And so for Xi Jinping to go and start reflating regional property markets or stuffing money into local governments, as they did after 2008, would be a big loss of credibility for him because he's kind of come in as the stern anti-corruptionist leader
you know, we need to get back to competition. We have the best TVs in the world kind of guy. So this has created enormous problems for China, but they're just not of the magnitude as this could create for the United States and the West, not in terms of economic disruption. But they've triggered this really hardcore retreat into Chinese nationalism that we're seeing in China right now, that you're seeing on the internet. And
I really, really hope American policymakers take this seriously. This could go in a really ugly direction if it's not managed properly. On the question of uncertainty, I think one of the issues that I found is that nobody quite can seem to settle on an argument for the tariffs. As far as I can see, there are three possible arguments you could make for imposing the tariffs. And in fact, different people...
whether in the press or within the Trump administration itself or some of the Trump administration's media outriders have made three different arguments for the tariffs. The first is, as you say, is a tool of rebalancing trade, essentially. It's saying that we run this huge trade deficit. We view that as problematic for a variety of reasons.
And we're going to close this trade deficit with tariffs, basically by making it much more expensive to buy imports, thereby making the U.S. produced goods more attractive and closing the trade deficit that way. The second argument is that it is a means of raising cash, essentially.
It's a means of, I mean, the U.S. government is running, what, five and a half, six percent fiscal deficits at the moment, which shows a huge amount in peacetime. Primarily, I mean, Trump was guilty of this in his first term in office. But, you know, the Biden overspending, the Biden efforts to juice the economy with fiscal, with big fiscal deficits has really put the U.S. in a pretty bad position. It's the sort of position that
That a country that didn't have the exorbitant privilege of the US dollar and didn't have the awesome strength and depth and breadth of the US economy simply wouldn't be able to cope with even for a few years, let alone the number of years that the US has been running these wartime-sized fiscal deficits.
So one argument is that, like, look, these tariffs will raise a lot of money, essentially. And we could use that to be a little bit more fiscally responsible. It's an argument I've heard made. The third argument is that it's a negotiation tool. It's basically, you know, putting a gun on the table. It's basically saying, look, we've been talking and complaining about these big trade distortions, which really are very, you know, grotesque.
these big trade distortions for a long time and nothing's really happened you know the eu is still running a trade surplus led by germany although that's changed since the energy the side of things has changed due to the the sanctions the eu placed on russia but certainly china has been running these big trade surpluses against us we've been talking and talking and talking and
nothing's happened across the negotiating table. So here's a loaded gun and I'm going to just put it down on the table so everybody knows I've got it. I'm not going to threaten anymore. I'm going to do it. Now, two of those arguments are really about kind of re-industrializing America, about dealing with some of the problems of the so-called hourglass economy where you've got like a big fat kind of working class slash underclass economy.
a thin like a narrow slim middle class and kind of skilled working class than a big fat
upper class, a big fat elite rich part of society. So it's about kind of rebalancing that. It's about bringing manufacturing back. It's about bringing blue collar jobs back. It's about bringing well-paying manufactured jobs back, which themselves are easier to make productivity gains. So that should be good for the economy. It's about making America's economy fairer and more stable and more sustainable.
And both of those can be achieved by the gun on the table negotiating tactics or tariffs as a negotiating tactic or tariffs as an automatic rebalancer for trade surpluses. But those two potential arguments are completely mutually exclusive to the raising cash side of things. Like if you want to raise cash from this, you can't do that by bringing trade back into balance. You can only achieve it
by essentially maintaining the current size of the trade deficits or reducing them only a bit, but keeping these tariffs. So why do you think they've done this? Which one of these arguments do you think is correct? Why do you think they've done it? And why the confusion about this? I think what's happened here basically is that Trump won't mark one. Everyone kind of knows that at this point was surrounded by kind of hostile advisors and people who didn't really believe in his vision or whatever.
Trump Mark II has a lot of sympathetic advisors, people who think the same way as him and so on. And some of them are very talented people, actually. This isn't a bunch of kind of suck ups or anything like that. I don't want to make it out like that. But the point is, I think there's increasing evidence that Trump has basically decided on two things. First of all, well, maybe three things. First of all, globalization is a bit of a crock.
for America, the current form of globalization that rests on American getting ripped off, as he'd say, we might say trade deficits, which there's probably a lot of truth to. And I think he sees the solution to that as tariffs. He calls himself tariff man and so on. And I think he's attracted a bunch of people around him who agree with his assessment of globalization, that the current structure of globalization is
The current way the globalization is being done is not good for America because America basically foots the bill for the whole thing and goes increasingly into debt, sees its society and economy rot due to deindustrialization, sees Wall Street bigwigs making absolute fortune recycling surplus dollars. It's an awful system. It is a truly awful system. And the fact that it's provoked a revolution is not surprising to me. I've got a lot of sympathy with that.
You know, I come from a pretty working class place in the UK, in the northeast of England. And I remember when I was growing up in a place called Wall's End, we would walk down the high street, what Americans would call Main Street of a suburb or, you know, a small town.
And literally towering over the buildings, I would see great ships being built on the shipyards. And I remember as a little boy seeing these ships towering over the two- and three-story buildings as they were being built on the great shipyards like Swan Hunters. That's all gone. It's all disappeared. And, you know, it's the same for all of the other heavy industry in the Northeast side. A few miles down the coast used to have one of the finest and biggest chemical industries in the world.
And it's just been decimated. Now, I'm not saying that's all due to globalization, but surely part of it has been to indifference of government about what's made by whom and where.
and that has created all kinds of problems for communities in the area that i'm from these communities which used to have pretty tough lives working in sometimes dangerous industries and certainly physically taxing and physically polling industries but they had a really tight-knit community spirit which had a certain degree of romanticism about it so i've got a lot of
sympathy with the arguments that I'm sure JD Vance would make that the current system of financialization and globalization that's seen these kind of communities decimated is
To the benefit of a kind of knowledge class elite clustered around the financial sector, which has grown fat beyond all comprehension on dealing with the financial flows. That, to me, is a pretty instinctively, if not intellectually, instinctively, it's kind of a persuasive argument, Philip.
Well, this is what I'd like to say if we have any Chinese listeners. What the Chinese are missing here is that the trade policies that they've been running for years has actually provoked a revolution in the United States. That is exactly what's happened. And sorry, guys, you bear some responsibility for that.
And, you know, you push a society far enough, it'll become revolutionary. And that's what's happened in the United States. So I think really the Chinese need to actually understand that. I think there needs to be a lot of mutual understanding right now rather than this retreat into extreme nationalism and war, hybrid war or whatever. But yeah, it's inevitable. If you push a society that much, it'll eventually become revolutionary. And that's 100% what's happened in the United States recently.
But to get back to how the sausage has been made, I'm only guessing here, but I think the guesses are probably pretty broadly accurate. Trump's diagnosed the problem. He's got a lot of supporters who see the same thing that he sees, that you see, that J.D. Vance sees, and they coalesce around him. Ultimately, Trump's a big dog kind of guy.
gives off big dog energy and everyone sits down and they have to do as tariffs. They could come up with other ways of de-globalizing or rebalancing trade or something like that. But at the end of the day, like it's Trump's call. He's the big dog.
And he says tariffs. So I think the team go away and they beaver away at how to do tariffs. And basically, I think the person that's most responsible for the current structure, not for the tariffs themselves, that's probably Trump and people like Navarro and stuff like that, who are also kind of just ideologically tariffists, as it were.
But the trade rebalancer crowd center around the arguments made by Stephen Moran, I think, who's the head of the Council of Economic Advisors. He used to be a senior strategist at Hudson Bay, had a somewhat similar job that I used to have in finance. We come from remarkably similar backgrounds.
But Stephen Moran wrote the kind of paper on how to deal with how to implement these tariffs and so on. If you read that paper, what you'll come away with is Stephen Moran probably believes in rebalancing trade, but he's a pragmatist. He's just kind of laying out the tools that you can use to get it done.
But I think the tariff option has basically been chosen because it's Trump's thing. It's like Trump's been into tariffs for a while. And although it might not be the ideal option and it's causing all sorts of problems, what I'd say optimistically, if you're a little bit terrified of what's going on right now, and probably rightly so, is that it might not end up being the final product.
They might see that the tariffs cause such disruptions and cause such problems that there might be other options on the table. But I think the reason that this has been put into play is basically because Trump is into tariffs. And so the court whisperers know that they may have other ideas about how to do this, more sophisticated ideas. But ultimately...
They have to become court whisperers for tariffs. And that's often what happens in politics. If you have a leader, a very charismatic leader with a vision of his own, you try and kind of squeeze in the way you think you should do it around the corners or around the edges. You can't really challenge the big dog directly and go, well, you're totally wrong on tariffs. Here's the actual way of rebalancing trade.
So I think that's basically what's happened. In terms of what they are actually for, all the stories that are mushrooming up around it are just stories. They're just gossip. They're just people putting their own interpretation on it. What the tariffs are for has been stated by the equation that I keep talking about that was released by, I think it was the Council of Trade Representative, but the White House promoted it. And that equation looks like it has Moran and his, Moran's hands all over it, or Moran and his team. And
And that equation is just tariffs or currency devaluations or any other method that they use to close the trade deficit will be targeted at a country relative to the size of their trade deficit. It's literally as simple as that. You have a large trade deficit, you get hit with a big tariff, a big devaluation, etc. And the only thing that we're really interested in there is closing the trade bonds.
And to be honest, the equation has got so much flack on Twitter. Lots of that is a concerted public relations campaign, I believe, coming from Wall Street because they're terrified of the implications of it and they want to besmirch him around and so on. He used to be one of theirs. So was Scott Besson. At the end of the day, if you look at that equation, you're like, no, that is the correct framework.
That is exactly how they should be thinking about this. I'm not saying that the actions that they're taking are the actions that are correct, but I'm saying that if they're interested in rebalancing trade, reindustrializing the United States and stopping it run up so much debt, yes, the way that you do that is through a framework of trade rebalancing.
So in my opinion, the equation, as it were, is actually a huge step forward. But the reason that it's being exclusively interpreted right now in terms of absolutely enormous encompassing tariffs is because the big dog, the big dog likes tariffs. That's why. So what's likely to be the effect, Phil? Because there's been some strange things happening on the market at the moment, on the stock market, on the bond market, etc.
What I approximately expected was this when the tariffs were announced. I thought that there would be a short-term inflationary spike, but then that would work its way out over a year. You know, it would be like a one-off lift in the price of certain goods. And it wouldn't be all goods, of course, because not 100% of goods in the U.S. market are imported. So it would be a small spike in inflation.
But obviously, you're not adding new tariffs, extra tariffs on every year. So that would work its way through pretty quickly. In addition to that, I thought that the price of commodities like oil and aluminium and copper and steel would decline a bit because the market would price in something like a global recession or lower global growth based on these. I thought that...
equities would take a hit because they were already quite vulnerable given their lofty valuations and the fact that they were already starting to roll over after the Chinese artificial intelligence shock with companies like DeepSeek and Tencent and others releasing their own versions of AI. And the third thing I thought would happen was that
The U.S. bond market would actually gain ground, the U.S. treasury market, the market for sovereign debt of the United States, because I thought that, first of all, the dollar would gain in value, which would make them more attractive. But also, you would see some kind of safe haven effect when other markets like commodities and equities, stocks and shares, that is,
start to get jittery when the market goes into a so-called risk-off mode. You get this safe haven effect where investors start to move defensive. They want to defend their money rather than maximize the profit that they make, the return they make on it. And they shift into things like US Treasury bonds. But that doesn't seem to have happened. First of all, there's been a really big hit to the stock market. And secondly, the yield on US Treasuries is actually going up
rather than down, which indicates that the safe haven effect isn't happening. The bonds are getting cheaper, not more expensive. So what's happening, Philip? Why has this had that effect? Well, I'll talk about energy in a minute because I think that's actually a separate issue. But look, it's a mess. They've created a giant mess in the markets. The markets no longer make that much sense. And the meta reason for that is twofold. Well, first of all,
somewhat geopolitical, that this is really the beginning of the end of the US dollar as the world hegemonic currency. And by the way, Stephen Moran, who I talked about earlier, put out an article, I guess, or a statement on an official government website as the head of the Council of Economic Advisers, saying that the reserve currency status of the dollar is
was actually problematic. So there might actually be some conscious self-awareness of doing away with the US dollar as the global reserve currency. Personally, I think if that's done in a reasonable manner, that probably is a good thing for America. I've long thought that, but I've always thought it should be done in a controlled manner.
what's going on right now is not quite controlled, sadly. I mean, the reason that they're just, you know, to go into the details slightly, the reason that the bonds are selling off rather than the interest rates going down is that they're pricing in inflation. There was some rumors online that the Chinese were dumping government debt. I've looked as far as I can. There's no current evidence of that. So it's domestic investors offloading.
creates an unusual situation where bonds are selling off at the same time as stocks. That is unusual. They usually move in opposite directions, but it's not completely unique. It's just a kind of crisis event. Volatility in the stock market right now is absolutely nuts. You can't really trade the stock market at the moment. You get kind of wiped out even if you're right. It's one of those weird situations where people are losing their shirts even though they're making the right call just due to the insane levels of volatility.
So, I mean, that's pretty much what's going on. It's complete chaos. And really, at a meta level, what it represents, well, first, it represents what I just said, the beginning of the end of the reserve status of the US dollar, which you're certainly seeing in some dollar weakening, as you said, although, you know, we shouldn't make calls too early. Dollar might strengthen. It might well strengthen on the back of the tariffs to eliminate the tariffs themselves. That might happen. We don't know yet.
So at a meta level, on one point, it's probably the decline or the increasing rapidity of decline of the reserve status of the US dollar. But at another kind of meta level, I think we're seeing the death of Wall Street, because no matter really what happens here going forward.
Even saw a headline pop up there that Trump's frozen the tariffs for 90 days or something. We'll get lots of this back and forth. I wouldn't pay too much attention to it, really. The fact of the matter is that the US has signaled that it's willing to go big. And you can't unsignal that. And they've signaled that they're intent on closing these trade deficits. And this will become normalized over time.
Not least because the US actually does have to do this. I think I said at the beginning of the show, if this stuff hadn't happened in this past week or two, it would have inevitably happened in the next five to 10 years over time. Trade deficits would have largely closed. US dollar would have lost its hegemony and so on. So we're only changing the speed here, not the direction of travel.
And the fact that the Trump administration has been willing to step on the accelerator is what spooked everybody. Because what used to be a theory that you and I would talk about in the show or I'd tweet about or I'd write articles about or whatever has now become reality. And it's woken up all the kind of people who quote unquote live in the real world. It's all a reserve status or just like navel gazing or whatever. It's kind of woken all those people up, the practical people or whatever.
But ultimately, in a world of balanced trade, which is where we're going to move, that does not mean no trade. It just means that imports and exports have to cancel each other out largely to a large extent. In that world, as I said at the beginning of the show, 80% maybe of Wall Street employees or City of London employees or finance employees in general, they don't have a job.
Because their job right now is to recycle global dollar surpluses in effect and sterling surpluses to a certain extent as well. That's their job. And once that's gone, once you go back to a period of relative free trade, relative balanced trade, you won't have that anymore.
That's why the finance sector exploded after 1971. The real reason is because when Bretton Woods ended, when the peg to the dollar ended, massive trade imbalances could be run and huge amounts of dollars could be sent into the global system. And lots of guys opened little offices in New York and London, which recycled those dollars. That's precisely what happened.
So I think the chaos in the markets right now, I'm not saying again that everybody in the financial markets is turning around to each other and saying, oh, no, we're on the menu now. They don't understand that. They don't understand the ramifications of these things, especially given the fact that a lot of the people who are currently in the city and in Wall Street are not as intelligent, frankly, as the people who were there 30 or 40 years ago when it was an up and coming industry. There's a problem with that, too. But I think they instinctively sense it.
They instinctively censored because...
Donald Trump clearly doesn't care that much and the people around don't care the people around him don't care that much about the value of the stock market which is completely different to how it was say in the late 1990s early 2000s when that so-called Greenspan put was in place and any time markets would have a fainting fit or whatever Alan Greenspan would get in would would stand up and he'd you know talk the markets up and then he'd get a big hug by whoever was president and
Those days are over and those days are over for multiple reasons. Part of it's due to this rebalancing of globalization, but part of it's also due to the fact, A, Wall Street's not that popular anymore. It's not really a leading industry. People go into tech now. They're not that interested.
And B, what's left of Wall Street? It's a big sector, but it's a lot more mediocre a sector than it was 20 or 25 years ago. What's left of it doesn't know which way their bread is buttered. And they back the Democrats. So Wall Street's actually backed the Democrats this time. And so they're a disposable industry from a political point of view. They don't have the political chops that they did 20, 25 years ago. It's mainly filled with kind of mediocre middle management type people.
DI, pumpers, these kind of people. It's become a very stale, stagnant corporate environment, and so they don't even know how to play the politics properly. I'll remind people again that the City of London backed Rachel Reeves to be Chancellor in Britain. Nuff said, okay? So these people aren't the kind of types that would pick the winners in politics and
and see the trends in politics. No, that's the tech guys now. So for all these reasons, Wall Street's being washed out. But I think you can pretty much see the stock market sell off and the craziness in the bond market has kind of a microcosm of that process. And I think it'll be read like that in the economic history books. Sorry, I've never done this before, but I am the breaking news bar and we interrupt this episode of Multipolarity to bring you the news out of Dallas this morning.
Trump has imposed a 90-day pause on the tariffs as we've been speaking. Live reactions, anyone? Well,
Well, the Trump put just hit, didn't it? We're doing something totally different on the show. We'll run with it. I just mentioned it there. I saw it. The direction of travel is pretty much set. You can't really set put the genie back in the bottle. The market can rally a little bit on the back of a 90 day pause. They can do that for now. That's fine. And I just saw the market. The market rallied because my shorts just got absolutely nuked. What Trump did with these tariffs is he set a meme in motion and you can't un-meme it.
So even if it's 90 days, everyone now for the next while will be debating what's going to happen over 90 days. You're just slowing down the process. And I don't think the Trump administration can come out and say we're completely going back on this. We're pro-globalization.
Let's go back to normal. You can't do that. So all these I'm not diminishing the importance of the fact that they've said this. It is very important. But the only thing I'd say to listeners is, look, the trains on the tracks now, there are no brakes on this train anymore. You can slow it down a little bit by kind of throwing something under the wheels as they've just apparently done a couple of logs or whatever.
and the stock market can rally and so on. Globalization is going to end by hook or by crock. That's the signal that's been put out. I also think it's somewhat unfair to lay this entirely at the feet of Donald Trump. We wrote on our Multipolarity Substack, and we actually spoke about it on the podcast as well, that when Biden imposed the tariffs...
the electric vehicles and the solar panels and the pharmaceuticals and the personal protective equipment and all of that sort of stuff on China we said at the time that the press even the financial press was missing the main signal here was getting caught up in the noise it was talking about
trade deficits and China's mercantilist policy and currency and whether it was undervalued and how sustainable China's policy was in the long term anyway. All of the sort of things actually that we're still talking about now. But the signal at the time was that Washington's, the elite in Washington had simply decided that they were no longer going to play by the rules by which the international trading system
Has been run since the end of the Cold War and then did the Western world for longer than even that and which Washington Had itself set they had already been hauled over the coals by the World Trade Organization and found in breach of WTO rules and the US response to that wasn't to adjust to fit in with the WTO which by the way was an organization that
that the United States fought tooth and claw to bring into being. It didn't acquiesce to the WTO or it didn't challenge the WTO. It simply blocked appointments to the WTO's appellate committee so that no punishment could be passed because no punishment committee could be convened.
It's as simple as that. Washington had signaled through the tariffs and through some of their other behavior that it simply wasn't going to play by these rules anymore. And therefore, that old system was dead.
Trump has removed all doubt. What he's done in his inimitable style is removed all doubt. He's taken the steps of imposing sweeping tariffs. Washington had already signaled to the world that this was the case, and whether the press covered it or not, or whether much of the world was in denial or not, that was the case. Essentially, as far as I can see, Philip Pilkington
The US has decided that the old empire, the US imperium that has sprung up since the Second World War and has expanded massively after the end of the Cold War is no longer worth the juice that they get from the effort of squeezing the orange, right? It's no longer worth it. The US has moved from acting as an imperium, from acting in a way that prioritizes the system
And the sinews and the muscles that keep this kind of postmodern empire, this economic imperium propped up, it's gone from favoring policies that do that to favoring policies that prioritize its own security and its own economic interests as it sees them. What America is starting to do is act more like a nation again rather than an imperial center again.
It has done in the past and I think that this is something that's been signaled, you know long hence This isn't something that's new and perhaps people are finally getting the message, but this is obviously gonna have huge strategic implications because as we've said before on the podcast one of the very underappreciated aspects of free trade and globalization was that although it benefited
a great many very powerful interest groups in the US whether it be Wall Street or the multinational corporations or various industry sectors or influential economists who tended to be in favor of such policies. Although it did indeed benefit those people and although it did indeed make a lot of people incredibly rich and powerful
The underappreciated aspect of trade policy is that it was also a strategic policy. The idea was that by opening up the United States market to, say, Vietnam, the U.S. could gain influence in Vietnam. It could guide the sort of economic development it would pursue, and it could draw a country like Vietnam together.
into the US orbit. Trade policy was a very important component of US grand strategy. And what's happening at the moment is that that's all being upended. You have all of these countries in the Western Pacific, countries like Vietnam, Indonesia, the Philippines, Taiwan, Japan,
Already, their major trading partners, I don't think this is true of Japan, but it is of the rest, their major trading partner is China by a long way. Now, by failing to offer any economic counterbalance to that, and indeed going the other way, essentially shutting the US market off from these countries, what you're doing is you're accentuating that process by which
These countries are assimilated into the Chinese economic system. And once that happens, it's really one step away from coming into the Chinese sphere of influence full stop. So I think all of the hysteria and the headless chicken talk
about, can a headless chicken cluck? I don't think so. This kind of hysteria about what's going on in the markets, what's going to happen with the economy, can this work, will it not work? People are kind of ignoring the strategic aspect here. And I think Philip's right. There's really no going back from this because...
90 days delay, whatever, people have got the message. I think it's the same with Europe as well, actually. Now, there might be no alternative to the US dollar at the moment. I don't think there is a credible alternative to the US dollar at the moment. But now we've focused minds yet again. You know, we had the 2008 financial crisis. Then we had the freezing of Russian assets.
Now we've got this and the Biden tariffs and the obvious desire to move away from the globalised free trade world. I mean, the dollar's taken a lot of blows recently and it's difficult to imagine a world in which major countries which may geopolitically conflict with the US over coming years or think they might...
or countries that are aligned with the U.S. largely, but are powerful enough to do so. It's difficult to imagine a world in which those countries don't start exploring alternatives to King Dollar. No, 100%. Look, what's just happened will go down in history as the beginning of the winding down or rolling up of the U.S. empire. And with it, the dollar and all the other institutions that matter are
And what we've definitely seen in the past few days, again, it doesn't really matter if they reverse or they alter the policies or anything like that. What we've seen is a U.S. administration signal that they're no longer interested in this empire, that they're no longer interested in this global arrangement because it's not benefiting them very much anymore. And wait for it. The whole political scene is going to jump on this. I don't want to get too much into American politics. Let me just say this.
The left in the US, the Democrats and so on, have been waiting for something that would be good enough for them to coalesce around to oppose Donald Trump. And they haven't got it until now. They're coalescing around this issue, the tariffs, the economic fallout from it, the Wall Street meltdown and so on.
This is a catastrophe for them. It means that the Democrats are aligned with Wall Street and that they're coming out and saying that they're pro-globalization. Most of their base doesn't agree with this. They may be able to fool them for a little while into thinking that supporting stock valuations and globalization and Chinese trade
trade into America. They may be able to trick them for a while into thinking that this is some partisan issue tied up with LGBT rights, but it won't last. It's like going back to the mid-1990s without those vibes, with this kind of decline vibe going on in America and going, yeah, we're pro-globalization. Like, that won't last. The fact of the matter is that the Trump administration, no matter what they do next, has let the cat out of the bag.
We've been speculating for a long time. It's not just us, but I think we have been at the forefront of this, and I think we can pat ourselves on the back with it. We've been speculating for some time that the US empire is actually coming to an end. It's part of the transition to multipolarity and so on. I'm not saying that we've had the massive impact on telling people that that's happening, although I think we have been part of a fairly small group of people who has been saying this and whose ideas have caught on.
but they have caught on. They really have in Democrat and Republican circles. The Democrats are just currently being quiet about it because they want to use this for opposition gain, but those are short-term issues. Those are like trading intraday volatility on the stock market. They're not like investing in companies. And if you want to win politics in the long run, you don't trade intraday volatility, you invest in political companies, right?
And that's exactly what's going to happen here. The Trump administration has just come out and it's let the cat out of the bag. Trump's very good at doing this. He's very good at kind of bringing all this stuff that's been chattered about in private.
And then dumping it out for all the neighbors to see, fighting with his wife outside on the lawn so that all the neighbors can see. That's what Trump does really well. And he's just done that for the political, the high level political, geoeconomic, geopolitical conversation in the U.S. He's just had the fight on the lawn and all the neighbors have seen it.
The neighbors aren't going to forget that. And nobody's going to forget that. And the wife's not going to forget that. And the husband's not going to forget that. So it's done. It doesn't really matter what you do next. You've set a chain of events in motion now that by the end of the Trump administration, it will be pretty clear, if they haven't largely wound down the empire by then, that the process of imperial unwinding is beginning.
That's exactly what we're seeing. And no matter what happens from here on in, unless Trump gets down on his knees in front of the American people and says, please forgive me for questioning globalization. I love globalization. We should all love. Unless something like that happens, which it won't. And even if it did, he might just like find himself replaced.
We like globalization is now seen as bad, right? By all the political class, no matter what posturing they do to try and do short term political gains. That is the consensus intellectually. And the consensus intellectually is we have to wind this down.
That's exactly what's happening. So we're on the freight train now of ending globalization, rolling up the US empire, and starting a genuinely multi-polar world. And the real conversation, and if anyone, again, listeners, are involved in policy or anything like that, the main focus now should be on doing that in a way that benefits all countries as much as possible with as little instability as possible.