Here's Why a New Trump World Changes Everything
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Learn more at Intuit.com slash enterprise. Money Movement Services by Intuit Payments Inc. Licensed by NYDFS. Bloomberg Audio Studios. Podcasts. Radio. News. I'm Stephen Carroll and this is Here's Why, where we take one news story and explain it in just a few minutes with our experts here at Bloomberg. Six weeks ago, I stood beneath the dome of this capital building

and proclaim the dawn of the golden age of America. Since Donald Trump has returned to the White House, you could be forgiven for thinking that time has somehow sped up. They can't come in and steal our money and steal our jobs and take our factories and take our businesses and expect not to be punished. And they're being punished by tariffs.

Donald, even though you're a very smart guy, this is a very dumb thing to do. You're gambling with the lives of millions of people. You're gambling with World War III. You're gambling with World War III. We are in an era of rearmament. And Europe is ready to massively boost its defense spending. The European Union was formed in order to screw the United States. That's the purpose of it.

If America doesn't just want America first, but something more along the lines of America alone, then it will be more difficult.

World leaders have been left reeling as the US has penalised its allies, made overtures to autocrats and thrown out international conventions. Markets too are increasingly uncertain about what the future holds. So how should we try to understand what's happened since the 20th of January? Here's why a new Trump world changes everything.

Joining us now is Bloomberg's editor-in-chief, John Nicklethwait. John, great to have you with us. Now, you've interviewed Donald Trump, you did in the last election campaign. You're, of course, overseeing Bloomberg's coverage of all of the announcements under the Trump administration. What is different about Trump's worldview in his second term?

I don't think it's necessarily that different to what it was in the first term. It's just slightly more a man who is in a hurry to achieve those aims. Donald Trump's basic psychology, his basic theory of the way the world works, as he's always said, is America first. And this time he's being slightly more persistent about it.

and rapid in terms of trying to enforce that. And I suppose one of the things that he has moved quickly on is the issue of trade. When you spoke to Donald Trump last year, he told you that tariff was the most beautiful word in the dictionary, an expression we've heard him repeat since. Now that he's actually started taking action on the trade issues, do we have a clearer idea of his strategic goal with these measures?

Well, I think trade is one of the areas where a kind of deeper Trump belief kind of slightly collides with bits of reality. And we've already seen it in a sense in the going backwards and forwards on tariffs with Mexico and Canada. I do genuinely think that Donald Trump genuinely thinks that tariffs are good. They're a way of raising money for the government. He

harks back often to McKinley and a different era where America got quite a lot of its tax revenue from them. And he also makes the very legitimate point that in many parts of the world, you know, America faces more tariffs than it imposes on people itself. So he seizes an equalization process. The difficulty is that if you put on tariffs, as we discovered, immediately you have the threat of inflation at home because by definition prices go up.

And there is a kind of contradiction in the end between the desire to deal with your budget deficit by bringing in tariff revenue and your simultaneous desire to push down imports completely. You can't have both. You either have more imports or imports with tariffs, which might bring you some money.

or else you're going to have less cash coming in. And fundamentally, imposing tariffs, erecting trade barriers, attacks one of the fundamental philosophies that has underpinned the world economy for many years now. You've written books about globalisation, goes back many years even writing about this subject. If you were to be writing the next chapter, perhaps for Bloomberg's weekend edition, what do you think it would say? Globalisation, you could argue, has been in trouble recently

for quite a bit. There are good and bad reasons for that, to be basic. The kind of reasonable reason for protesting about globalization is the fact that by definition it creates winners and losers. I think you can make the case still very strongly that from the point of view of the overall health of the world, from the point of view of dragging millions, indeed billions of people out of poverty,

There have been few things that have been as effective at eliminating the things that most people want to get rid of than globalisation. However, there's no doubt that it causes problems in particular areas. And the sort of backlash has come in terms of especially poorer and middle class people in the West who feel as if they're competing with people who are cheaper labourers.

You've got the issue of dumping and things, which again is somewhere where you can see genuine reasons to intervene. But in general, there has been a sort of ideological problem with it. And then secondly, you've had a drift towards regionalisation already, which was happening before Donald Trump. And in some ways, what Donald Trump is doing is he's making that even more acute.

You know, he's looking at not just at, you might argue, the NAFTA area. He's looking just completely within everything from an American first area. And the underlying problem of globalization is the same as it's been ever since the days of Robert Peel back in the 19th century, is the gainers from globalization tend to be very diffuse. It tends to be every single time you go and buy everything from a piece of chocolate to a car, it will be cheaper globally.

because of the ability to source things around the world. On the other hand, if you have a shuttered steel plant, it's got some very identifiable losers. And that is the problem that goes around. And you can see that happening right now with the politics in America. There are lots of people who supported Donald Trump because he thought he was protecting America.

He was out there to stop this cruel world of globalization. Now suddenly they discovered that manufacturing jobs do actually depend on these imports coming in and out of the border very quickly, especially with Canada.

But secondly, also rising prices. You know, another reason why people voted for Donald Trump was they want to get rid of what he called Biden's inflation. Well, you know, one of the surest ways to increase inflation, in fact, it's the definition of inflation, is to increase prices and tariffs do that.

So globalization already in trouble, perhaps more so now. If we were to try and think about the philosophy of what the direction the U.S. is going in now, is it as simple as to say this is mercantilism, economic nationalism? Is there a different way we should be thinking about how the U.S. is placing itself in the world?

I think there has definitely been a move towards economic nationalism. And you can't blame Donald Trump for that because Joe Biden did virtually nothing to rein back what Trump did in his first term. And actually, many times over the past 25 years, you would say that the main opponents of globalization have come from the left rather than the right. Indeed, the kind of the interesting thing is the Republicans who genuinely believe

generally being the kind of free trade party, perhaps more than the Democrats, although obviously Bill Clinton fell in that category. This time, they're the ones who are suddenly coming up with reasons, excuses, whatever you want to call it, to kind of dump on free trade.

How do we think about the hostility that Donald Trump has demonstrated towards multilateral institutions, the WHO, the WTO, NATO? Is this another nail in the coffin of multilateralism? Is it the end of multilateralism? Well, you can argue very clearly that

The WTO has been, that's the World Trade Organization, has been in retreat for quite some time. But it still serves a purpose. If I think that you are dumping products on me, I can go to the World Trade Organization and complain about it. But secondly, beyond that...

By having common tariffs, it makes life much easier, as we've all discovered in Britain thanks to Brexit. These free trade agreements are not just simply to do with the level of tariffs, it's to do with the enormous amount of paperwork you need if you have them. And if you start applying different rules for different places at different times...

then that causes you real problems. And you can argue, yes, that if America really pushes through every individual country and it renegotiates this and renegotiates that, it could indeed get some better trade deals. But the advantage of the multilateral system is you have one tariff. You basically have one rate. So people don't have to spend a lot of time working out what to do. It

It's more complicated than that, but that's one of the basic ideas behind it. Do you see this reorientation of the US on all of these fronts, on trade but also on defence? Is this an irreversible course? Could we see a next administration that changes the direction entirely again? There's always a mixture in these things between a kind of long-term trend and there has been, as we've discussed, there's been a long-term trend against globalisation.

I think you could argue that within that, Donald Trump represents a kind of completely new edge to that, because I think there was quite a lot of people in America who were fed up with some parts of the world trading system, but you certainly wouldn't find anybody from the business side who thought that it was particularly bad. As various people have pointed out, this is despite the fact that America has been, quote-unquote, penalised by this system,

This has been a time when America has pulled far, far ahead of other places, especially Europe. There's a supreme irony in Donald Trump claiming that Europe have won when it comes to trade when you look at pretty much by every economic measure,

It's America that has surged ahead because, again, to go back to the fundamentals of the argument, this is not just about tariffs. It's about an attitude. It's about competition. And this is where you see people like Elon Musk come in because they do make the case, sometimes now with more sotto voce than they used to do, that if you protect things, you get flabby. You get less willing to do things. The whole beauty...

places like Silicon Valley has been that you have dog-eat-dog capitalism and people compete very, very hard against each other. The very definition of tariffs is you're providing protection. You're stopping that cruel magic working.

So you could argue from all those points of view it's harder, but the arguments about globalisation, the political arguments at the moment, are more about the losers than the winners. But you can see a time over the next few years when the argument begins to turn from...

what happened in terms of protecting these individual jobs as to why is my grocery bill so much higher, why is my car costing so much more. And in a strange way, that is a sort of circular way in which the arguments about globalisation have ever happened. You know, the birth of free trade was back in Britain in the 19th century and that was around things like the Corn Laws, which were fantastic for landowners.

but terrible for the new sort of emerging middle and working class in the cities of Britain. And you saw people, especially Robert Peel, go out and give speeches to people and say, this will bring you cheaper bread. Well, you can imagine a system whereby globalisation becomes part of that argument again, but you're not going to see that

I would imagine, in the next couple of years. Okay, but definitely something to watch. Bloomberg's editor-in-chief, John McAthwaite, thank you. For more explanations like this from our team of 3,000 journalists and analysts around the world, go to Bloomberg.com forward slash explainers. I'm Stephen Carroll. This is Here's Why. I'll be back next week with more. Thanks for listening.

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