Live from Milken: Looking to Nixon for a Peek at Trump’s Future with Niall Ferguson and Fareed Zakaria
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I have been a skeptic of this entire project, not because of ideology, but because of economic history. I think the most dangerous long-term trend that Trump has created is a sense among America's closest allies that after eight decades of relying on the United States as the pivot of geopolitical strategy and geoeconomic security, they're asking themselves, do we diversify a little bit? Do we buy a little insurance?

Welcome to Trumponomics, the podcast that looks at the economic world of Donald Trump, how he's already shaped the global economy, and what on earth is going to happen next. This week I'm in California for the annual Milken Institute Global Conference, where Wall Street comes to Beverly Hills. It's one of the greatest concentrations of investment capital on the planet.

Well, so they say, with tickets starting at $25,000 a head. And it attracts thousands of attendees wanting to hear from titans in the world of business and politics publicly and behind the scenes. U.S. Treasury Secretary Scott Besson kicked off the proceedings on day one, and that was followed by a long list of finance and investment luminaries and chief executives.

Now, it's the 28th year of this conference, and the boast was that the turnout and the money represented in the room was higher than ever. But of course, it was happening only a few months after the fires that have left large chunks of the city still looking like a post-nuclear wasteland.

That was one weird thing about this year. The other was, well, that it felt remarkably normal. I mean, the rest of the world might be freaking out about the economic impact of Donald Trump's trade wars, America's reputation as a safe haven for global capital or, you know, the end of the rule-based global order. But...

for the big money folks gathered here, I have to say it just seemed like a period of heightened uncertainty. So I was looking for a reality check when I sat down on the first day with the historian and commentator Neil Ferguson and CNN's Fareed Zakaria, who's the author most recently of The Age of Revolutions. We've got a lightly edited version of that conversation for you here.

I started by asking them to put the past hundred days, this moment in world history, in some kind of perspective. What patterns do they recognise from previous eras and what strikes them as genuinely new? MUSIC

Well, if you think back to the campaign last year, President Trump cited a previous president in one of the interviews he did. I think it was a Bloomberg interview. And he said William McKinley was his inspiration, tariff man.

And that was something that most people ignored, but I found it very interesting, not least because McKinley was both a tariff man and something of an imperial president who, as a result of the Spanish-American War in the late 1890s, acquired Puerto Rico, Guam, etc. So that was a clue as to the kind of president that Donald Trump wanted us to expect, but

And unlike most political figures, Donald Trump has said what he was going to do and done it. The second historical analogy, and Farid and I were talking about this on his show, that's relevant here, is the first 100 days of Franklin Delano Roosevelt's presidency. I don't think we have seen such an active 100-day period in American politics since 1933. You have to go back

to that extraordinary time to see a comparable level of presidential activity. And I wrote a piece for Barry Weiss's Free Press saying you kind of think of this as like Roosevelt in reverse, because Roosevelt came in after a depression with a mandate to expand the federal government and

And Trump has come in after a boom with a mandate to shrink the federal government. I'll throw in one more way of thinking about this. I think behind all the bravado, Canada's going to be the 51st state, Greenland we're going to annex, the Panama Canal, all that trolling that drives liberals and professors insane...

I don't really think that Trump is acting from a sense of strength. I don't think he is, in fact, William McKinley. I think a strong motivation in Trump's mind is that the United States is kind of weaker than it looks, and it can't do all the things that it was able to do, say, in the 1980s. I got into a fight with Vice President Vance about this. And

My other analogy is that I think there's something quite Nixonian about this second term. The shocks to allies, the talk of some kind of devaluation plus tariffs, it's all out of the Nixon 1971 playbook. Even the talk of reverse Nixon, which you hear from some of his advisors, we're going to somehow peel Putin away from Xi Jinping and somehow find some space between China and Russia. That is at least an approach

appeal to Nixon as a precedent. And you have to ask yourself, why has no president since Nixon regarded Nixon as a role model? I'll just leave you to posit that, Stephanie. But it is an unusual thing to want to rerun some of these Nixonian gambits. And I do think...

it has some meaningful downside risk. Although we are seeing in real time the undoing of some of the things that were done directly in response to the Nixon experience. But we won't get into all that. Well, that's right. Farid, place this moment for us. Nothing is new under the sun, but what is unusual and hasn't happened for a long time is...

One, the rise of cultural politics. If you look back over the 20th century, most politics was explained by a left-right divide on economics. The left wanted to tax more and the right wanted to tax less. Similarly, the divide on spending. It was the role of the state.

We're in a new era where culture is defining the backlash. If you try to predict how people vote based on their income, you find it very hard to do. Most of you are rich, and my guess is many of you voted left of center. The majority of people who are non-college educated, working class, now vote right of center. Why? Because we are in an age of great uncertainty and change, and when that happens—and I owe Tony Blair this insight—

When people feel deeply anxious, they tend to move right culturally, not left economically. They don't say, I need one more government program. They say, get those damn foreigners out of my country. And you can see this in almost every country in the Western world. The left is flailing. Think of France. Think of Germany. Think of Sweden. Think of Italy. And of course, think of the United States, because the left finds it difficult to address that problem.

cultural anxiety people have. It is more easily addressed by a right-wing populist movement, which is what has taken over right-of-center parties everywhere. Point two, what has changed is the United States has rarely had a cult of personality in its political system, but we now have a situation where the Republican Party is not really a party anymore. It has become a cult of personality. In the last Republican convention,

No former nominee for the party, for the presidency, for the vice presidency, no former president or vice president, including Trump's own vice president, Mike Pence, was even invited to the convention. And yet five members of the Trump family had primetime speaking slots. That is not a normal political party, but certainly by Western standards. And finally, I would say, I mean, honestly, what is unprecedented is

the fairly systematic level of corruption taking place at the very highest level in the United States. I don't think we have seen something like that for a very, very long time. Can I jump in and say that if you go back far enough, and you know this, Farid, you do find exactly these things. I mean, this is Gilded Age America. I began by saying nothing is new under the sun. Well, I just want to illustrate the point because...

Maybe not everybody's studied this period. Scott Bedford this morning talked about the Golden Age. The olden and gilded sound a lot similar. Regency England had lots of corruption. But he, you know, late 19th century United States, the time of McKinley was famously corrupt. It was a time when Tammany Hall was one of the political machines that ran the system. Foreign visitors were shocked by the scurrilous quality of American politics.

And the populists of the late 19th century had very Trumpian themes. You know, I have this longstanding argument with people like Tim Snyder and Applebaum about whether there's some kinship between Trumpism and fascism in interwar Europe. And my point to them has always been, you do not need to look so far afield because the populists in the late 19th century were in favor of the

same kind of things that Donald Trump's been talking about since even before 2015, 2016. That is to say, restriction of immigration,

immigration, tariffs, a weak dollar. I mean, even that's part of the populist. But what was different about William Jennings Bryan, who was the great populist, nominated three times by the Democratic Party, it was not anti-democratic in quite the same way. The extraordinary expansion of governmental authority. You know, all these tariffs are taking place in a situation that, frankly, is illegal.

The Constitution makes clear that Congress has the role of tariff setting. It has delegated in very specific circumstances to the presidency. The president claims that because there is a national security emergency, he has this power. It's a little odd that you would have a national security emergency against every country in the world simultaneously, including one that is only inhabited by penguins. Yeah.

But Congress has, over the years, delegated more and more of that authority. So I think they could probably take it back, but they haven't chosen to take it back. We've got on to the sort of cultural and some of the political instincts of this administration. I suspect we'll get back to it. And many people here will be kind of mesmerized by those aspects of the administration. But they have to live day to day. And we at Bloomberg are living day to day with the economic consequences, trying to think about whether...

this administration can actually do the big things that it set out to do economically in the world. So maybe a sort of gut check on that. I mean, the two very highly related targets, decouple from China and re-industrialize the US. Feasible? And if not feasible, what's going to happen in the attempt?

It's certainly possible to decouple two large economies. Britain and Germany decoupled their economies. But that was the outbreak of World War I in 1914. To kill what I called Chimerica back in 2007, when...

the Chinese and American economies had almost fused is extremely difficult. The president tried to do it in his first term, and all that happened was that Chinese goods were shifted via third countries and continued to flow to the United States. What he did since being inaugurated this second time has been to impose an embargo on U.S.-China trade. It

It's an extraordinary thing that went even further than the worst case scenario that the Chinese had been preparing for. The tariff rates on imports from China are now so high that nobody's quite sure what the rate is, but it amounts to prohibition. Now, you can take the view that this is a rare case where a country imposes sanctions on itself.

Maybe because the habit of imposing sanctions has become so ingrained with the American government, we finally had to sanction ourselves. But if you are running, let's just say, a small-sized toy company, this is a catastrophic blow. You have already ordered the Christmas goods from China.

And you cannot afford for those goods to arrive unless this trade war is called off. So decoupling is in process, but its costs to the American economy have yet to be felt by the majority of people. Does this lead to the reindustrialization of the United States if the president follows through with it? I'm skeptical because there are lots of reasons why...

all mature economies go through a period where they industrialize, where manufacturing becomes a larger share of employment and a larger share of gross domestic product. And then after a certain per capita GDP, they shift away from manufacturing and they go into services. There's no exception to this rule. It's true of all the major economies.

and the United States has gone down that curve. Turning the clock of history back is hard, and that's the project. The central project of Trumpism is we're going to turn the clock of history back and have the kind of manufacturing employment that we had in, let's say, the 1950s. Now, you'd have to reform permitting,

You would have to make American labor significantly cheaper, and you'd have to live with more expensive and inferior products as a consequence. I do not believe that any president can achieve those things in four years, and a president who loses one or both chambers of Congress at the midterms isn't going to get to first base. So I have been a skeptic of this entire project,

Not because of ideology, but because of economic history. I went to see the Minecraft movie. Who has seen the Minecraft movie in this audience? Okay, so you have a seven-year-old kid. I'm not saying you should go and see Jack Black in the Minecraft movie, but as I was watching it and thinking about Minecraft, I realized the project is kind of Minecraft. Because in Minecraft, it's really easy to mine and manufacture and build stuff. All you do is you're just going to go, "Bam!"

and magically you've made something. And unfortunately, there's a sort of Minecraft element to this strategy, and that's not the way the world works, as anybody knows who has tried to build a manufacturing entity in the United States in the last 10 years.

I agree with everything Neil said, but let me add to it by pointing out the entire project is unnecessary. The United States in the last 30 years, contrary to what you hear, has not hollowed itself out, turned itself into this basket case economy that is in severe need of some kind of revolution.

The real story of the last 30 years is the United States has leapt ahead of every other advanced industrial country. Let me give you a few numbers. In 2008, the Eurozone economy and the U.S. economy were the same size. The U.S. economy is today twice the size of the Eurozone economies. In 2000, German wages and U.S. wages were roughly the same. Today, U.S. wages are 50% higher than German wages.

If Great Britain were to join the United States, Boris Johnson once joked as the 51st state. Little did he know that President Trump had another country in mind for that honor. But let us say they joined as the 51st state. On a per capita GDP basis, Great Britain would be the poorest state in the union, poorer than Alabama, poorer than Mississippi. Why is this? Because unlike

other advanced industrial countries, what the United States was able to do was fully embrace the services economy: digital, finance, software. We export a trillion dollars worth of services to the world every year. That somehow doesn't show up in Donald Trump's theory of economics, even though services employ 80 percent of Americans, manufacturing employs eight.

So the project that Neil is talking about also is essentially a project to tax the 80% who work in services to subsidize the dwindling 8% who are in manufacturing, almost out of a kind of aesthetic desire to have a country where we build something. That's the sense in which it's like populism. Absolutely. That was about agriculture. The populists were trying to keep farmers going when it was clear that agriculture was going to decline as an employment sector. But

But Stephanie, can I add one point? Because I don't want to sound entirely negative. I listened to Secretary Besant this morning, and there was much that he said that I liked. I think it's true that the United States economy is anti-fragile. As Fareed says, it has massively outperformed the competition, particularly in the period since the financial crisis. Though I think it implies that the trade war, the tariffs, are a kind of shock to

that the US is somehow going to be able to power through. And maybe it is. I think your Bloomberg readers will be interested to see if there really is going to be a Mar-a-Lago accord. If the analogy with 1985 works, then you not only get tariffs, but more importantly, you get a weaker dollar and you get lower interest rates. If they are able to do that,

then it seems to me that the U.S. may once again surprise to the upside, and the Cassandras are going to be left looking, as they so often have, very wrong. The critical issue here for everybody who's interested in markets is, as the dollar goes down, what do rates do? Because the thing that has been most scary about the last month has been that moment between Liberation Day and April 9th, when

when the dollar did go down, but yields went up, and in a way that is very, very rare in modern financial history. And there you run the risk of what I'll call the Nixon moment, because Nixon had a weak currency strategy. He had a tariff strategy. But what happened between '71 and '74 was that the dollar was weak, but rates went up because inflation went up.

And you ended up with the stock market declining from Nixon's re-election until his resignation by 46%. So there's risk embedded in this whole strategy. But it could work. And we mustn't underestimate the probability that once again, Donald Trump surprises to the upside because he does seem to have a strange luck, as well as a

powerful intuition about the people that he's up against. Some of this may come down to a sort of fundamental tension, which I think many people here and you guys have certainly identified in the president's approach, which is an end to forever wars, you know, channeling the sort of previous past history, those populists who were isolationists as well. We don't want entanglements abroad, but China is the real enemy and we are going to wage at least an economic war against China.

Those two things certainly come into tension over Taiwan and in other areas. You and I spoke about this on my podcast last year, Neil, and you thought that the hawkish kind of bipartisan consensus in the US today and certainly in Congress would prevail over Trump's transactionalism.

Do you still think that or do you think we'll have an accommodation with China that involves, I don't know, a few Trump towers in Taiwan? It is so hard to know at this point because the administration has roughly three different strategies going on at the same time. There are those that are much weakened now since Mike Waltz's exit who really wanted to take on the axis of authoritarians in every different theater from Eastern Europe to the Middle East to the Far East.

Then there are the China first people like Bridge Colby who want to focus on the Taiwan issue and not worry too much about Ukraine or even Israel. And then there are the hemisphere folks around Vice President Vance who just want to focus on the Americas. And they really don't even care about Taiwan. It's not clear who comes out ahead. I will, for the sake of brevity, put it this way.

At some point on this president's watch, I believe there will be a Taiwan crisis. I think Xi Jinping has that option. It is risky for him, but he has to exercise it when Trump is president because Trump does not look like a president who's willing to go to war.

actual war, not trade war, over Taiwan. So if I'm Xi, I want to pose that question either next year or in 2027, not with an invasion, not with a blockade. I just want to send my Coast Guard vessels and claim that everything going into Taiwan has to clear Chinese customs and present Trump with a choice. Do you want the biggest naval battle since Midway? Do you actually want to have a war over Taiwan? Or do you want to fold

and let the Chinese have not only Taiwan, but TSMC, and therefore the key to the semiconductor industry in the world. That's a very nasty dilemma. And I think that Trump may well confront it before he leaves office. Sareeb, what's at stake? I think the central tension is exactly the one you described, which is you can have a China strategy, the kind that Trump is talking about.

But in order to have that, you need to unify the rest of the world with you and against China. Well, it's very hard to unify the rest of the world when you've slapped tariffs on them and when you've disproportionately slapped tariffs on your closest allies. If you look at the reciprocal tariffs, it was better to be a foe of the United States than a friend. Russia was exempt entirely from the tariffs. Some of the worst tariffs were on Canada, they're on Germany. So

Part of the problem here is that Trump has broken the trust that America's closest allies had with him. And if you look at that moment that Neil was talking about, that scary moment where all American assets started to decline, the dollar, the bond and stocks,

it was almost certainly because America's friends were selling Treasury bills. The Canadians, the Japanese, maybe others. And so I think the most dangerous long-term trend that Trump has created

is a sense among America's closest allies that after eight decades of relying on the United States as the pivot of geopolitical strategy and geoeconomic security, they're asking themselves, do we diversify a little bit? Do we buy a little insurance? And they just have to do it on the margin because we are running the largest deficits essentially in our history. We need enormous amount of confidence for people to buy that debt

every few months. That is what Trump has jeopardized. Obviously, there's been a lot of talk about the sell America trade, as Neil mentioned, was pretty popular at various times over the last month or so. And

And it feels like a structural change in the attitude to American assets, maybe even to reset, as Scott Besson said this morning. But there's one thing to get. There's a question, if you sell America, then buy what? And you've just mentioned how other countries should buy. There's always been this problem. And so the dollar's role as the reserve currency of the world is probably still pretty strong.

Who knows if the euro is going to exist and it's a slow growth area. Japan is in demographic, you know, death trap. China won't open its currency to the world. So Larry Summers' famous line about the dollar still holds. As long as Europe is a museum,

Japan is a retirement home and China is a prison, the dollar will remain the reserve currency of the world. And Bitcoin is an experiment. Just to remember that additional line that Larry had, as long as Bitcoin's an experiment. But it's less of an experiment than it was when he said that back in 2019. We're almost out of time, but can I just say the paradox

of all of this is that we cudgel our brains trying to understand what Trump's strategy is. Is it two-dimensional chess, three-dimensional chess? Is there some master plan? The more we spend our time talking about that, the less we're talking about AI, the less we're talking about quantum computing, the less we're talking about the ways in which the United States is still far ahead of the competition. I mean, you want to sell the US and buy Europe?

when all the innovation, by far more innovation is happening here. So let's not be so distracted by politics that we forget what was long ago said by Calvin Coolidge, the business of America is business, not politics. Okay, give you one statistic to close. 100% agree. He always has the last word, you notice? The United States is 4% of the world's population. It's about 27% of global GDP. It is currently 70% of the stock market capitalization of the world.

you need a lot of confidence to maintain that. All I'm saying is you could go down to 60%. We'd still be dominating the world, but that's a 20% correction in the markets. Thanks for listening to Trumponomics from Bloomberg. It was hosted by me, Stephanie Flanders. I was joined by Neil Ferguson and Fareed Zakaria. Trumponomics is produced by Samar Saadi and Moses Andam with help from Chris Martlew, Tala Amadi, Amy Keene and Barakat Ugado.

Sound design by Blake Maples. And Brendan Francis Newnham is our executive producer. And special thanks also to the entire team at the Milken Conference. Please do rate this show wherever you listen to podcasts so other people can enjoy it. Thank you.

Hiscox Small Business Insurance knows there is no business like your business. Across America, over 600,000 small businesses, from accountants and architects to photographers and yoga instructors, look to Hiscox Insurance for protection. Find flexible coverage that adapts to the needs of your small business with a fast, easy online quote at Hiscox.com. That's H-I-S-C-O-X dot com.

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