To respond strategically to the US administration's actions on international relations and trade, it is essential to have a good-enough model on what its goals are.
1. The traditional "guns vs butter" perspective on US tariff and other foreign policy actions is that economic efficiency is what everyone aims for, ideally, but we are sometimes diverted by, say, security considerations. Is that a useful model of the world now? I think no longer. In today's reality, the US administration might well view China as its no-compromise strategic adversary. But that administration is also lashing out at others (the EU, Japan, and other long-term friends and strategic allies) who might actually be helpful to the US in contending with China's hegemonic rise. The US's approach to geostrategic competition is both focused and unfocused, both razor-sharp narrow and flailing wildly.
2. The US administration's tariff actions reveal its model of the economic world. That latter is not a landscape of economic competition or geopolitical strategizing. It is built on one idea and one alone: That if you are, in any measure, successful against the US, you must be cheating. Running a bilateral trade surplus is a sure sign, but the administration is also free to choose and change its mind on what cheating constitutes. Even your scrupulously following rules previously agreed (with Trump himself, say) is no guarantee you will escape the charge. It doesn't matter whether you are a hegemonic rival or long-standing friend and strategic ally. The least helpful thing? To keep telling the administration what economic efficiency or simple logic says, in the hope it'll actually change its behaviour. Economic efficiency allows the possibility that the US bilateral trade deficit is unimportant or even bolstering American strength. (I run a trade deficit against Singapore Power. It would weaken my well-being if I tried to run my own electricity-generating station out of my office in an effort to remove my dependence on Singapore Power. Whatever.)
3. Domestic jobs too carry a positive political externality, the way that national security might. Your people having good jobs maintains social cohesion. Not that jobs should be created for just the sake of jobs alone, ignoring economic value. Domestic jobs provide national good beyond what they might add to GDP alone. But at this stage the "cheating" idea dominates the "jobs" one in America's approach to trade and foreign policy.
4. The Trump administration is not transactionalist in that it seeks "a good deal". The Asian business community needs to stop thinking it is just as transactionalist as Trump. Economics has always been about getting everyone a good deal. There are no gold nugget surprises in the transactionalist/"good deal" narrative. Trump appears to be quite willing to reinterpret past deals or tear them up.
In a world where the greatest national and economic power in the world behaves according to 1-4. above, what should the rest of us do? Appeasement might work if you're dealing with someone who has both memory and a sense of rational calculation. Without those latter in your interlocutor, you're just burning your own reputational capital and weakening those who might want to stand alongside you. Complaining and trying to reason only stands to worsen their sense of your cheating.
I see a lot of good sense in those who, strategically, take the short-term pain and walk away from this horror-show to build their own more sensible world of trade, economic exchange, diversification, and doing good for their own people, where it again becomes logical to talk about resilience-adjusted economic efficiency. Not to be neglected either is the significance of continuing to keep good relations with the everyday people of the US, as they are also the ones suffering under the vagaries of 1-4.
For more insights by Professor Danny Quah, Dean at the Lee Kuan Yew School of Public Policy, follow his
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