Latest / Uncomfortable Conversations with Josh Szeps / PREVIEW: “Tariffs, Greenbacks, Qatar’s Air Force One, and American Empire” with Assoc. Prof. David Smith
Transcript
- 0:00G'day, humans! Welcome to The Safe Space for Dangerous Ideas, and it's an idea, a question
- 0:08that has plagued me ever since the beginning of Donald Trump's political career. What exactly
- 0:14is his theory of the case of international relations? What is his view of diplomacy? How
- 0:21do you reconcile the Trumpian passion for American greatness with his disengagement and withdrawal
- 0:30and disdain for all of the international systems which America itself set up, like free trade
- 0:37deals and security guarantees and so on? This conversation provides me with a better answer
- 0:42than I have ever heard before. It comes from associate professor David Smith, who's an expert
- 0:48in American and international politics at the US Studies Center in Sydney, and he's an associate
- 0:52professor at the University of Sydney, but he got his PhD at the University of Michigan,
- 0:58PhD in political science. He appears frequently in Australian press as a decoder of all things
- 1:04Trump and all things America. Here we really get into the weeds on the theory underpinning
- 1:09Donald Trump's foreign policy. That expands to conversations about tariffs, about the
- 1:15strength of the US dollar, about what bond markets and rising yields on bonds could
- 1:21pre-sage about the fate of the US dollar as the reserve currency of the world and what
- 1:25exactly will that means, whether Ukraine can be resolved by Donald Trump and Vladimir
- 1:30Putin alone, and where all of this leaves America in relation to the rest of the world,
- 1:36PS, what the hell is going on with the Cateri 747 that Donald Trump wants to use as Air
- 1:42Force One, and what does that reveal to us about the great man's mind? I hope you enjoy
- 1:47as much as I did. This conversation with the one, the only, David Smith.
- 1:56Everyone's sort of spinning around trying to figure out what to make of Trump's first
- 1:59100 days in domestic policy. Let's just start with international relations. I haven't noticed
- 2:05anything so far in the Trump administration, Mark II, that is notably different or notably
- 2:11revealing about Trump as a president. There are a few things. One is everything is just very
- 2:18much Trump's foreign policy now. There are really no independent voices in Trump's foreign policy.
- 2:24When you look at the fact that Marco Rubio holds the positions of both national security advisor
- 2:30and Secretary of State, last person to do that was Henry Kissinger, who was a very powerful
- 2:37and influential voice on Richard Nixon. Most presidences you look at have these very powerful and
- 2:44influential independent foreign policy figures. George W. Bush had people like Rumsfeld and
- 2:51Cheney, Bill Clinton had people like Warren Christopher, Barack Obama had Hillary, Clinton,
- 2:58and John Kerry. Trump certainly in his first administration, he really did own his own foreign
- 3:07policy, but he still had people around him who were associated with more traditional foreign policy
- 3:12positions. This time around it really just belongs to him. I mean, the weird thing is sort of
- 3:18jump in, but he does have people who have traditional foreign policy positions. He's just chosen
- 3:23the spineless one. He totally had first time around. They actually had backbone. Marco Rubio does
- 3:28believe all the same things as Hillary Clinton on internationalism and intervention. He just won't
- 3:38Trump was confident in giving him two positions because he knew he wouldn't
- 3:43Marco. He wouldn't be an independent voice stand up. Having said that, Joe Biden was very much
- 3:48the singular voice in his foreign policy as well. I mean, he had experienced foreign policy
- 3:54people like Jake Sullivan and Anthony Blinken, but I can't ever remember anything that they said
- 3:59that was anything other than just being a mouthpiece for Joe Biden. Joe Biden, because of his
- 4:05experiences in the Obama administration, where he kept getting overridden on things like we're
- 4:09drawing from Afghanistan, the lesson he took from that was I just have to completely own my own
- 4:15foreign policy. I suppose the difference is that he's one of the most experienced and oldest
- 4:21elements that's been in the world. He literally sat down with golden may air and
- 4:26joined with Churchill and Thomas Jefferson. Who would he have around him who is more
- 4:33experienced or knowledgeable about enacting his vision of foreign policy than him, whereas in the
- 4:38case of Trump, not so much. Not so much. No. So it is very much solely Trump's foreign policy.
- 4:45That is the way that he likes it and he's not the sole negotiator because he doesn't want to be.
- 4:53He wants to leave a lot of negotiation to other people, but certainly other countries have been
- 4:59learning very quickly that really the only way to deal with the United States is to appeal directly
- 5:04to Trump, which is another thing that Trump really likes. What else we've discovered about what
- 5:10Trump really likes is announcing deals. He is always prepared to announce a deal before there's
- 5:17any substance of that deal worked out. Now that is a continuation of his first turn as well. The most
- 5:23memorable example of that was when he claimed he had a comprehensive nuclear deal with North Korea,
- 5:28which just turned out to be a half page memo and apparently very nice personal letter.
- 5:33We're also seeing the announcement of deal after deal, which in most cases, at least politically
- 5:40have very little behind them. There have been some big sales deals announced like the 142 billion
- 5:47dollar weapons deal to Saudi Arabia. That's something. But in terms of actual political agreements,
- 5:54very, very little. And even in terms of trade agreements, we've had announcements of frameworks,
- 5:59but not actually a very much. So what Trump really, really loves is announcing deals. And other
- 6:05countries are aware of that. They have decided as they did after a while in his first term that the
- 6:11way to deal with Trump is to come up with things that can be announced. Just as a way of keeping
- 6:19things moving, of getting Trump away from his most intransigent positions like 90% tariffs on things,
- 6:26yeah, like that. But when it comes to really difficult conflicts, when it comes to things like
- 6:31Gaza and Ukraine, none of this is amounting to very much at all. Even the minerals deal between
- 6:39Ukraine and the United States involves minerals that may as well be hypothetical because they're
- 6:46inaccessible. A lot of them are in territory that's under Russian control or it's going to require
- 6:51years, decades of investment before they can actually be extracted. So far, we're seeing a lot
- 6:58of announcements of deals without much that is very substantial. And I think that the whole world
- 7:05is kind of in the process of working out exactly where they are with Trump and how to get what
- 7:11they want out of him. I mean, in real estate, a deal is good when you shake on it and you've
- 7:16got the big broad outline of the deal. And then you can let the lawyers go off and they can iron out
- 7:21the little details, which are usually subservient to the deal itself. In politics and foreign policy,
- 7:27often you have to build from the ground up and then you can't just make the handshake because
- 7:31actually the devil is in the details and it's really, it really is a sticking point what the
- 7:35right-of-return of refugees means, for example, or some post-nickety little thing that he would
- 7:40probably bore him to tears. But he's actually the fundamental sticking point for the deal to work.
- 7:46The kind interpretation, the Trump supporter would say, well, this is precisely the problem
- 7:52that we can never get anything done because we're so focused on the minutiae of everything.
- 7:56It's a little bit like reforming government or anything like that. He's trying to do big things
- 8:03and not be stopped by the process and the roadblocks and the bottlenecks that have accreted
- 8:10in the system that make it impossible to change the status quo. What do you make of that rational?
- 8:17Well, the reality is anything that can be done as quickly as Trump wants to do it can be undone
- 8:23equally quickly. If you want anything that is going to stick, whether it's in international
- 8:29politics or in domestic American politics, it involves long detailed negotiations. That is just
- 8:36the reality. There are too many people in the world. There are too many powerful players in
- 8:41the world for in any situation just for a couple of powerful people to be able to get together and
- 8:47sort out the world's problems over handshake. Let's talk about specifics then. A couple of powerful
- 8:53people sorting things out over a handshake sounds remarkably like an illusion to the Ukraine conflict
- 8:58where Donald Trump felt that he could sideline the Europeans and even sideline the president of
- 9:03Ukraine and just go straight to the two big superpowers and they can hammer it out as if this was
- 9:081962. Where do you see things going? What is your take on the snapshot of the current? Where are we?
- 9:16It's very difficult to say where we are at the moment. I don't believe that Vladimir Putin is
- 9:24really has much desire for peace at all. Peace is definitely the second best option for him
- 9:29behind victory and he clearly still believes that victory is possible. Despite the fact that he has
- 9:35been throwing all of the might of the Russian military machine at Ukraine for the last three years
- 9:41at a cost of hundreds of thousands of Russian lives for gains that on a map hardly look like
- 9:50anything. I mean, it's not nothing, but it hardly looks like anything. He has sunk so much into this
- 9:58that I think for him victory is the only thing he really wants to consider at this point.
- 10:06Peace he'll start to consider when he's facing genuine existential threats. As far as
- 10:12Ukraine goes, they are really desperate. I think that Ukrainian people are completely exhausted
- 10:23from the war, but they're not so desperate that they're prepared to surrender at the moment.
- 10:28And even if they lose US support, they're still counting pretty heavily on European support.
- 10:33And European support seems to be getting firmer. We've had the announcement from
- 10:41Germany's chancellor, Merz, I forgot his first name, probably Friedrich or something like that,
- 10:48that they'll raise German military spending to 5% of GDP.
- 10:54And I said that a lot. They have said that a lot, but there does seem to be this acceptance
- 10:58among the European powers at the moment that they need to have military capabilities that are not
- 11:03completely dependent on the United States. And given how long Ukraine has managed to hold out
- 11:10with what it has, certainly it's going to be very, very difficult for Russia to get the victory
- 11:17at once. And so we're still at a point. The victory at once, you mean that's like taking the whole
- 11:23thing. Taking the whole thing at the very least, really reducing Ukraine to a satellite of Russia
- 11:30that never looks towards Europe again. And I think there's just been so much sacrifice on both sides
- 11:38that we're at this stalemate point, who wants to give up after everything that they have that,
- 11:44you know, the both sides of sacrifice. And even without US support, I think there's enough European
- 11:51support that the Ukrainians will keep on going. As much as Trump says, Zelensky's got no cards left
- 11:58to play, he still got that European support, which the resolve seems to have hardened as a
- 12:04result of Trump. Is that not a testament to Trump's strategy? Look, you could say it is.
- 12:12I'm not sure if that was actually the outcome that Trump intended for Europe to become more
- 12:17independent of the US. Oh, I think it was. I mean, he doesn't phrase it like that, but he always
- 12:22says they've been mooching and freeloading for too long. He does pay for their own, pay their own.
- 12:26But I think what he wanted was a continuation of the dependence, but with Europe paying the
- 12:30United States a lot more. This I think is actually Trump's fundamental vision of the world.
- 12:35It's not American withdrawal. I think it's always been a mistake to call him an isolationist.
- 12:41When he's complaining about other countries freeloading off the US, what he's saying is he wants
- 12:46them to pay the US. As much as people claim that Trump's foreign policy is incoherent and impulsive,
- 12:53there are elements of it that are nearly 40 years ago, he published this open letter in the New York
- 12:59Times and a couple of other newspapers saying there's nothing about US foreign policy that a little
- 13:04backbone can't fix. And what he was complaining about then was the US Navy guarding oil shipments
- 13:10from Saudi Arabia to Japan saying why are we doing this? Why is our Navy guarding these ships that
- 13:17aren't ours for oil that that isn't ours? What he says towards the end of the letter is let's
- 13:24tax these other countries. Let's use our war machines to make money. We could solve our problems
- 13:30everything from the deficit to homelessness if other countries were paying for defense.
- 13:36That I think is what his basic vision is. The idea that the United States can use its power
- 13:41to tax other countries. It's the same vision behind tariffs that other country in Trump's
- 13:49understanding of them anyway that other countries are going to be paying. I think he really does in
- 13:56some ways see the US as his mighty empire that completely failed to take advantage of its imperial
- 14:04power in the way that previous empires did. It didn't demand tribute from other countries which
- 14:09is what it should have been doing. And his view is that every problem with the United States can
- 14:14be traced back to the US allowing other countries to take advantage of its
- 14:20imperial altruism rather than the US taking advantage of its own imperial power.
- 14:27I think that's a very misguided view personally but there is something quite consistent in everything
- 14:32that in everything that Trump does. So I actually don't think that Trump wants Europe suddenly taking
- 14:38charge of Ukraine's security which would ultimately kind of leave the US out of the
- 14:43out in the cold in the process. I think what he would like is for the US to be benefiting a lot
- 14:49more directly like benefiting financially from its security agreements with the rest of the world
- 14:55which is why when people ask me is Orcas under threat from Trump? I don't think so because I think
- 15:01also the submarine deal that Australia has with the United States and the UK to buy a bunch of
- 15:05nuclear subs. Yeah, I think Orcas actually conforms a lot more closely to Trump's idea of what
- 15:12alliances should be. Right, they pay us money and we give them things. We supply them security.
- 15:18That's fascinating. You've done an amazing job of resolving a contradiction that I have been
- 15:23mulling over since throughout this term which is he talks about American greatness and make America
- 15:28great again is his slogan. He wants America to be great and everything that he does globally
- 15:33is accelerating American decline because it's empowering other countries to form alliances with
- 15:39each other that exclude the United States because they realize that the United States is telling
- 15:43them to fuck off. That's right. So if someone tells you to fuck off you go and you make alliances
- 15:47with your other friends. Yes. Of course you would. So NATO will become emboldened in the absence of
- 15:53the United States, whatever that means. Australia looks to alliances with Japan and South Korea
- 15:58and India and whatever else we can muster and Europe and the UK and even economically we'll
- 16:04just be like okay well if there are this erratic tariff regime all of a sudden in the United States
- 16:09and we can't depend on them if they're not bankable then we'll form our own multilateral alliances
- 16:14which I'm sure we'll come about and trade deals that exclude the United States. All of which
- 16:18just precipitates an era in which the US is no longer indispensable for security, no
- 16:22all are indispensable for economic security and yet he talks about American greatness and that
- 16:27that contradiction has perplexed me because it seems like I would understand the consistency if
- 16:32he was saying why do we want to be such a big great country standing astride the planet? Why
- 16:38can't we be sort of humble and just do our own thing? Why can't we be Switzerland? But that's
- 16:45interesting that it's not that he doesn't want America to be an empire. He wants it to plunder more.
- 16:50He wants he wants to get the spoils like if you're going to do Iraq take the fucking oil if you're
- 16:55going to do Ukraine take the gems. That's what he said. He wants to reinigo shops the terms of the
- 17:01contract. He wants to raise the rent. Is the basic way of looking at it. So what is just my
- 17:08devil's advocate? What is wrong with that? I mean there is a well understood phenomenon in
- 17:13Europe that they basically have had their healthcare subsidized by the United States because they
- 17:18didn't have to spend money on bombs. So they've had they've had the luxury of having great welfare
- 17:23states because they had much lower defense budgets. They've spent what America had been spending
- 17:27on defense during the Cold War. They wouldn't have been able to have such lavish social welfare
- 17:32mess. Was that fair? And if not then what do you do about it now? I think we have to remember that
- 17:38the US constructed this order for its benefit. Yes it benefited other countries as well. Yes it
- 17:44allowed the rise of the European welfare state but it was also immensely beneficial to the United
- 17:52States because the US had all of these countries around the world who in political terms were prepared
- 17:57to do basically whatever the United States wanted. And that was a massive source of American power
- 18:08in the world because getting countries to do things because they believe in your legitimate
- 18:15authority as the leader of the free world. That's a lot cheaper than coercion. I think one of
- 18:21the mistakes that Trump is making is believing that coercion and threats are somehow cheaper than
- 18:29the alliance system. They're not. The alliance system was the cheapest form of American domination
- 18:35that the United States is ever going to have. Threats are expensive. How are threats expensive?
- 18:41How are alliances cheaper than threats? Yeah so when you make the threat of a tariff like a 90% tariff
- 18:49and then you back off it in return for some sort of fairly trivial deal then what you've shown
- 18:57is this is what I will actually accept instead of a tariff. It means that you can't use that
- 19:02threat again very credibly. So when for example first time Trump threatened 25% tariffs on
- 19:11Canada and then backed off when Canada created the post of fentanyl's are in its government
- 19:18that then completely weakened the tariff threat. So you know Trump had to threaten a trade war
- 19:26in order to get one meaningless government post created. That's what coercion actually costs
- 19:31when you're trying to use it on an ally. Now Trump is in an incredibly expensive trade war with
- 19:37Canada and because he spent months pissing Canadians off by talking about the 51st state and
- 19:43governor Trudeau, Canadians are much more prepared to fight that trade war than Americans are.
- 19:51So the cost I mean the Trump would say yes of course there's a short term economic cost to
- 19:55rebalancing things. You got to take your medicine and your medicine doesn't taste good but in
- 19:59the long run you have to fix the problem and if the problem is that there's an imbalance of power
- 20:03and that everybody just assumes that American largest will be showered upon them with nothing
- 20:07expected from them in return. You have to shock the system a bit, make a bold threat, then retreat
- 20:12from the threat and see what's boils, see what you have gotten, see what your subjects have been
- 20:16able to deliver unto you and at least you know yes there's a short term cost but there's a longer
- 20:22term gain in being not in not looking like a Trump. So maybe if he if he did that in a more strategic
- 20:28and consistent way rather than this one day it's a threatening the worst trade war in history
- 20:36and then the next day pretending it didn't happen then that strategy would probably make a bit
- 20:41more sense. This is like a lot of things with Trump tariffs in order to bring the manufacturing
- 20:46industry back there are specific ways of doing that you target them in particular ways you give
- 20:51everybody a lot of advance notice that you're doing it doing them and you stick to it and you accept
- 20:58rising prices because the whole idea is for prices to rise on foreign goods in order to change
- 21:03people's consumer behavior. Trump just doesn't seem to have a lot of interest in that level of
- 21:11strategy. With the tariffs he's doing several things at once isn't he I mean he's right to do
- 21:17several things. Yeah he seemed to actually believe in tariffs and actually want them in order to
- 21:21fund the resurgence in American manufacturing which many economists say if you want manufacturing
- 21:27if you want to be able to manufacture your own stuff in a particular industry just subsidize it
- 21:31into it's it's cleaner just to pay money to it is the industry to make it rather than to tax what's
- 21:37going in but then he's also doing the I mean he's a businessman he's a wheeler and dealer right he
- 21:42likes making deals so he likes he likes the game yeah like announcing deals and he likes well in the
- 21:48case of tariffs they are actual deals in the sense that it's an agreement with a country for them to
- 21:53give him something in order for him to remove the threat of the tariff in I mean it's a pretty
- 21:56rudimentary deal but it's you know I threaten you with this yes you give me that yeah we it's a
- 22:01haggle it's a little haggle yeah yeah and he can't resist himself from haggling and but the haggling
- 22:07undermines the credibility of the tariff as a tool of rebuilding American manufacturing because as
- 22:13you say there's no consistency there's no expect nobody believes that he's gonna stick by it for long
- 22:17enough for them to bother investing in a factory yeah in Arkansas yeah that's not going to open
- 22:22until 2028 and then he claims that the tariffs are going to raise enormous amounts of revenue as
- 22:26well now if the tariffs were serving their purpose of reviving the manufacturing industry they wouldn't
- 22:31be raising a lot of revenue because people wouldn't be buying they'd be buying American that many
- 22:35foreign goods so there's a lot of contradictory things going on there the other thing is and I
- 22:41think this this gets to a few of the questions that you've been asking the elephant in the room
- 22:47is the very strong United States dollar it's really the US dollar is this is part of what's
- 22:55behind all of the subsidies of the US to the rest of the world this is one of the things that makes
- 23:00it possible but it's also one of the reasons why there is such a massive imbalance in trade it's
- 23:07because of the strength of the US dollar which is being driven by the fact that the US dollar
- 23:12is the world's reserve currency it's traditionally the safest thing for the safest currency for foreign
- 23:18investors to just apologize sorry about how it creates trade imbalances because yeah sure I always
- 23:23have to think this through yes logically in a clean series of steps how does that a high a strong
- 23:29dollar weakens exports yes it does because it makes American goods import cheaper for America yes it
- 23:35makes American goods more expensive for foreigners and it makes foreign goods cheaper for Americans
- 23:41so this is one of the big things that leads to the imbalance right so if I'm in the states and I'm
- 23:48shopping at Walmart and I'm comparing an American made good from a foreign made good the delta
- 23:53between the two is exacerbated by the fact that my buying power and the buying power of all the
- 23:59people who made the American thing yes is so much stronger absolutely then the buying power of the
- 24:05people who made the Chinese thing yes because they live on a much lower wage I mean put yes set
- 24:12aside the economic differences but even just in terms of the the exchange rate yes and conversely
- 24:17if I'm in France and I'm looking at something uh well maybe let's not let's not take the euro but
- 24:22you know I'm not in your own country I'm in Norway yes and I'm looking I mean my store and look at
- 24:27an American producer versus Norwegian produce the American one is artificially expensive
- 24:32dollar is so yes strong yeah yeah so this massively strong dollar is the single biggest economic
- 24:39benefit that basically the US gives to the rest of the world and it but the effect is the imbalance
- 24:48of trade one of the most thoughtful economists who proposes protectionist policies is a guy called
- 24:55Michael Pettis who was an advisor both to the first Trump administration and the Biden administration
- 25:00so he's for for people who want to do who want to take a more protectionist angle he is one of the
- 25:09well-respected figures that they turn to actually teaches economics in China and he wrote a really
- 25:14interesting foreign affairs article in the lead up to the Trump administration saying tariffs would
- 25:19actually be appropriate now because unlike when the disastrous tariffs were put in place in the 1930s
- 25:26back then the US produced a lot more than it consumed so the US was really shooting itself in the
- 25:31foot with tariffs so now the US consumes far more than it produces and tariffs would be a way
- 25:37of rebalancing that but tariffs are for Pettis they're a secondary thing the big thing he believes
- 25:44that has to be tackled is the strength of the United States dollar as long as the US dollar
- 25:49is that strong as long as other countries are buying so many of them this trade imbalance is
- 25:56going to persist forever now what's Trump's position on the US dollar he loves the strong US dollar
- 26:02he just sees that as the most important symbol of global power when there was some ridiculous
- 26:09pie in the sky proposal to create a bricks currency which could be a rival to the world's reserve
- 26:17currency now I expect being Brazil Brazil Russia India China and South Africa the developing
- 26:23yeah yeah now try to imagine those countries really doing anything like that together creating an
- 26:30alternative car India and China in an alternative currency together a complete pipe dream but Trump
- 26:36was so incensed when he heard about this that he truth out if you threaten the almighty US dollar I
- 26:44will put a two hundred percent tariff on you right so he is very very protective
- 26:51get a humans well if you've listened to this much of the episode then you must enjoy it
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