Adam S. Posen
The post-American world economy has arrived. U.S. President Donald Trump’s radical shift in economic approach has already begun to change norms, behaviors, and institutions globally. Like a major earthquake, it has given rise to new features in the landscape and rendered many existing economic structures unusable. This event was a political choice, not an inevitable natural disaster. But the changes that it is driving are here to stay. No guardrails will automatically restore the previous status quo.
To understand these changes, many analysts and politicians focus on the degree to which supply chains and trade in manufactured goods are shifting between the United States and China. But that focus is too narrow. Asking whether the United States or China will remain central to the world’s economy—or looking primarily at trade balances—yields a dramatic underestimate of the scope and impact of Trump’s changed approach and how comprehensively the prior U.S. framework undergirded the economic decisions made by almost every state, financial institution, and company worldwide.
In essence, the global public goods that the United States provided after the end of World War II—among others, the ability to securely navigate the air and seas, the presumption that property is safe from expropriation, rules for international trade, and stable dollar assets in which to transact business and store money—can be thought of, in economic terms, as forms of insurance. The United States collected premiums from the countries that participated in the system it led in a variety of ways, including through its ability to set rules that made the U.S. economy the most attractive one to investors. In return, the societies that bought into the system were freed to expend much less effort on securing their economies against uncertainty, enabling them to pursue the commerce that helped them flourish.
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