Donald Trump’s bizarre trade war brings the Western age to its end

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John Rapley is a contributing columnist for The Globe and Mail. He is an author and academic whose books include Why Empires Fall and Twilight of the Money Gods.

On his “Liberation Day” Donald Trump brought the Western age to an end. A country as dependent on the U.S. as Canada has allowed itself to become will sink or swim as per the whims of the day’s President – and henceforth, unless it diversifies its economic relations, it may do more sinking than swimming.

That’s because the biggest loser of Mr. Trump’s trade war will be the U.S. itself. For nearly a century the country oversaw what was, in effect, the greatest empire in history, as virtually the entire world traded in dollars and conducted international business within the rules set by a handful of western states. If this imposed a responsibility on the U.S. to act as the world’s policeman and financial backstop, it also granted it the exorbitant privilege to print as much money as it wanted. The U.S. was the one country on the planet whose people could endlessly live beyond their means.

But that meant the U.S. imported stuff from all over the world, something that irritated President Donald Trump to no end. Nostalgic for a time when Americans made their own things, he opted to rectify the situation with the most bizarre trade policy the modern world has ever seen – a schedule of tariffs with no basis in any known school of economic thought, which looks suspiciously like it was designed by an AI chatbot. But the main effect was that the U.S. turned its back on the world, saying it won’t come back until everyone begs for forgiveness.

Carney, Poilievre, your tax cuts will lead to disaster, like in the U.K.

There will be some of that in the coming weeks, but most of it will probably be performative time-buying. Here in Canada, Ontario Premier Doug Ford and Alberta Premier Danielle Smith might think they deserve congratulations for softening Mr. Trump, while Prime Minister Mark Carney may feel his tough stance bought Canada a reprieve from the maximum tariffs. But the reality is that any concessions that rely on good personal relations between political leaders aren’t worth the Signal chat that records them, as we already know that Mr. Trump will happily abandon his own deals once he thinks he can extract further concessions.

So even as they try to stretch out Mr. Trump’s anger, astute governments will be looking to reduce their dependence on the U.S. So too will investors, something that showed up this week in currency markets. For generations, in any crisis, the U.S. dollar strengthened as money flooded in from around the world to what was seen as the safest port in a storm. But on Thursday, money rushed out of the U.S., which is no longer seen as reliable. The Canadian dollar joined the stampede, strengthening over the course of the day.

Businesses and consumers are also souring on the U.S., with tourist bookings down and boycotts spreading beyond Canada. Within the U.S., given the volatility of the administration’s policy-making, surveys reveal sharp drops in spending and investment plans. With their economy already slowing, such trends could become self-reinforcing, shifting the economy’s gears to reverse.

As the U.S. economy weakens, so too will its geopolitical heft. When you look not at the tariff rates but at the hits each country will suffer to their economies, a troubling pattern emerges: It’s not the U.S.’s enemies but its friends, in Europe and North America, who will come off worst. Assuming the tariffs remain in place, G7 economies will enter or come close to recession.

However, though growth will slow, Asia will keep rising. Indeed it’s a reasonable bet that China will now ramp up fiscal stimulus and use domestic consumption to replace the exports it loses in the U.S. In that case, China will become an even more attractive trading partner, as will other developing economies whose markets continue growing. As the U.S. turns on its friends, it seems inevitable they will go looking elsewhere. Canada would be foolish to buck this trend and hope the Trump administration will somehow come back to its senses.

Because what we have to accept is that however much Mr. Trump seems like an aberration, he isn’t. During the election campaign he never hid his intentions and secured a strong popular mandate to do just what he’s doing. His followers stand by him. Even if he were to leave office under a cloud, we have to assume there will be future presidents cut from the same cloth.

Whether what emerges from the rubble is a new type of Western-led system, a Pacific Age or perhaps something altogether different, there seems little doubt that the U.S.-led international order is now history. It’s time to adjust to that new reality.