Regime of disruptions

Donald Trump has just been sworn in as the 47th President of the United States. Although the margin of victory is somewhat slim (Trump won by 1.5 per cent of the popular vote), he has been very effective in claiming that his victory is nothing short of a landslide. While the left is demoralised, the MAGA crowd is ecstatic. Globally, his election is viewed with trepidation since the vibes (both positive and negative) about his accession to power are far more pronounced than what is truly expected to transpire during his presidency. If his first term is any indication, the familiar obsession with immigration and international trade is once again expected to dominate his agenda. Mexico is again expected to be the poster child for America’s fateful immigration policy, while China will once again be the symbol of international trade going rogue.

Immigration and trade wars will be designed to feed his cultural crusades, economic policies will be transactional, designed to hurt real or perceived enemies with little consideration of their effectiveness, and foreign policies will be designed to move away from traditional alliances, which he sees as cost centres and costing the US way too much. His foreign policies will be focused on breaking away from trans-Atlantic and trans-Pacific partners towards dictators and would-be dictators with whom he feels personally very comfortable. Bye! Bye! Europe, Japan and Australia, hello! Russia and North Korea.

Everything however will be pale in terms of its effect compared to his southern border policies and the ensuing mass deportation. United States has the potential of being transformed into a police state with law enforcement authorities rounding up brown and black individuals and families with mere suspicion that they are illegal in the United States. The clash between federal and blue-state governments could reach epic proportions with unending legal actions. The sight of kids getting separated from their parents, which were all too familiar in his first term (2017-2021), is expected to intensify even more in his second term. Trump always wanted to redefine the American tapestry of diversity, a land of immigrants, and this is his chance to make that a reality.

Trump inherited an extremely vibrant economy. President Biden has literally transformed the American economy, and has been remarkably successful. He presided over a record number of new jobs created in the US economy, a surge in domestic manufacturing, and brought down the persistent US inflation without creating a recession. The US unemployment rate is reported to be around 4.1 per cent, way below the natural rate of unemployment. The annual inflation rate for the United States was 2.9 per cent for 12 months ending December 2024. The US stock market has literally soared since Biden took charge in January 2021, with the Dow Jones Industrial average increasing by 39 per cent under his watch, while the S&P 500 SPX is up by 55 per cent and the Nasdaq Composite increased by 46 per cent.

The Covid malaise has been wiped out with optimism about the future with far reaching legislations, namely the Chips Act, the Inflation Reduction Act, and the Infrastructure Act, all designed to create an ecosystem of future growth and prosperity. Biden presidency can thus be seen as a total devotion to the future, where the future is driven by promising change in technology including artificial intelligence, and potentially disastrous climate change. America now seems unfazed about what the future has to offer, and seems ready to make lifestyle changes to combat climate change.

Trump will hit China with more tariffs. China is now a bipartisan target. There is an unanimity among both the political parties that China is a mortal threat. Trump will ensure that China suffers, even though that might eventually hurt the Americans even more. Trump is also expected to increase tariffs on goods and services imported from Canada and Mexico. Any country that bruises his ego can expect a tariff imposed on their products. Although economists agree that tariffs will lead to higher rate of inflation domestically, Trump is unlikely to pay much attention to that possibility.

Secondly, Trump is expected to enact significant tax cuts aimed predominantly to benefit the rich. It is not clear that Trump subscribes to any Neo-liberal philosophies, so tax cuts to him is not a supply side tool to enhance economic growth, it is simply a tool to transfer funds to himself and his rich buddies. Trump’s tax cut in his first term increased the national debt by 40.43 per cent, about 8.18 trillion dollars. His second term tax cut will increase national debt enormously, but it is unlikely to faze him. His economic policies are thus expected to create trade wars with significant inflation, rapid deregulation, oil explorations in the US with serious environmental consequences, and a massive tax cut with a steep rise in national debt.

Biden revived domestic manufacturing without the MAGA slogan. He laid the foundation for future technological revolution, also without the MAGA slogan. He maintained the pressure on China started by Trump, risking inflation, also in tune with the MAGA policy. Biden was MAGA without the snide cultural baggage that Trump so effectively cultivated. Biden has made the required downpayment for the transitioning American economy. Trump now is expected to make the estimated monthly payment to ensure that this transition reaches its fruition. So, the real question is, whether Trump will make good on the Biden transition promise? The answer to that question is probably a mixed yes. He will maintain the trade war with China, start the trade war with Mexico and Canada, strive for a transactional relationship with existing allies, and unleash a cultural war that will be unprecedented. However, America will surely get what the slim majority seems to have voted for.

The writer is Dean at the School of Business, Seton Hill University, Greensburg, Pennsylvania, USA. Views expressed are personal