The era of globalization as we know it is slowly fading, as geopolitical tensions escalate and major powers reshape their economic policies. The question is whether the West can survive in a world where the doctrine of free trade is being replaced by protectionism and state interventionism. Especially as the debate in the US over who said what on Signal rages on among politicians and journalists – via Signal, of course.
- US consumer inflation expectations have soared to 6.2% a year. That’s a far cry from the “stabilized” level the Fed insists it sees.
- The Philadelphia Fed’s services survey price index hit 36, the highest since November 2023.
- Economic activity collapsed to -32.5, the lowest level since May 2020, in the midst of Covid lockdowns.
The US says a ceasefire has been reached in the Black Sea between Russia and Ukraine in exchange for the lifting of restrictions on Russian exports of agricultural products and fertilizers.
But Russia first demands the full lifting of sanctions on its banks and their access to SWIFT, which requires EU approval. If that happens, where does that leave Europe’s diplomacy?
Will it start buying Russian gas again or – to put it sarcastically – Russian weapons?
If Europe refuses, will the US walk away and leave the bill to Europe, as conversations revealed in Signal?
US intelligence suggests that Russia and Ukraine prefer a long war to a quick peace that will not satisfy them. At the same time, there is the risk that Russia will use nuclear weapons, which would further burden Europe.
Europe and its “autonomy”
In the noise about whether to pay for the operations against the Houthis, Europe forgot to consider something else: if it wants to have real strategic autonomy, it needs not only weapons for Ukraine, but also a navy that can protect its global trade.
Based on a recent analysis, the 1.5% of GDP agreed on for military spending is not enough if it needs an army, air force and navy at the same time.
The US continues to demonstrate its military power. The concentration of bombers on Diego Garcia (a base for attacks in the Middle East) seems excessive only for the Houthis.
This means that we are either seeing a “Ukraine-for-Iran” strategy, or a clear message to Tehran.
Israel-Saudi Arabia Agreement
Information indicates that Washington is insisting on concluding a peace agreement between Israel and Saudi Arabia, and soon. At the same time, it seems to be pushing for a specific timetable for military operations in Gaza.
US Vice President J.D. Vance will visit a military base in Greenland, after his wife’s vacation there (!), which some local politicians described as an “aggressive move”.
If enough White House officials stay there, the balance of power in the region will change dramatically.
Markets are waiting to see if the US will apply an additional 25% tariff on those who buy oil from Venezuela. Although the origin of the oil is camouflaged through… international waters, the final buyers are known. And the US can still add 25% more tariffs on China, with the clear message: “China”, Monroe Doctrine, “Energy Dominance”…
In a rapidly changing world, the geopolitical moves of the US show that the “signals” they send are not only economic, but also strategic.
The world is changing
Meanwhile, markets are increasingly focused on US trade moves against Canada and Mexico, rather than on their broader geopolitical context.
However, Washington’s loud statements may be more about China, if we look at them strategically. The US has just added about 70 Chinese companies to its export control blacklist, in order to prevent their support for China’s development of artificial intelligence and military technology.
Merchant Shipping: A Shift to Self-Sufficiency
In addition, the White House has nominated a former Navy officer and a staunch advocate for the revival of the US merchant shipping industry to head the US Maritime Administration (MARAD).
The move signals a greater push for the US shipbuilding industry, despite industry opposition to:
- new port fees imposed on Chinese-built and operated ships, and
- quotas requiring US exports to be carried by US-flagged, US-manned and US-built ships.
Fiscal developments
In parallel, Trump signed an Executive Order authorizing the Treasury to modernize the payments system to reduce waste, fraud, and abuse.
He also signed a second order, establishing Election Day in the US as a national holiday. (Both measures are expected to end up in the courts.)
The UK announces a grim Spring Budget, full of austerity measures, arguing that “the world has changed.”
In fact, the world is changing towards a military Keynesian policy, but not in the UK, despite frequent references to Churchill. (Meanwhile, a major EU-UK defense cooperation deal remains stalled as France demands more fishing rights in British waters. Symbolic perhaps, but absolutely true.)
The end of globalization?
If globalization as we know it ends, this would be news that may shock those who believed that asset prices would continue to rise unhindered. At the same time, politics and markets as we know them are changing rapidly. Case in point:
- Trump offers a stablecoin, backed by US Treasury bonds, adding to the collection of meme coins that already bear his name.
- The head of the US Council on Foreign Relations, in an article in Foreign Affairs, states bluntly: “China has already reshaped the international system.” “From 2009 to 2017, as the National Security Advisor for International Economic Affairs and the U.S. Trade Representative, I repeatedly warned my Chinese counterparts that the international environment that had enabled China’s success would disappear unless they modified their aggressive economic policies. Instead, they doubled down on their aggression. The U.S.-China relationship deteriorated because there was no reciprocity.
Washington may have created the liberal, open international order, but China defined its next phase: protectionism, subsidies, restrictions on Foreign Direct Investment (FDI), and industrial policy.
To say that the U.S. must take back the reins to maintain the rules system it created is a misnomer. China’s nationalist state capitalism dominates the international economic system. Washington, having failed to persuade Beijing to change course or create an alternative trading bloc to compete with it, was left with one choice: The United States had to become more like China.”
What comes after globalization?
In the United States, the emerging state model combines neoliberalism at home and mercantilism abroad.
In China, by contrast, the reverse is true: mercantilism at home and neoliberalism abroad.
So what is Europe’s proposed course?
So far, the signals are not clear, despite the intense geopolitical noise overhead.
Continuing a piecemeal approach, without an overall macroeconomic or military strategy, is far from ideal.
