“Take the highway to the end of the night”
Now, more than ever, it feels like we are witnessing the end of the America era, which ran through the twentieth century and has finally been “Trumped!”
The era of US dominance was marked by its economic power and deep capital markets, military might, and role as the world’s policeman.
Today, all of that is in question; the emergence of China, and too many overseas wars, all of which have ended badly, have finally caught-up with them.
To this, we can add the vagaries and totalitarianism of Trump himself.
The ICC has long been in Trump’s sights, with Secretary of State Rubio vowing to dismantle it “brick by brick, if necessary”. Their intent is to end the funding and participation of signatories, but, to date, their bombast has had little impact on the court’s 125 members.
‘too many overseas wars, all of which have ended badly, have finally caught-up with them’
Adding to the thirteen already sanctioned are the ICC president – its chief judge, Tomoko Akane of Japan – and Abdoulaye Seye of Senegal, a senior ICC trial lawyer, for his role advancing the prosecution of Benjamin Netanyahu and the former Israeli defense minister Yoav Gallant for deliberately starving and depriving Palestinian civilians in Gaza.
Rubio tried to dignify the sanctions, saying the ICC threatened “America sovereignty.”
Previously, after the ICC prosecuted Vladimir Putin for the kidnapping of children from Ukraine, Joe Biden called the prosecution “justified”. The late senator Lindsey Graham, a Republican leader on foreign policy, orchestrated a unanimous Senate resolution in support.
Aside from Trump’s support for rogue insurgents such as Israel and Russia, there is also his own misguided debacle in Iran, which has produced none of the intended results. Instead, it has seen the regime further embed itself, and attain control over the Strait of Hormuz, which has let to inflation, and diminished both US prestige and their stock of missiles.
The latter will take both time and money to replenish, which isn’t ideal when your $40trn in debt.
There has been some strange goings-on at the US Treasury, with this month intervention to help prop up the Japanese yen. But, instead of selling dollars they sold euros, a move perceived by markets as a sign of weakness.
‘There has been some strange goings-on at the US Treasury’
Japan, with holdings C.$1.116trn, is the largest owner of US debt, and these actions are being viewed as the administrations reaction to concerns that they might sell a proportion to buy yen, which would result in higher interest costs.
This support was followed by the Treasury allowing Japan future access to a little-known facility, the Foreign and International Monetary Authorities Repo Facility, allowing them to borrow against its treasury holdings rather than selling them.
Also, Treasury Secretary Bessent, who had sanctioned buying the longest-dated Treasuries’ in an attempt to lower yields, announced plan to double this, after markets sold-off, pushing-up yields on 30-year government bonds to levels last seen before the GFC.
Financial commentator Stephen Innes, reacting to this intervention, said: “Once traders think they have identified a policy pain threshold, they tend to come back and test whether it is real.”
The sell-off is due, firstly, to inflation fears due to the Iran war and tariffs, which are eroding the real value of those payments.
There is also the AI investment boom, with providers issuance giving the market indigestion, with issues seen as an alternative to treasuries and crowding out public debt.
Lastly, and most worrying, is the feeling that despite continued robust economic growth, the US is not the rock-solid creditor it once was.
‘despite continued robust economic growth, the US is not the rock-solid creditor it once was’
Historically, America has benefitted from the “exorbitant privilege” given the US dollar’s status as the global reserve currency, ensuring demand for dollar assets and enabling it to run persistently high trade and budget deficits. However, some analysts warn that the Trump administration is putting this at risk through his trade policies and eye-wateringly expansive tax and spending plans.
Raghuram Rajan, a former governor of the Reserve Bank of India and an ex-chief economist at the IMF, said previously: “There is a worry about how volatile and unpredictable US policy has become, as well as increasing fears that if the high level of tariffs are to stay, the US will head into a recession. [Though] of course, tariff policy seems to be a moving target.”
Tariffs are back in the news after the US and Canada failed to finalise a deal to lower tariffs on steel, aluminium and cars, with both sides blaming each other.
As a result, the US has imposed 50% tariffs on some goods from Canada, with Mark Carney, the country’s PM, vowing to match them “dollar for dollar”.
Although the tariffs capture C.$20bn of goods which, trade experts say, could result in some job losses, the largest impact is expected to be political, driving a further wedge between the traditional allies.
‘US has imposed 50% tariffs on some goods from Canada’
Carney accused the Trump administration of using “economic integration as a weapon”, and saying his country had been “attacked” by the new US tariffs.
Carney said of US final demands: “They asked too much and offered too little.”
US trade representative, Jamieson Greer, said the breakdown represented a “missed opportunity for Canada”. He continued, saying the US was compelled to act after a year of retaliatory measures by Canada. “We’ve said enough, and so we’ve taken countermeasures. Our interest is in protecting American workers and protecting American supply chains.”
Trump, predictably went further, saying: “Canada wants the benefits of being a State, without being one!!!”
“They have also charged our great farmers, for many years, massive amounts of tariffs. No more!!!”
This again highlights Trump’s willingness to throw US voters under the bus.
Minnesota senator Amy Klobuchar, said the new tariffs meant “higher costs for small businesses, farmers, and all Minnesota families. Canada is Minnesota’s #1 trading partner. Minnesotans are paying for Trump’s chaos.”
Lastly, there is the president himself, who aside from self-enrichment, seems to have lost the plot.
‘the president himself, who aside from self-enrichment, seems to have lost the plot’
The most recent example of this was a personal attack on Kristen Holmes, a senior White House correspondent for CNN, after she asked Trump to respond to a widely shared comment by the Democratic senator Jon Ossoff.
The Georgia senator told a crowd that Trump “doesn’t want to do the job” and instead “wants to build his ballroom and travel with Natalie on their apparently defenseless flying palace gifted by the emir of Qatar”.
The White House responded to Holmes question with a personal attack, accusing her of asking a “disgusting and inhumane question”, calling her a “disgraceful, humiliating embarrassment to her alleged profession.”
This was followed by: “Someday, your children will come across your disgusting and inhumane question. They will be sickened and embarrassed to have a parent be so callous and vindictive. It’s quite troubling.”
Hate to say I told you so….
“Do what I want ’cause I can and if I don’t because I wanna
Be ignored by the stiff and the bored because I’m gonna
Spit and retrieve ’cause I give and receive because I wanna”
Today, we consider the decline of the US. Something I predicted not long after Trump returned to the White House.
Their 100+ years at the top, like their predecessors, must end sometime.
The great irony is that Trump, in his desperation to make America great again, has hastened its demise.
This need not have happened. Yes, China is fast catching up, but overtaking is another matter.
A more measured president would have handled the economy better and avoided unfunded tax cuts for the rich.
Inflation would be better controlled without tariffs or unnecessary wars importing inflation.
American military might would be intact, as a more measured administration would not have picked a war with Iran. A war it can’t win and is conceivably losing, along with its stock of missiles.
Also, a more alert administration might have imposed checks and balances on the tech bros, especially their AI spending, which threatens to overwhelm debt markets.
Instead of running hard to catch up, China has been able to sit on the sidelines watching the US dismantle itself.
Oh well…..
Lyrically, we start with “End of the Night” by The Doors and finish with “Hate to Say I Told You So” by The Hives.
Actually, I am quite enjoying this!
@coldwarsteve
Philip Gilbert is a city-based corporate financier, and former investment banker.
Philip is a great believer in meritocracy, and in the belief that if you want something enough you can make it happen. These beliefs were formed in his formative years, of the late 1970s and 80s
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