The second coming of the most controversial man to have occupied the Oval Office for generations has been many things to many people. While there have been losers — any semblance of a rule-based world order, for example — it is facile to argue that he has had unequivocally negative impacts.
As we mark the first anniversary of Trump’s victory in last year’s US presidential election it is worth looking at the upside. Trump’s chaotic diplomacy and erratic protectionism, though not without costs, have also served as a catalyst for long-overdue change.
How a wrecking ball can lead to reforms
The so-called world order that Trump inherited in his second term had long been fraying. The Western-led, rules-based system had been eroded by financial crises, populist backlashes and China’s rise. But Trump’s outspoken disdain for multilateralism, his sneering at Nato, his tariff wars, his transactional worldview, these were all new. It was this that forced others to adapt with uncharacteristic speed.
Nowhere is this more evident than in Europe. For decades the European Union talked of “strategic autonomy” while relying on an American security backstop. Trump’s open disdain for Nato allies — Nato formally adopted a 5% of GDP defence and security spending commitment by 2035, a back-of-the-envelope target no one will meet — has at least had a galvanising effect.
EU member states are finally coordinating defence policy, while common borrowing to fund defence spending at a federal level is practically inevitable. What was once an abstract debate in Brussels is now, at last, an agenda. This can only be a good thing.
Germany, long addicted to fiscal frugality, has finally reformed its sadomasochistic constitutional “debt brake”. In March, the Bundestag approved a €500-billion fund for infrastructure and defence, ending years of persistent and endemic under-investment. The euro is meaningfully stronger than a year ago, and European equities have outperformed American markets since Trump’s re-election. These facts will not be lost on the White House. The EU’s ponderous machinery is slow, but at least it is moving.
This reality extends beyond Europe. Canada, facing the wrath of Trump’s tariffs, has found new enthusiasm for dismantling its obstructive interprovincial trade barriers. India, stung by punitive duties, has accelerated long-stalled tax reforms.
Even South Africa, threatened by the ending of its privileged access to US markets under the African Growth and Opportunity Act, has been forced to clarify its global role; closer alignment with fellow BRICS members is inevitable, who now view any concept of American reliability as a relic. Rising powers China and India, whose militaries were clashing bloodily only a few years ago, are moving rapidly towards détente.
Ex-US trade deals are the natural consequence. Many, which were mired in negotiation, have suddenly acquired urgency. Since Trump’s return, the EU has sealed accords with Mercosur, Mexico and Indonesia, while advancing talks with India. China and the Association of Southeast Asian Nations have inked an expanded pact. The emerging world knows that it will have to work more closely together if it wants to act as a genuine geopolitical force.
The upside of the dollar’s decline
Second, Trump’s absurd protectionist bent and habit of bullying the Federal Reserve has resulted in, contrary to what economists had expected, a weaker dollar. Conventional wisdom assumed that tariffs and fiscal profligacy would strengthen the currency. Instead, uncertainty and erratic policymaking have debased the greenback. Since Trump announced his tariffs in April the dollar is almost 4% lower against a basket of major currencies, according to Bloomberg, despite strengthening 1.2% in the last month.
For emerging markets, a softer dollar is a great thing. It eases debt burdens and supports growth. The dollar’s erosion as the world’s unquestioned reserve currency has been under way since Russia’s invasion of Ukraine, which duly exposed the geopolitical risks of dollar dependence, particularly for those holding foreign exchange reserves in the greenback. Russia learnt the hard way how those reserves can be weaponised, and other emerging powers will not want to make the same mistake. Trump’s antics have simply hastened a long-term realignment towards a multipolar monetary order.
Will the world mourn the dollar’s dominance? This is unlikely. Reserve diversification brings costs, but also resilience. In undermining America’s financial exceptionalism, Trump may inadvertently have nudged the global economy towards a healthier balance, economically and geopolitically.
Trump has made the US the centre of FDI
Third, domestically in the US, while tariffs can never be a good thing for competitiveness as they shelter firms and result in higher prices for consumers, there have been beneficiaries.
The most obvious positive effect has been the surge in foreign direct investment. Last month the White House boasted of $8.8-trillion in new investment pledges, or roughly a quarter of America’s GDP. That figure is obviously a complete falsification. Nonetheless, the underlying shift is real.
According to the Peterson Institute, foreign investment inflows may approach $400-billion this year, hardly $8-trillion but still striking. In recent decades America was chiefly an exporter of capital, its multinationals building factories in China and beyond. Now the flow has reversed. fDi Intelligence estimates that the ratio of inbound to outbound investment has climbed above 40%, one of the highest levels in two decades. The US is once again seen as a place to build, rather than simply direct outsourcing decisions from. Even if this is driven by fear of tariffs rather than business confidence, the effect is the same.
Lifting the veil of ignorance
But finally, and perhaps most importantly, the US has been revealed as what it truly is. Perhaps Trump’s most enduring contribution has been to strip away the moral pretence from American power. For decades the US cloaked self-interest in two-faced neoliberal acceptability.
It’s blatantly illegal interventions, often under Democratic governments — Guantanamo, Iraq, enabling and supporting Israel’s genocide in Gaza — were cloaked in talk of democracy and human rights. Trump dispenses with such hypocrisy. He is not ashamed to say that America comes first. The rest of the world, relieved of illusions, can finally see Washington for what it is; an extractive imperial power like any other. There is no shining city on a hill.
This is forcing other countries to adapt and evolve. In Europe, centrist forces are stirring. The liberal D66 party in the Netherlands, campaigning on an unapologetically pro-EU platform, this weekend nearly tripled its parliamentary seats in the parliamentary election, overtaking a floundering extreme right.
Across the Danube, Hungary’s Viktor Orbán — Trump’s loudest European ally — faces sliding poll numbers and is likely to lose re-election next year. In Canada, the liberal Mark Carney’s ascent to the premiership owed almost everything to repulsion against Trump’s bullying, which at one point extended to bizarre threats about annexation.
Historians have long ridiculed the “Great Man” theory, the notion that individuals shape world history. We have been taught to believe the world is too big and too complex for any one person to dictate its trajectory. Trump challenges this notion. He may not be a great man, but he is certainly a consequential one. It is hard to imagine a counterfactual world where the same tectonic geopolitical shifts could have played out without him as president.
But of course, Trump is a symptom not a cause. The US has got the man they wanted or, perhaps more accurately, the man they deserved. His vulgarity and unilateralism are not divergences from the American tradition; they are its essence.
With hindsight, Trump’s second term will be remembered less for what he built than for what he demolished. Yet, as Joseph Schumpeter wrote, destruction can result in creation. By upending alliances, unnerving markets and exposing hypocrisy, he has forced governments to confront uncomfortable truths. Europe is rearming. The global South is coordinating. The world is adjusting to a future without Washington.
It is tempting to lament the disorder Trump has unleashed. But acknowledging the reality is critical to understanding it. The world is, unquestionably, Trumpian now. The only sensible response is to adapt and get on with it. DM
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