A rules-based order established in 1945 has reliably channelled capital into the West, but according to his former White House communications director, Donald Trump’s stance on NATO threatens to destabilise this system.
Speaking at the ASFA Investment Summit on Thursday, Anthony Scaramucci criticised Trump for seeking to dismantle this order, which he believes has been vital for fostering innovation and economic stability.
“It’s a rules-based world order. Yes, we have our adversaries, but there are certain ground rules regarding how we operate with each other. And this had led to a steady flow of capital going into great innovation and great ideas in the West,” Scaramucci said.
“So, when you think about the American Navy, as an example, it has done more in the last century to protect your economy that just about any other engine in the economy, because of the shipping lanes for energy, for manufacturing, all of this is very hard to go up against the current American Navy.
“So, what I don’t like about what he [Trump] wants to do is he wants to roll this back.”
A major concern for Scaramucci is Trump’s proposed isolationist policy, including repealing trade agreements and withdrawing from NATO, which overlooks the benefits the US gains from maintaining such alliances.
Using South Korea as an example, the former communications director said what Trump doesn’t realise is that in return for stationing 14,000 US troops in the DMZ [Korean Demilitarised Zone], the US benefits from discounted goods and services from Korea.
“We are getting direct benefits from that, but he fails to address that,” Scaramucci said.
Scaramucci strongly supports the idea that the world needs a single military hegemon to ensure peace by suppressing global tribal conflicts, a role he said the US has historically fulfilled well and might lose if Trump is elected.
“When someone like myself would explain something like that to Mr Trump, he would scoff at that,” Scaramucci said.
“Rather than listening to you like a good executive would … he’ll try to run over you … Intellectual insecurity is driving him, which makes him very dangerous.”
On China, Scaramucci said he believes the US must proceed cautiously and focus on finding ways to coexist with the Chinese to prevent escalating tensions and potential conflict.
“This is something that Mr Trump doesn’t think about in the necessary way, in my opinion,” Scaramucci said.
Regarding the upcoming election, Scaramucci believes Kamala Harris has a genuine chance of defeating a Republican Party that has been lurching farther to the right, but to win, she needs to appeal to people in Illinois, Indiana, Michigan, Missouri, Ohio, Pennsylvania, West Virginia, Wisconsin, and parts of New York State.
“[These] people have become economically desperational and Trump’s message resonates with them,” he told ABC’s 7:30 this week.
“Her economic agenda is actually working, and Americans may not feel it today, but she can go into the heartland and she could explain to them what Joe Biden and her did, that are actually creating a good set-up for the next four years … but she’s got to get out there and articulate that.”
Back in July, before Harris took over as the Democratic candidate, AMP’s Shane Oliver said that Trump’s views on tariffs, immigration, and the Federal Reserve’s independence are greatly concerning.
“Taken together, Trump’s policies point to a further blowout in the US budget deficit and higher inflation,” Oliver said.
“His proposed 60 per cent tariffs on imports from China and 10 per cent on all other imports would boost the average US tariff from 3 per cent to around 17 per cent or near the 20 per cent that applied after the Smoot–Hawley tariffs of the 1930s.
“This would potentially add 2.5 per cent or so to US consumer prices [as importers would seek to pass the tariff on or have to use more expensive suppliers] and take around 0.5 per cent off US GDP. And it’s hard to see other countries not responding to the US declaration of a trade war with their own tariff hikes which would accentuate the hit to growth as we saw in the 1930s.”
Higher budget deficits and inflation, Oliver said, would be detrimental to both US and global bonds, which would, in turn, negatively impact sharemarkets.
“Australia would be particularly vulnerable,” he said.
Also at the time, Oliver said that Trump’s prospects could shift significantly if a strong Democratic candidate were to replace President Joe Biden.
