In defence of Donald Trump

Following a trip in May to a US investment conference to meet with company bosses, James Harries, the manager of STS Global Trust, reported that, “as ever one cannot fail to be impressed by the sheer scale, dynamism and competitive zeal of US corporates and the wider economy. There was widespread angst relating to tariffs, the unpredictability of policymaking and the stress on the consumer, but this had yet to show up in end demand.” Perhaps most remarkably, “not one company mentioned the word ‘Trump’”. At the time, it seemed that business leaders, fund managers and pundits in the UK were talking about little else. The consensus that had prevailed at least since his inauguration, if not well before, that Trump was mad, bad and dangerous, is being slowly transformed into a more measured analysis.

Jonathan Sumption, a former senior judge on the UK’s Supreme Court, remains firmly in the critics’ camp. He has warned that Trump’s bullying tactics, intolerance of even mild dissent, readiness to use presidential prerogative to drive through his agenda and vocal threats to those who stand in his way bear all the marks of an aspiring dictator. The checks and balances of the US constitution, with its division of power between the executive, Congress and the Supreme Court, and between federal, state and local government, has been steadily undermined, says Sumption. The muted opposition to all his proposals must mean that opponents and sceptics have been cowered into submission – that Trump has captured the Republican Party and has made himself unaccountable. The approval of presidential appointments, including cabinet positions, is just a rubber-stamping exercise.

Donald Trump is not Adolf Hitler

This view is echoed by Filipe Campante and Ray Fisman, writing for Bloomberg. “The second Trump administration has undertaken a sweeping expansion of presidential power,” they write. “The White House is attempting to usurp some of Congress’s spending powers and to reclassify civil servants so as to make them easier for the president to fire. He deployed the National Guard on California over the governor’s objections under the auspices of responding to a rebellion.” Campante and Fisman argue that the power of the courts is being challenged, students detained and universities bullied into submission. “The system that is currently under threat has endured periods of remarkable stress but democracy survived and thrived by responding to these challenges. This track record led to an understandable and almost unshakable belief that American democracy was unassailable.”

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Now, however, the two-party system has turned from being a barrier to extremism (as voters converge to the centre) into a trap, say Campante and Fisman. “If extremist or anti-democratic forces somehow manage to capture one of the two major parties, the system would switch from being a barrier to extremism into an accelerant. Helped by the rise in partisanship, which keeps voters loyal, Trump and his loyal proxies can credibly threaten every Republican elected official with the destruction of their political career.”

Niall Ferguson, the author and historian, takes a very different view. “People on this side of the Atlantic don’t remotely understand him,” he says. “He is not Mussolini, much less Hitler. It is enormously stupid to compare Berlin in the 1930s, when everyone was in uniform, militarism was rife and lawlessness everywhere, with America now. Trump is recognisably in the American tradition of populism, with tariff policy deeply rooted in the late-19th-century politics of president William McKinley.”

As for the idea that the US is teetering on the brink of authoritarianism, forget it: Trump’s use of executive orders is comparable with that of F.D. Roosevelt in 1933. Trump owes a large debt to Richard Nixon, who first took him seriously as a political figure. Nixon shocked the world in 1972 by meeting Mao Tse-tung, severing the dollar’s link to gold a month later, and by introducing a general 10% tariff.

Ferguson also compares Trump to Reagan in his restoration of military deterrence and the use of surgical strikes. “It reminds people of the superiority of the US military” and that “will have shocked Putin”. The bombing of Iran showed that Russian air defences are useless. German rearmament – precipitated by vice-president J.D. Vance telling Europe that if it doesn’t do something about its defence, Nato was over – is also a disaster for Putin. “Russian attacks on civilians are a sign of desperation as it can’t hit military targets. Putin has overplayed his hand and a war of attrition is unsustainable.”

These developments also make confronting the US a worse idea for China than it was just a few weeks ago, says Ferguson. A Taiwan crisis is still a strong probability, but Xi Jinping “is not a well man and doesn’t have long”. Trump’s successor may not be as amenable to a deal as Trump is, so “the stand-off will reach a culmination in the next three years”. Ferguson believes that China is more likely to blockade Taiwan than invade. After all, “when did the PLA last fight”? “Ukraine would be the last place in the world where I would want to get into a pub fight,” he says. “Taiwan would be my first choice.”

Trump’s tariff masterstroke

As for Trump’s widely derided tariffs, Torsten Slok, chief economist at Apollo Global Management, wonders if Trump hasn’t outsmarted the world with his tariff plan by keeping tariffs below his threatened rates to ease uncertainty while still producing $400 billion of annual revenue for US taxpayers. “This would seem like a victory to the world; trade partners will be happy with tariffs of only 10%.”

Dr Pippa Malmgren, a former US presidential adviser, gives Trump a mark of nine out of 10 for how well he’s doing. “His electoral base loves the changing of the power structure around tariffs, the fact that its succeeding in compelling other governments to negotiate not just on trade but on a variety of other issues.” It might seem as though his attempt to control the budget deficit and hence government indebtedness is failing, with Elon Musk disillusioned about the administration’s failure to slash public spending. Malmgren, however, says that “getting spending under control, will take many decades but the commencement of the process has gone incredibly well. This means addressing the issues of why money is being spent, what it is being spent on and whether it should be. His base is also very happy with his decisiveness on illegal immigration.” This has increased 50% year on year in the UK; attempted crossings of the US-Mexico border have dropped by more than 90%.

Trump’s critics are expecting (or is it hoping for?) a US debt crisis, particularly after the extension of the temporary tax cuts enacted in 2017. In Argentina, Javier Milei’s drastic cutting of public spending has turned an unsustainable deficit into a primary surplus (before finance costs) and is now being rewarded with an economic boom. That was never possible in the US. But it is far too soon to say that Trump has given up on cutting government expenditure; a 10-year US Treasury yield below 4.4% does not suggest that the bond vigilantes are particularly worried. As Ludovic Subran, chief economist and investment officer of Allianz, says, “it’s quite impressive to see how much the market is pricing in the pragmatism of President Trump. A lot of the uncertainty that was really peaking in April and May is now fading away.” You may not like Trump personally, but he is proving effective and markets are responding.

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