Last week, a UN resolution condemning Russia as the aggressor found a surprising opposition – the US. Whilst the resolution did go through, US voting in favour of Russia is one of many actions in the past few weeks which shows Donald Trump’s cozying up to Putin, which has shocked even some of his ardent supporters. But few seem to be talking about the concessions to the Chinese as well.
In this rather entertaining essay, Noah Smith theorises about what Trump’s ultimate intentions could be. But before he does that, he compares Trump’s actions to the Treaty of Versailles, a settlement post WW-I that subjected Germany to withdrawal of support to allies, disarmament and deindustrialisation. He gives pointers to a similar pattern now:
Withdrawal: “Trump is holding “peace” negotiations with Russia over Ukraine, to which Ukraine and its European supporters weren’t even invited. At those talks, he has unilaterally and pre-emptively conceded to a long list of Russian war demands, with Russia as yet offering nothing in return.
…Trump has also proposed that Chinese troops should police a ceasefire deal in Ukraine.”
Disarmament: “Defense Secretary Pete Hegseth has ordered senior leaders at the Pentagon and throughout the U.S. military to develop plans for cutting 8 percent from the defense budget in each of the next five years
…Trump called for a “deal” with China where each country would cut its military spending in half. (This would actually be unilateral U.S. disarmament, since most of China’s military spending is off-budget.)
The market thinks this is a big deal. Hegseth’s memo caused a big drop in the value of U.S. defense stocks — not just traditional “prime” contractors, but also Palantir, commonly thought to be allied with the administration”
Deindustrialisation: “Trump is rapidly moving to cancel the industrial policy push initiated under the Biden administration. He has frozen Congressionally approved funding for EV subsidies, and issued orders to end policies favoring battery-powered vehicles. Now he’s firing large numbers of workers tasked with administering the CHIPS Act. This is a huge blow to semiconductor industrial policy…
Meanwhile, Trump’s threats of tariffs against China are rapidly evaporating. During his campaign, he promised 60% tariffs on China. After he was elected, that suddenly fell to 10%. Now Trump is talking about making a “deal” in which he repeals even the original tariffs he put on China in his first term (and which Biden kept in place), in exchange for Chinese promises to buy U.S. goods.
This would essentially amount to unilateral cancellation of U.S. tariffs, since a similar “deal” in Trump’s first term led to China breaking its promise to buy American agricultural products. But even if it succeeded, such a “deal” would push the U.S. in the direction of deindustrialization, ceding manufacturing to the Chinese”
Whilst the author reckons it is unlikely that Trump could be subjected to threats or bribes from the Russians and Chinese to play ball, he proposes his own theory which essentially points to a collaboration of the global right-wing leaders to suppress internal liberal opposition. He calls it:
““Metternich-Lindbergh Theory” because it combines Klemens von Metternich’s dream of a concert of conservative powers dedicated to cracking down on internal dissent with Charles Lindbergh’s vision of an America focused exclusively on the Western Hemisphere.”
He substantiates his hypothesis with:
– “Remember JD Vance’s words from the recent Munich Security Conference:
[T]he threat that I worry the most about vis-a-vis Europe is not Russia, it’s not China, it’s not any other external actor…[W]hat I worry about is the threat from within, the retreat of Europe from some of its most fundamental values, values shared with the United States of America.”
– “Darren Beattie, currently serving as interim undersecretary of state for public diplomacy under Trump, tends to tweet things like this – “The reality is Taiwan will eventually, inevitably be absorbed into China…this might mean fewer drag queen parades in Taiwan, otherwise not the end of the world….””
…So ideologically, the MAGA movement is inclined to seek something like the Concert of Europe — a triple alliance with Russia and China to tamp down on dissent, reverse immigration flows, and so on. Of course this wouldn’t look like the formal institutions Metternich devised, but an informal partnership. The key would be to avoid any great-power conflicts and to focus on internal ideological battles.”
Whilst this explains the Metternich analogy, he elaborates on the Lindbergh parallel:
“Lindbergh argued that the U.S. should completely avoid involvement in Eurasia, and focus entirely on the Western Hemisphere:
His movement was called the “America First” movement, which is a name that many Trump supporters use nowadays as well.
At the time, America rejected Lindbergh-ism. But there’s a big difference between then and now: the global balance of power. In the 1930s, the U.S. was the world’s manufacturing colossus, giving it the power to determine the fate of Eurasia. Today, that role is occupied by China, whose manufacturing capabilities now dwarf America’s.
Trump, Musk, & co. may have looked at that lopsided manufacturing equation and decided that there’s just no way that America, even in concert with its allies and potential partners like India, can match Chinese power over the next few decades. The daunting prospect of retooling American society to keep up with the Chinese may have caused the MAGA people to balk, and to start looking around for ways to come to an accommodation with the new reality of overwhelming Chinese power.
Lindbergh-ism — a voluntary retreat to the Western hemisphere — might seem like a way of appeasing the Chinese, at the same time that it allows America’s new rightist leaders to focus all of their energies on Metternichian internal struggles. Part of that idea is to divide the world into three spheres of influence, controlled by three authoritarian conservative powers — China as the ruler of Asia, Russia as the ruler of Europe, and America as the ruler of the Western Hemisphere.”
He goes onto explain why if true the Metternich-Lindbergh is bad for America and the world.
He also proposes an alternate theory – the Reverse Kissinger theory:
“Kissinger exploited the Sino-Soviet Split to make a de facto alliance with China against the USSR in the second half of the Cold War; the idea here is that Trump wants to peel off Russia from China in order to refocus all of America’s efforts on its more powerful rival in the Pacific.”
Whilst these do seem hypothetical for now, given the events of the last few weeks, even the craziest of theories cannot be dismissed.
If you want to read our other published material, please visit https://marcellus.in/blog/
Note: The above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. The information provided is intended for educational purposes only. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India (SEBI) and is also an FME (Non-Retail) with the International Financial Services Centres Authority (IFSCA) as a provider of Portfolio Management Services. Additionally, Marcellus is also registered with US Securities and Exchange Commission (“US SEC”) as an Investment Advisor.
