Cromwell

When he’s not advising Trump to escalate in Iran–Trump has largely followed his suggestions, and look where it got us–Bret Stephens is assuring us that China is a paper tiger, because its government regulates too much and picks winners and losers. Chinese economic success simply can’t exist, according to Stephens’ CL ideology, so it doesn’t. Should we take him seriously?

Let me put it this way. If Stephens had been in Athens during the Peloponnesian War, he would have told the Athenians they had nothing to worry about, because their society was much less regulated than Sparta’s.

What will Xi demand in return for maintaining some sort of equilibrium on trade? Here is a big part of the list:

1. STABILITY ON TARIFFS: The current level of tariffs and the various agreements with the EU and others hasn’t prevented China from increasing its already vast trade surplus relative to the rest of the world. Just don’t do any more wrecking, please.
2. COMPENSATION FOR LOST INVESTMENTS IN THE WESTERN HEMISPHERE: Xi hasn’t done much in response to Trump’s aggression pertaining to the Panama Canal, Cuba, and Venezuela. Expect him to demand compensation of some sort–probably in the form of a freer hand in his own backyard. This could ultimately turn into a spheres of influence agreement.
3. TAIWAN, ALL THE TIME: This is where he really wants the free hand. At a minimum, expect Trump to move carefully in this direction in return for the trade concessions he considers more important.
4. END THE IRAN WAR, PLEASE: China is profiting to some extent from the war, but its fuel stockpiles won’t last forever. Something has to give reasonably soon.

I predicted a decade ago that Trump’s ultimate objective with China was a managed trade agreement. The rumors floating around suggest that I was right; Trump wants a deal that looks similar to the ones he has with the EU, Japan, and South Korea, with commitments for investment and a fixed number for tariffs. It could happen, if not right away; the Chinese typically don’t move that fast.

The premise behind this kind of agreement is that China is not fundamentally different from the EU, Japan, and South Korea; it is simply bigger and slightly more troublesome. Not everyone in the Trump orbit agrees with that conclusion. No less a luminary than Oren Cass has argued that the Chinese present a unique problem, and that permitting vast Chinese investments in America would be a huge mistake.

For once, Cass is right. In ideological and geopolitical terms, China is qualitatively different than the rest of America’s trading partners. It cannot be treated as just another country that wants to rip us off.

In connection with the last post, do you remember the scene in “The Godfather” in which Sonny tells his underlings to make sure that the gun is planted properly, because he doesn’t want his brother to come out with just his private part in his hand? That’s Trump in Beijing. He thinks he has the cards, but no one else does.

Trump likes to talk about the party who has the cards almost as much as he enjoys being called “Sir.” It follows, of course, that he believes he always has them, partly because he’s an American, and partly because he’s Donald Trump, the master maker of deals. But is he right this time, or does China have the cards?

Let’s look at the record. On the plus side, Trump presides over an economy that has been amazingly resilient, given the burdens he has put on it, and his military has performed remarkably well from a tactical perspective. On the minus side, America is blowing up the world with nothing to show for it, and Trump’s party figures to lose the midterm elections, which will result in two years of constitutional chaos. He is also busy alienating America’s allies, which will make taking coordinated efforts to control China’s trade surplus far more difficult. China, for its part, is doubling down on high tech and exports and getting away with it even in the face of stagnation at home. Trump’s efforts to rewrite the international trade rules have had a seriously negative impact on the rest of the world, but not the Chinese. In addition, the Chinese can wreak havoc on the American economy by denying us rare earths. Trump doesn’t have a lever that works as well as that; tariffs certainly haven’t done the job.

In short, yes, China has the cards at this point.

The honest truth is that nobody really knows very much about how AI will change the world. It could lead to widespread job growth or destruction. It could enable criminals and fraudsters or keep them under better control. It could lead to a cure for cancer and a world of more fulfilling labor or a world in which a handful of overmighty capitalists dictate terms to a government that is no longer democratic. Only time will tell.

The one thing for sure, however, is that it will be a boon for the owners of capital. It will lead to much larger profits for businesses that use it wisely. The American tax system, however, is primarily based on the taxation of labor, not capital. Is that sustainable? Will we see an America with a far more comprehensive welfare state financed by AI profits, or will a few capitalists use their growing economic and political power to shred the safety net and force us all to be their retainers?

If recent history is any guide, don’t get your hopes up.

I grew up during the Cold War. I was a small child during the Cuban Missile Crisis. I remember the furor over “The Day After.” The possibility of nuclear war, in short, was always with us during my lifetime. It seemed pretty remote, however. The likely results were so appalling that it was essentially unthinkable.

About a week ago, I had a dream in which Trump led us without proper preparation into a nuclear war with Russia and China. That never happened to me until now.

It serves as a reminder of the real stakes in American politics. Electing the man with the golden gut threatens us with extinction, not just an American variant of fascism. Keeping him under constraint consequently has to be our highest national priority.

Many pro-Israeli commentators complain that Israel is held to a higher standard than other countries when it comes to issues involving human rights. Ross Douthat notes that Israel is not entitled to exceptional support from Americans unless it embraces the double standard; in fact, it might as well be Saudi Arabia, with whom we have a purely transactional relationship. Is he right?

Indeed he is. Why should an imperial Israel be treated differently than, say, Ukraine? The notion of an exception to America First becomes illogical.

A note to my readers: I will be on vacation for the next two weeks. Regular posting will resume the second week in May.

For Xi, the hits from Trump just keep on coming. First, of course, there were the tariffs; then there were the efforts to force leaders in the Western Hemisphere to give up their Chinese financial and political ties; then there was the military action in Venezuela; finally, Trump blew up the Middle East without any regard for China’s interests. What comes next?

Trump will go to Beijing in a few weeks. He will probably ask Xi to bless the status quo instead of making additional demands. Even that will come at a price. My guess is that the price will involve Taiwan and Chinese support for the Russians in Ukraine.

Raise interest rates when a Democrat is president, even in the depths of a recession, because Democrats are irresponsible populists who can’t be trusted with rich people’s money. Lower rates when a Republican is president, even when inflation is out of control, because the good guys need all the help they can get. And always deregulate banks, because bankers know best.

He doesn’t need Trump to tell him that.

A second line of thought suggests that Orban’s willingness to hold elections and transfer power proves that Trump isn’t an existential threat to American liberal democracy. Is that correct?

No, because Hungary has a parliamentary system and is largely dependent on the EU for handouts. Trump has far more power within his system, controls the armed forces, and does not depend on any outside forces to stay in office. He also has guaranteed immunity for unconstitutional actions, the right to pardon accomplices, and a history of trying to overturn election results. It’s not the same thing as all.

Some commentators think Orban’s defeat marks the beginning of the end for right-wing European populists (call them Europops). Is that correct?

No. Hungary is too small and idiosyncratic to matter that much. The connections the Europops should really fear are to Trump and Putin, not Orban, because they have such a large and negative impact on the quality of life in Europe.

The Hungarian election was won by a large coalition opposed to Orban, not by the woke left. Is something similar possible in 2026? What about 2028?

The Democrats are not obligated in any way to offer a progressive alternative to Trump in the midterms. The election will be about bringing the president back under control; there are no divisions of opinion about that. In 2028, on the other hand, you will see a clash during the primaries between candidates who want to maintain the united front and return America to what it was in 2024 and other candidates who want to abolish the filibuster, reform the Supreme Court, and use the powers asserted by Trump to create a dramatically more progressive country. Who wins that battle? It is way too early to tell.

Trump announced on Friday that the Iranians had agreed to all of his demands, which was almost certainly not true. The Iranians denied his claim and closed the strait again for good measure. What is going on here? Does Trump believe in the power of wishful thinking?

Not exactly. He is engaging in psychological warfare. He thinks creating expectations of peace gives him leverage. As usual, he is wrong.

Given the unpopularity of the war, Trump desperately needs to make a plausible deal on nukes and then get out. This would, in all likelihood, resemble the 2015 Obama deal. Unfortunately for Trump, he has repeatedly described this as a surrender to the Iranians.

So what does he do? He needs something at least slightly better than the Obama deal in order to avoid embarrassment. It is not clear that the Iranians will make him that offer. It is clear, however, that Bibi will be mad as a hornet if it does happen.