The Age of De-Globalization

Annex Greenland! Take back the Panama Canal! Canada as the fifty-first state! Speaking at an early January press conference, Donald Trump put the world in a tizzy. German chancellor Olaf Scholz recoiled in disbelief, soberly intoning, “The principle of inviolability of borders applies to every country, whether it is to our east or west, and every state must keep it.” Trump also said he would demand that NATO members spend 5 percent of GDP on defense (the U.S. currently spends less than 4 percent). Former U.S. ambassador to NATO Ivo Daalder sniffed that the target was “a made-up number with no basis in reality.”

The pearl-clutching is sadly familiar. Although the forty-fifth and forty-seventh president of the United States has been at the center of public life for nearly a decade, establishment politicians and commentators remain incapable of interpreting his rhetoric. By my reckoning, Trump seeks to convey an important message: Geopolitical realities have changed, and thus American foreign policy must change. And not just American foreign policy. A great deal of the world order ­constructed after the demise of the Soviet Union must be revised and, in some cases, jettisoned. The era of globalization is over. America must consolidate her alliances and ensure her economic advantages.

Economic globalization did not “just happen.” It was orchestrated by a bipartisan consensus in the 1990s. That consensus led to NAFTA, empowered Silicon Valley, and remade the American financial system as the center of the world economy. Those were heady times. The end of the Cold War was interpreted as history’s verdict in favor of the American Way. The idea was to open up the American economy to the world—so that the world could be Americanized and America globalized.

Our leaders believed that globalization would serve America’s interests. They were convinced that economic integration would enhance U.S. security, just as linking Japan and Germany to the American economy after World War II had transformed enemies into allies. The consensus promised that globalized free markets would create interdependent economics, making for a harmony of interests that would moderate national rivalries. The consensus also held that an enlarged global market would redound to America’s economic benefit. We would specialize in financial management and high-­return innovation, while low-wage countries would focus on resource extraction and low-return manufacturing.

Over the past ten years, innumerable commentators have detailed the failures of these promises. Globalization created an environment in which China could emerge as a dangerous rival, moving its economy up the value chain rather than remaining content to manufacture cheap clothes. (Why would we have imagined any other outcome?) Economic interdependence did not deter Putin in Crimea or Ukraine. Globalization succeeded in creating great wealth in the United States, but the benefits flowed largely to the fortunate few, at great social cost. As the gulf between those plugged into the global economy and those left behind in Rust Belt towns grew, the social contract in America frayed. 

Globalization was possible only because the United States enjoyed unprecedented military hegemony in the 1990s. During this “unipolar moment,” American power faced no credible adversary. Setbacks in the Middle East after the invasions of Afghanistan and Iraq exposed limits. But it was only in the 2010s that the decline in American hegemony became evident. Russia’s annexation of Crimea revealed that nations other than the United States could control events, at least in their own neighborhoods. 

We should not underestimate the importance of hard power. It’s simply impossible for the architecture of globalization, made possible by American super-­hegemony, to endure without our military supremacy. Every aspect of America’s diplomacy, security arrangements, ­alliances, and especially our financial regime must necessarily change so as to accord with the reality of America’s relative decline from its serene omnipotence in the two decades after the demise of the Soviet Union. Failing to make these changes will produce instability and, eventually, system failure.

Trump’s blunt statements about Greenland, Canada, and NATO are demotic ways of conveying the necessity of significant changes in America’s relations to allies and adversaries. The president was sending a message to the Danish diplomatic corps and other national bureaucracies. He was also preparing the American people for the changes that are needed to respond to the broken promises of globalization. Annexation of Greenland is unlikely. Canadian sovereignty is secure. But Trump will almost certainly put new demands ­upon our allies, demands that require them to reorganize the resources they control around America’s military and economic needs. 

Soon after his remarks, the Danish government backchanneled messages to the Trump transition team suggesting that expanded U.S. military installations in Greenland might be possible. Next on the agenda? Perhaps mining rights for rare earth metals. Canada? Perhaps the new administration will press for energy policies more closely coordinated with the United States. Whatever Trump was signaling in his remarks, it was not “isolationism,” a slur used to discredit those who think realistically about American power in the 2020s. Trump points to the need to reconfigure the capital and resources of our own country and those of our allies to buttress U.S. competitiveness on the global stage rather than supporting the never-­fully-realized and already disintegrating global system.

Speaking at a June 2024 Manhattan Institute event, incoming treasury secretary Scott Bessent acknowledged the changing geopolitical situation. He observed that the end of the unipolar moment will require “a grand and global economic reordering” on the scale of Bretton Woods or the Treaty of Versailles. In another setting, Bessent noted that a reserve currency functions within a security zone. American military power undergirds the dollar’s status as the global reserve currency. Changes in the scope of our power demand a rethinking of our economic and financial policies and institutions.

In the present global system, the United States plays three crucial roles. We have consumptive power capable of absorbing production from around the world. We provide liquidity to the world, which is to say that U.S. financial markets and the U.S. Treasury Department issue and turn over debt, the essential lubricant for markets. Finally, America provides security to the system, promising to use military might, if needed. 

In an obvious way, tariffs and other trade restrictions serve as a tool for regulating access to America’s consumptive power. In a geopolitical environment in which the United States must halt its relative decline in global hegemony, using this tool becomes necessary. 

A bipartisan consensus has already imposed trade restrictions on China that target technologies and industries deemed crucial to national security. In September 2024, then-Sen. Marco Rubio introduced a bill that taxes profits on investments in China at the higher income tax rate rather than the lower capital gains rate. Bessent recognizes that U.S. strategic thinking needs to go beyond measures that target China. Our current account deficit (imports being greater than exports) must be addressed. Our allies need to buy more things from the United States if they want to continue to sell things here. There are also domestic political reasons for ­tariffs—for example, to encourage ­re-industrialization that increases middle-class wages and supports the production of military hardware. In view of these factors, it is difficult to imagine that the United States will not erect further trade barriers in the coming years. The mere threat has already motivated foreign leaders to make concessions on trade and other matters.

The Biden administration overestimated American financial power. The super-sanctions designed to paralyze the Russian economy did not work. But the appeal of access to the U.S.-dominated global financial system is far from negligible. For example, the Federal Reserve operates a “repo” facility that allows central banks of other countries to borrow dollars temporarily when they lack liquidity. Access to this and other financial mechanisms will be reframed to strengthen alliances and weaken consortia of adversaries.

In his first term, Trump shocked establishment opinion by questioning NATO. He’s sure to rouse the ire of many by cutting a deal with Putin to end the Ukraine war. Perhaps NATO will remain a cornerstone of America’s military commitments. And perhaps the details of Trump’s deal with Putin will be ill-advised. But the larger truth must be acknowledged: The end of the unipolar moment demands scrutiny of America’s security guarantees to other countries—and revisions must be made when necessary. It is a false and irresponsible moralism that preaches great duties for American power that it cannot fulfill. It is ignoble to promise to do what you cannot.

I have no way to see the future, but of this I am sure: The world is evolving toward a new Cold War. The ideological divides will be less clear than those that obtained during the old Cold War. Economic interdependencies will endure, at least to some extent. But the End of History has ended. Events are undermining globalization. The Financial Times warns that Trump “risks turning the US into a rogue state.” This hysterical response bespeaks a dangerous myopia—or maybe it’s just the bellow of globalist interests anticipating losses to come. Either way, “international norms” are not timeless principles. They are the old truisms of globalization. New realities require new thinking. Ours is a time of reconsolidation. It is not occuring in ignorance or rejection of America’s international responsibilities. Reconsolidation is necessary to renew the sources of power so that we can meet those responsibilities.