Trump Bites the Hand That Feeds a Lot of Americans

(Bloomberg Opinion) -- It’s hard to convey the full breadth of the shock felt from witnessing the president of the United States attack NATO allies, refer to the E.U. as a “foe,” criticize and insult the U.K. prime minister while on British soil, and call into question a post-Brexit U.S.-U.K. trade deal. This is particularly true when contrasted with President Donald Trump’s shameful and disgraceful press conference with Russian President Vladimir Putin.

Trump’s foreign travels this week and last call into direct question whether he understands and is committed to the foundational relationships, dispositions and institutions that have kept the West safe and free for decades.

Safe and free — and prosperous. Much of the discussion following the president’s misadventures abroad has focused on their diplomatic and security ramifications. But there are serious economic implications as well.

American commercial relationships with the U.K. and the European Union are vital. The U.S. Chamber of Commerce reports that Britain is the largest investor in the United States, and that the U.S. is the largest investor in the U.K. More than 1 million Americans work for British companies in the U.S. in a variety of industries, including manufacturing, pharmaceuticals, technology and finance. The office of the U.S. Trade Representative reports that the U.K. is the fifth-largest market for exported U.S. goods. According to the Commerce Department, 665,000 jobs are supported by American exports to the U.K.

The economic relationship with the E.U. is arguably even more important. American exports to the E.U. support an estimated 2.6 million jobs. The European Union countries (including the U.K.) are the largest export market for the U.S., and the second-largest supplier of American imports. According to the chamber, one-third of global GDP is represented in the flow of transatlantic trade between the U.S. and E.U., and more than 4 million Americans work for European companies.

Relationships this important should be handled with care and purposiveness. They have not been. The administration’s aluminum and steel tariffs levied against European allies are problematic enough. And the fallout from the president’s criticism of U.K. Prime Minister Theresa May’s plan for leaving the European Union could be significant.

When Trump made his undiplomatic remarks, the U.K. government was already in disarray because of disagreements over the prime minister’s vision for leaving the E.U., including protest resignations by Foreign Secretary Boris Johnson and the chief Brexit negotiator. The government had been hoping and expecting that a trade deal with the U.S. would come quickly once the time for negotiating one arrived. By casting doubt not only on a quick deal, but also on the success of any deal at all, Trump has further destabilized the British government.

How this will end is anyone’s guess. But many of the possibilities — the inability of the May government to agree on a Brexit plan, difficult negotiations between the E.U. and U.K., the enactment of an unfavorable Brexit deal, the prospect of prolonged post-Brexit negotiations with the U.S. — carry significant risk to American businesses and consumers by threatening to disrupt the investment and trade that advance the economic welfare of both nations.

The continued assaults on the E.U. could have even more significant longer-term economic ramifications. The liberal international order has been a prerequisite not only for the U.S.-E.U. economic relationship, but more broadly for the post-World War II prosperity enjoyed by Western nations.

This liberal order can only survive as long as Western democracies — ultimately, their people, not just their leaders — want it to. Troublingly, anti-liberal values and political parties are on the march in Hungary, Poland, Italy, France and elsewhere. Even in Germany, a right-wing, populist party has been making gains. Last week’s political turmoil in the U.K. has led to a surge of support for the right-wing, populist UKIP party, according to a poll released over the weekend.

It is in the economic interest of the United States to shore up the global, rules-based system that encourages cooperation, healthy competition, specialization, open markets, exchange and innovation. Authoritarian, anti-liberal politics and governments threaten the prosperity the liberal order creates by turning their nations inward and stoking tensions with neighbors.

And Trump weakens this system by creating turmoil, attacking allies, embracing Putin and treating international commerce as a zero-sum conflict to be won, not as something to be managed.

I have argued in previous columns that this turn against the liberal order is likely a passing state of affairs. Economic research examining more than 800 elections across 20 advanced countries between 1870 and 2014 finds that right-wing populist parties significantly increase their parliamentary vote shares following financial crises, but that politics returns to normal thereafter.

This is comforting, but not dispositive. The ability of the liberal order to recover from the current surge of populism will depend in large part on how much damage is done in the years to come. If you care about prosperity for your children and theirs, you should care about this.

To contact the editor responsible for this story: Katy Roberts at kroberts29@bloomberg.net

Michael R. Strain is a Bloomberg Opinion columnist. He is director of economic policy studies and resident scholar at the American Enterprise Institute. He is the editor of “The U.S. Labor Market: Questions and Challenges for Public Policy.”

©2018 Bloomberg L.P.