Ten days of chaos was long enough to convince non-American traders that Trump’s America has become a place you cannot trust or make deals with — but brief enough that the bond vigilantes still had time to step in and stop the folly before the Greatest Depression got under way.
Trump was shocked by the bond market sell-off and caved instantly. Indeed, when he announced on Friday he would "postpone" his new, higher tariffs (above 10%) for 90 days for everybody except China, his spokeswoman was still defending those same higher tariffs about three doors down.
Alas, Trump forgot to exempt Chinese-made smartphones and computers from his new 145% anti-China tariffs. That would have infuriated US consumers, because most high-tech goods coming into the United States would have doubled in price overnight.
He remembered just in time — but that looked like "backing down", so Trump then declared he was just moving the high-tech tariffs to a different "bucket" and they would soon be back. Amateur night.
Trump’s minions may not have told him yet, but last week was not just a temporary setback in his crusade for high tariffs. It was the end of that road. Bring those tariffs back in 90 days, and the bond market will shut him down even faster next time.
Donald Trump will not stay quiet for long. He needs a quick victory to wipe away the humiliation of the tariff fiasco — invade Panama, perhaps, or fire Elon Musk. But it opens a window of opportunity for the rest of the world to discuss its options. They are not all that bad.
The time should be used to sketch out financial and military institutions that can replace those created by the US over the past 80 years. That is not really such a huge task, because in most cases it just involves a cut-and-paste job, duplicating existing structures but without the US.
There is still far more wealth and population in China, the European Union countries and Japan, in the middle-sized developed countries like Canada, the United Kingdom and Korea, and in the bigger emerging powers like India, Brazil and Indonesia, than there is in the US. It is not indispensable.
Almost everywhere else (except Russia) wants to preserve as much as possible of the old free-trading world, and the building blocks already exist: almost all of the G20 countries, Asia’s Trans Pacific Partnership, the Gulf Co-operation Council, South America’s Mercosur and the Southern African Customs Union.
Bringing China in would be trickier, especially because Beijing will be heavily distracted by the trade war Trump has launched against it, but China also wants a rules-driven trading system. That might be managed through the World Trade Organisation, which Trump is threatening to leave. (China is already a member.)
There’s no chance of building a similarly broad military security system, but that didn’t exist in the old days either. What to do about Russia is a problem, as usual, but it’s not a problem that has to be solved right now.
Russia is still "Upper-Volta-with-rockets", as they used to say: It has taken three years to conquer one-fifth of Ukraine, a country with a quarter of its population.
Russia now has oil as well as rockets, but a country with the same GDP as Canada is not an existential threat for a unified post-American version of Nato.
A Nato-minus-America alliance to deter the Russians can be fashioned by just building parallel security structures without the US. Indeed, exactly that is under active consideration in Europe right now.
The hardest part may be replacing the US dollar as the international reserve currency, since Trump’s actions are undermining faith in the current arrangement. The solution is bound to be a basket of other currencies, but it will be decades before it acquires the same aura of infallibility as its predecessor.
The project of building an international trading and security structure that duplicates and preserves the rules-based system Trump is now trying to destroy is daunting, especially since there is no dominant single power in charge this time.
On the other hand, at least this time the world has 80 years of experience with a reasonably functional system of that sort to guide its efforts. It also has a very strong incentive to build something similar but more equitable, because the only other alternatives are to become a servant of the Trumpian empire or a victim of it.
The great benefit of Trump’s arrogance is that he makes the choices so clear for all of America’s erstwhile customers, partners and allies: make the trek to Washington and "kiss my ass" or defy him and be cast into the outer darkness.
Actually, even submission might not save you. He lies a lot.
• Gwynne Dyer is an independent London journalist.
