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Control, Alt, Delete Pax Americana
Key insights:
- The US-led global order of Pax Americana is being rebooted by the Trump administration and replaced by a multipolar world.
- Tariffs, transactional foreign policy, and abandonment of multilateral commitments have weaken-ed alliances, fractured global trade, and undermined the dollar’s credibility as a global currency anchor.
- The US’s twin deficits and China’s trade surplus are symptoms of structural flaws: suppressed consumption and inequality in China, and debt-driven overconsumption and deindustrialisation in the US. Sustainable rebalancing will require wealth redistribution, higher consumption in surplus nations, weakening of the US dollar and lower consumption, and strategic industrial policies in the US - tariffs alone cannot achieve the needed rebalance.
- As globalisation goes into reverse, the winners from globalisation - platform companies, will face headwinds, while national champions will be favoured because of their more defendable business models.
- The US will go from being a destination for capital to becoming a source of capital. For investors, now is the time to allocate to international equities.
"Pax Americana, built after World War II on military dominance, trade interdependence, and the dollar’s reserve status, is disintegrating due to unilateralism, institutional withdrawal, and economic nationalism."