Transcription
[Music] Hello and welcome to the GZERO World podcast. This is where you can find extended versions of my show from public television. I'm Ian Bremer, and today, as President Trump's tariff battle heats up, we're asking a question that just a decade ago seemed unthinkable. Is the era of globalization over?
Since the end of World War II, America sold an optimistic vision of free trade. Goods and services, people and ideas flowing across borders would lift all boats. A more interconnected world would be more peaceful. It would be more prosperous. Everybody wins.
But today, the United States is telling a very different story. One where America is being ripped off. The rest of the world is taking advantage. The Trump administration's new vision is one where strong countries dictate terms, deals are zero-sum, and everyone looks out for themselves. We're seeing fewer open markets, more political fights over trade, and rising backlash from people who feel left behind.
My guest today says this doesn't mean globalization is disappearing entirely, but it is giving way to a new era, what he calls "globalization." So, what happens when globalization's biggest backer becomes its biggest critic? Will China, will Europe step in to lead? Trump recently announced a few deals that leave some tariffs in place. And his tariffs have had a limited impact on the global economy so far. But is this just the calm before a very big storm?
To help break down the stakes and where the world goes from here, I'm joined by Fared Zakaria, author, journalist, and host of CNN's GPS. Let's get to it.
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Fared Zakaria, welcome to GZERO.
>> Always a pleasure, Ian.
>> So, first thing I wanted to ask you, and not like we have a hard, tough plan here. Um, is the thing that I've, I think I've learned recently is the Chinese seem a lot more powerful now than they did three years ago, five years ago, ten years ago, in their willingness and ability to hit the Americans back. Is that a significant lesson that you think is appropriate right now?
>> Yeah, I think that's exactly right. I think a few things have happened. Uh, the first is the Chinese have, you know, kind of figured out they, they've, they've hit their stride a little bit better in international relations. Uh, if you remember after, uh, Xi Jinping comes to power, he starts asserting control over the, the Communist Party, he starts, uh, pushing back against private business, and then he gets pretty aggressive internationally. The "wolf warrior diplomacy," they called it, very tough on India, very tough on Australia, starts making nasty anti-American speeches, and he gets a lot of blowback. He gets a lot of blowback from the Australians, the Vietnamese, the Indians. And I think that even though, you know, it's a, it's a one-party system and, you know, he's a, he's a dictator, they, they realized this was not working. Secondly, the Americans, particularly under Trump, but even under Biden, started getting tougher and tougher on the Chinese. So they felt like they had to start finding, you know, ways to, to combat. And all that, you put that all together, and I think China has now kind of tried, I wouldn't say it's gotten there yet, but it's trying to figure out a way to assert itself against an American policy of soft containment. Call it what you will. And what it involves is much closer alliance with Russia, much, much greater degree of independence from American supply chains and American dependence, even if that means lower economic growth abroad. And finally, new, new alliances and strengthening of old alliances or relationships in places like Africa and the Global South. That third piece has become much, much easier under Trump.
>> Given the Trump?
>> Because Trump is so alienating so many people. Um, the big power play is going to be, they are going to try and make, uh, have better relations with Europe, uh, and, and drive a wedge between the Western alliance. Is that going to work? That's what we're going to have to wait and see.
>> Because they've certainly not been friendly towards China on critical minerals, challenges on semiconductor export controls, all the things the Americans have had problems with. The Europeans are having the same problems with the Chinese, irrespective of Trump administration antagonizing the Europeans. The Europeans are also Western capitalist democracies with open trading systems. They're also worried that the Chinese are going to come in and flood their markets. Think about EVs. The German, uh, manufacturing base is, is in very substantial part an automobile manufacturing base economy. If you have Chinese EVs coming in at, you know, half the price, very high quality, what happens to Germany's manufacturing base? So, they're all worried about that. They also, so, there's one piece where the Europeans face the same challenge the Americans do. They, if they flood the zone, their own economies with Chinese goods, what happens to their manufacturing base? So, they're going to be cautious. The second is, I think the Europeans have made a strategic decision. The Americans are more important to them than the Chinese. Um, it's, it's the right decision to make, and they know that if they try to cozy up with the Chinese, it's going to piss the Americans off. Not Donald Trump, I mean, the Americans. What I mean is, they know that that would be a bipartisan view in the United States that if a Democrat were to come into the Oval Office, that person would feel exactly the same way. And so those two forces mean there isn't going to be any marriage between China and Europe. But I think you will see better relations than, than, uh, they've had in the past. Look at a country like Canada. The Canadians, spurned by the Trump administration, are searching for other markets in which to be able to do business, sell their energy. I suspect there'll be more Canada-China trade over the next 20 years than there has been in the last 20 years. What the Chinese now have is a stranglehold of critical minerals, of exploitation, of supply chain. They've got dominant technology in electric vehicles, in solar, in wind, in nuclear, in a lot of places that the Americans have not been investing a lot for the past decades, that the Europeans have not invested adequately over the past couple decades. The Chinese do have that, and it seems in response to Trump's willingness to put a de facto trade embargo on them, that they're willing to hit back pretty hard. Surprising to you? Not surprising. People have often wondered, this was the weapon they had. We've known this for a while. They haven't been willing to use it because they felt like, you know, the Chinese need trade. They need, they're not Russia. Russia is a kind of rogue regime that is happy to ferment instability. By the way, it helps them economically because it raises the price of oil and commodities. And that's the Russian economy. It's basically just, it's a commodities economy. China is different. It's integrated into the world system. It's a manufacturing economy. It needs trade. It needs stability. So, we always wondered, well, will they be willing to do this because it'd be disruptive? Well, the thing about Trump is that he's so disruptive, and he's been so tough on the Chinese. You know, as you say, the tariffs are effectively an embargo. Their feeling is, we might as well. I mean, things are getting disrupted anyway, and we got to protect ourselves. We got to have something to fight back on. So, I, I think I was a little surprised at how quickly they did it and, um, the degree to which they've, they've sort of made clear that this is the first of many. And as you know, they've pulled back the minute that the, the Trump people said, "We'll pull back." So, when, when the Trump tariffs were paused, they, they paused the, uh, the restrictions on rare earths, but in a way that they can turn them on very quickly. The, the way I think we should be thinking about this stuff is, um, temporarily, you can, you can push the Chinese, uh, as much as you want. What we have come to realize is we cannot have, uh, sole dependence on the Chinese for these kinds of products. It does not mean we need to make them here. This is the big mistake I think we're making, which is the genius of the way that the United States has set up its, um, its influence and its ecosystem is that we have 59 treaty alliances in the world. We have an even larger number of countries, >> trade agreements with, you know, it's, it's various kinds of security agreements. We have an even larger group of friendly countries. If we can make sure that the things that we care deeply about are made within our ecosystem, and we have good trading relations with those countries rather than having punitive tariffs, that is a very viable and secure, uh, you know, supply chain. It's what Janet Yellen calls "friend-shoring," and I think that makes a lot more sense than onshoring because you can't, in today's world, make everything yourself. Uh, there are huge costs to it. It's hugely cumbersome. It's inefficient. But it's, it's inefficient on a scale most people don't understand. There have been estimates that to make an iPhone in America would cost $3,500 rather than $1,200 or $300. But we do have this amazing resource of alliances and friends. The Chinese don't. The Chinese can barely trust, you know, the Russians. We saw what happened with the Iranians. The Iranians expected the Chinese and Russians to come to their aid. Didn't come to their aid at all because those aren't real alliances. Those are fake, you know, government-to-government alliances. Whereas we have these deep connections with Canada, with Mexico, with Britain, with Europe. Why don't we use them?
There is, of course, a big decoupling trend, and not just of the Europeans away from the Russians on gas, not just from the Americans away from the Chinese on critical minerals, but also general this rise of nationalism, rise of protectionism. And we know historically that when one country does it, it becomes contagious.
Talk about where you think the future of global trade and interdependence is heading in 10 years' time. Do we still talk about an era of globalization, or do you think it's becoming fundamentally different?
So, I, the, the book I wrote, "Age of Revolutions," I think my main point was, we are living through an age of backlash, backlash to 30 years of globalization, massive technological change, cultural change. And I think we're in that for a while. I don't think that this is a blip. I think we are going to see 10 years, at least, of, um, globalization, not de-globalization, but a much slower pace and a much more political, uh, economy where there are going to be all kinds of tariffs, restrictions, carve-outs. Now, in some places, that will be, you know, very, very small inefficiencies. In other places, there will be very substantial. The place where there, they are the most substantial right now is the United States of America. We are becoming the highest tariff country in the world. If you look at, look, they're going to vary.
>> Going back to 1930s levels.
>> If you, if you look at this, it's going to vary, and Trump will change them week to week. Roughly speaking, we've gone from 2.5% tariffs to 15% tariffs. Um, now they may go up or down a little bit, as I say, depending on his, on his mood that week.
>> Not on the courts, but yeah.
>> But, but, you know, you're at Smoot-Hawley levels of tariffs. Um, and, yeah, the courts rule against him, he'll find some other way to do it. And that is going to be a substantial shift in the world economy. But one of the great strengths America has had is it, it sets the agenda for the world. And it's really done that since 1945. And the agenda that the United States has set for seven or eight decades was openness, integration, free markets, democracy, human rights. And the US is now in a different mode. Uh, Trump couldn't give a damn about human rights. He's a very much a protectionist, restrictions on immigration. It's a very different model. But with a few exceptions like immigration, while the US has gone off on this different model, the rest of the world is not taking America's lead. It's not following America's example. It's not following the new narrative put forth by America. Because when I go to Europe, they say to me, "Look, we depend on trade. You know, you are a big, vast continental economy. I mean, US is 85% domestic, uh, economy, 15% trade. Germany is 50/50. We have to have more trade. And if we're not going to be able to have it with America, we'll have to find other places." When I go to Asia, they say exactly the same thing, you know. So, it's a very interesting moment where the US is pointing in a different direction. Other countries have to accommodate themselves to the US because it's so powerful.
>> But they're not following that course. They're trying to freelance on their own and figure out how to make deals.
>> The big exception, though, to globalization that I see is what's coming out of China. Because of course, in this environment, the Chinese are saying, "Well, yeah, if the Americans are trying to soft contain us and the Europeans are ultimately more with them than they're going to be with us, we actually have to count on ourselves. Yeah, >> we have to invest in our economy, our strategic industries. And if that's going to create a fragmentation in top strategic industries between what's happening in the US and countries that align with it, and in China and countries that align with it, whether we're talking about AI or post-carbon energy or biotech or quantum, that's a very different world than the world of globalization that you wrote about in "Age of Revolutions."
>> Yeah, that's very true. And there's one other piece that I actually, I'd say further complicates it, which is digital goods and services are rising as a percentage of the overall economy dramatically. Those are much harder to put restrictions on. Think about, you know, uh, accounting services, radiology. How do you stop the globalization of accounting services and radiology? What is it? I'm sending an email to a radiologist in India with with an attached file saying, "Read this and give me an opinion about it." Um, you know, now maybe AI makes it so you don't need the radiologist in India, but you probably still need somebody, and, you know, some accountant overseeing an AI program, and maybe that still is done in India. But there's so much cross-border digital trade and goods that's growing that is harder to, uh, to put any kind of, uh, restrictions on.
>> It's not been part of liberation day at all.
>> No. Trump, for Trump, uh, the service economy doesn't exist, even though it employs 80% of Americans.
>> And it's a bigger part of the American economy than manufacturing by large.
>> And, and, and we export a trillion dollars. We have a trade surplus of a trillion dollars. So, there's like a very, we, so that's why I say we're living in a very weird economic moment where some things are growing like gangbusters. Other things are being curtailed and restricted. As you said, China has its own imperative. So, it's more of a hodgepodge, and that's why I think globalization is the right word, not de-globalization. But more than anything else, we are living in a much more political economy than we've ever lived in. You and I study political risk for a living. Um, we are in a period of maximum political risk because why does some industry get a benefit over another? It's politics, not economics. It used to be economics, efficiency, you know, uh, fastest good to market. None of that matters. What matters now is what, what are the political imperatives that are making somebody favor one industry, favor another?
The Europeans are going to spend a huge amount of money, uh, on defense, and for the first time, they're not going to just buy American goods. Uh, the, the European-American bargain was, America protects Europe, Europe buys American defense.
>> German defense companies are like the highest performing companies this year in the world. And my guess is you ain't seen nothing yet because they're going to have to found new companies if they're really going to spend 3 and a half percent of GDP. Remember, Europe as a whole, the EU as a whole, has a larger GDP than the US, I think.
>> And, >> and they've been spending less than two.
>> Right? And so that money has to go somewhere. And if it's not going to go to Lockheed and, and, and Raytheon and American defense companies, they don't have enough defense companies in Europe. They're going to have to create new defense companies. Uh, and that is going to, and that's why I say the, you know, the signature of the next 20 years is going to be political economy, not economy.
>> Would you say, since we're moving towards national security trends, that we are now witnessing a larger change in governance trajectory in Germany than we've been through in the United States over the last 10 years?
>> I think that, I would have said that, except for tariffs. I think the tariffs are, you know, because with Trump, you get a lot of noise and, you know, sometimes there isn't that much shift. Shift. I would say the tariff change for the United States to go from being the leading advocate of free trade in the world to being the most protectionist country, uh, certainly the most protectionist advanced industrial country in the world. That's a big shift.
>> But you know what I'm going to say? From the Germans, from being mo the most fiscally responsible and restrained country in Europe to being suddenly the most profligate, right? And on their military is pretty astonishing. So the military.
>> And these aren't Germans culturally, we're talking about.
>> Yeah. So the military part, just remember, we often forget this. Europe spent a lot of money on the military during the Cold War. The Germans had an army, I think, three times the size of what they have now in 1985. So the money is a big deal. But you're right, the profligacy is a big deal. Now, my own view, it's been about time. The Germans have been traumatized by the, the memory of Weimar for so long that they have always worried that everything is going to lead to hyperinflation. The, the, I'll give you a quick statistic. The Eurozone economy and the US economy in 2008 were the same size. The US economy is today twice the size of the Eurozone economy. What happened? Two big mistakes. One, the Americans embraced the economy of the future: services, technology, software, software services, and the Europeans didn't, which, it's actually funny because.
>> The UK is the big exception.
>> The UK and, um, and the second is that the Europeans had an absolutely disastrous period of experimenting with austerity. They wouldn't, after the '08 financial crisis, they wouldn't pump-prime the economy. They didn't spend. That was all German austerity. German austerity cost the continent essentially almost a generation of, of, of foregone growth.
>> And think about how they responded to Greece, right? I mean, it almost destroyed the EU.
>> Right? And, and so if the Germans now, because of security, because of Russia-Ukraine, have finally understood that it is, you know, for Mario Monti, the Prime Minister of Italy, used to say that the problem with the Germans is they regard economics as a branch of moral philosophy. They think it is deeply immoral to spend more than you make. It is deeply immoral to run up big deficits. The truth is, we live in an age where you have to have some pump-priming of the economy. The state is too large a part of the economy not to participate. And if the Germans finally get that idea, and they're at much, much lower debt levels than the US, so they have, nowhere, there's a lot of space for them to go. I think it actually boosts European, it could boost a generation of growth in Europe. The Germans are not yet willing to say, "Let's collateralize debt across the EU." And there are a lot of countries that aren't in a position to do what the Germans are presently doing. But just the Germans, I mean, if you talk, look at the 500 billion euros they're going to spend on infrastructure. Look at the tripling of defense spend that they are planning by 2029. That's pretty staggering.
>> It's absolutely staggering. And if, if they were to do what you're describing, which is collateralize European debt, what that means is essentially create an instrument that represents all of European debt, undergarded by the German economy. Probably needed to be undergarded by the German and French economy with a, with maybe some mechanisms that really, uh, create that, that, that backstop. Uh, you could have a real competitor to the dollar. The, the reason that the European, uh, Union has not been able to produce a competitor to the dollar in the euro is that two things: one, people don't know if the euro will still exist 20, 30 years from now. That, you know, as you say, if you imagine Le Pen winning in France and the AFD winning in Germany, so there's that specter, that specter of instability. But the second is that they've been unwilling to produce the kind of deep, wide, uh, liquidity of, of, of debt instruments, uh, that, you know, you need. You need euro bonds that can have the same. I mean, the thing about, uh, reserve currency is you've got to be able to invest hundreds of billions of dollars in an, in a debt instrument that you can easily cash out on, you can move around. And the dollar is the only game in town right now. If the euro becomes one, I don't predict that the dollar will collapse or as a reserve currency, but it might have to start sharing space with the euro. The euro might start, I think the euro is now, maybe the, maybe the dollar is 60% of central bank reserves. The euro is 20%. Maybe the euro goes up to 30, 35%. That's real competition.
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I mean, if I see one of the biggest things that's been a clear negative for geopolitical stability over the past decades, it's the asymmetry in power development between the United States and its allies. I'd also include Japan and South Korea, but most importantly, Europe. Like America's been powering ahead, and Europe has not. And I mean, one of these "be careful what you wish for" moments. But nonetheless, I think a very positive thing is over the course of the next 10, 20 years, you got a Europe that was much more competitive, was much more productive, was spending a lot more in its own defense. And yes, building up the European defense industries, and those will be competitors to the US, but at least competitors with rule of law as opposed to competitors with a Chinese worldview that supports authoritarianism and state capitalism. How do you think about that?
Um, if you look back over the last 30 years and you say, what, what is the dominant trend in the world economy? It is what I've called the "rise of the rest," right? The rise of China, of India, but even Indonesia, you know, Brazil. So, if you looked at 30, 35 years ago, the emerging markets were about 5% of the global GDP. They're now about 40, 45%, depending on how you measure it. That's the big shift. But that shift, fascinatingly, did not affect America. Uh, American share of, of global GDP 30 years ago was 25%. Today, it's 25%. So, where did that growth?
>> So there's no American decline that everybody talks about.
>> Where did that growth come from? It was Europe and Japan. Those are the countries that declined in relative terms to allow the China and India of the world to rise. And, and that has created the circumstance where the US is the only country upholding the liberal international order. Uh, and so, which helps create the backlash that you're talking about.
>> Exactly. And so you're exactly right that if we have a Europe that can be more competitive, more strategic, more defense-oriented, if we can have a Japan and a South Korea and an Australia, all those countries can contribute to a world of order because they all share these ideas about a rule-based international system, about human rights, and things like that. And that has to be the hope because what we have discovered is the United States cannot do it alone. Not because, by the way, we do not have the capacity in, in hard power. We probably do, but because it produces a massive political backlash at home. There is, this is still, and, you know, in its DNA, a country that is suspicious of the world, suspicious of our, why do we have to be involved in the world? Trump has tapped into that.
>> And that's not new.
>> It's not new at all.
>> That was World War II too.
>> Yeah. I mean, Tucker Carlson, Steve Bannon, they represent, in a sense, the, the hard, the beating heart of MAGA. And one of the ways to solve that problem is to say, "Yeah, we are, we're going to shed some of those loads, but they will be taken up by Europe, by Japan, by South Korea, by Australia, not by China and Russia."
>> But this is kind of the argument that you'd want the America Firsters to make if they were strategic, if they were long-term. You'd want them to say, "No, it's not that we don't care about the rest of the world, but we want our allies to be more competitive. We want our allies to be stronger." As opposed to, "We want to divide them and make them weaker and beat them up and win all the time." No, we want to win together. That, that's the way America ultimately is strongest. That's the way the American worldview wins, in the same way that the Soviets were ultimately defeated.
>> So, it's a very important point because it outlines two different worldviews, right? One is to say this rules-based international order, uh, that has promoted, you know, economic growth, trade, uh, cooperation, the, the, the flourishing of human rights, all that created by the United States after 1945, is a great thing. We just don't think we should be bearing the burden alone. And we have, part of our, the genius of the system was it allowed for growth, and it allowed a lot of countries to become very rich. Now they should participate in that collective project of collective hegemony to, to undergird this system. But I think at the heart of MAGA, at the heart of popular, this kind of American right-wing populism, is a deep rejection of that world, of those values. And what they want is a, a world that is much more nationalist, protectionist, uh, in a sense, a kind of world of the, of the, of, of the great power jungle of realpolitik, where every country hustles for itself. Nobody is constrained, and we are able to do well, well, because we're very powerful. We want Greenland. We want the Panama Canal. We want to annex Canada. If the Russians want to annex, you know, Ukraine, great. Fine. That's their sphere of influence. If the Chinese want to annex Taiwan, that's their sphere of influence. And that's for many people, that, that kind of throwback to a 19th-century realpolitik is the world they think about. I, I get that if you talk about the beating heart of MAGA as if there were some ideological purity, but of course, when you talk about Trump, you don't talk about ideological purity. You talk about whatever happens to be on his mind and the deal and the wins that he wants. And, you know, for Trump, the idea of spheres of influence implies that there can be more than one winner. And when I see, you know, Hagerty going off to Asia, the Secretary of Defense, and I see, you know, sort of Marco Rubio, um, talking in the Middle East or talking to the Russians, even, I don't see spheres of influence. I mean, to me, it's about, no, no, the Americans are doing what we want, and you guys are all going to have to march by our.
>> So it's fascinating, right? You're exactly right. There's competing, uh, impulses. And the beating, when I say the beating heart, I mean the ideological heart. That's why I think of Tucker and Bannon and people like that. But, you know, one of the funny things about American hegemony is even those who have been very critical of it, like Barack Obama, like Donald Trump, very different critiques, but when they come into the Oval Office, they realize, you know, it's kind of nice to run the world. It's kind of, you know, and by the way, if we don't do it, it's anarchy. If we don't do it, it's the Chinese who step in. If we don't do it, it's the Russians who gain. So, there's a kind of strange default, uh, imperialism that takes over the people who enter into these positions. So the tension, I think, and you saw it with the Iran strikes, is the, the tendency of the people in Washington running things to say, "We want to control, we want to, you know, we want to be involved in these, in these great world-shaping military operations, decisions," or call it what you will, versus the people, the beating heart of MAGA, like Tucker Carlson and, and, uh, you know, people like that, who were totally opposed to the strikes on Iran. So, I think there is going to be that tension. But I think you're right to say that with Trump, it's all impulse, and he likes to win, and he likes to be on top. And you guess what? When you're the President of the United States, you do have that option of saying, "I get to run the world." Um, and maybe he's going to be reluctant to give it up. But I do wonder whether JD Vance would have that same attitude, cuz he is much closer ideologically to that beating heart of MAGA.
>> That's absolutely right. And I'm, I'm glad you mentioned, and we haven't talked much. It's funny about the big national security issues, the Iran, the Russias, the Gazas, but maybe we talk about them together, you know, which is that because Trump does have certainly an impulse that a big mistake that Americans across the aisle have been making for a long time has been sending young men and women to fight very damaging wars, right, in Afghanistan, in Iraq, in Vietnam. Trump did his best when he was younger to avoid service, and Trump understands why lots of other people would want to as well. This is not a World War II environment. This is an America getting involved in wars of choice. And for me, Iran was not that. For me, Iran was, Trump wanted to get some credit, and then did everything possible to get out of that, to not be at war. Right? That's an interesting impulse where everything about Trump's, you know, sort of instincts align completely with the Bannons and the Carlsons and JD Vance. Trump very neatly fits into the "Judean" view, and the "Judean" view, unlike the Wilsonian, which has spread democracy around the world, and the "Judean" view is, we need to be very strong, >> we need to be threatening, we need to be taken very seriously, but we don't want to be involved in the world. We don't want to mess around with. We don't care how other countries govern themselves. We don't even care about what shape the international system has, but if you mess with us, we will clobber you. Uh, and that idea that, you know, the United States demonstrates its strength, but it never gets it permanently involved. It never gets its hands dirty. It feels very much like Trump's basic instinct, and you saw it with Iran. I think you're exactly right. The key, uh, line, I think the, the key impulse in Iran was captured by, I think Lindsey Graham best, according to the New York Times reporting. Lindsey Graham says to him at some point, "This is going to be a great military success. This Israeli operation, you want to get your fingerprints on it." And that was Trump's impulse. You know, I think this was a victory. We, by the way, we were correctly. The US had been providing Israel with a lot of the intelligence that allowed them to be >> all the way through. It was clearly a green light. I mean, it wasn't like Trump saying, "Don't do this."
>> And so, I'm thinking, I think he's thinking, look, we're providing the intelligence anyway. They're succeeding. Why? We need to get more credit. We need to be seen as being part of this. And as you say, he clearly has shown that that's the extent to which he'll go. He may, in a, you know, extreme circumstance, bomb again, but there's no circumstance in which he's going to put troops on the ground. Uh, and I think that "Judean" impulse, uh, in some ways is a reflection of the reaction to two wars, Afghanistan and Iraq, that went badly. But I think it also does reflect a much deeper tradition in America that obviously goes all the way back to Andrew Jackson.
>> So, secure the borders, check. He's done a lot on that. End the wars. He hasn't ended the wars, but certainly he's making an effort to end the wars. It seems like, going back to the beginning of our conversation, it's the economy, stupid, is the place that he's actually having the hardest time.
>> Yeah. Yeah. I mean, he's having trouble ending the wars even though he tried to end the Ukraine war by by by essentially forcing Ukraine to surrender. And I think.
>> Which they accepted, basically. They.
>> They were willing to at least, um, you know, kind of make the effort of ceasefires and peace deals and all that.
>> And Putin gave him nothing.
>> And Putin gave them nothing. But I think what I also mean is I think he's come to realize, you know, the Ukrainians are fighting for their lives. They're fighting for their country. They're not going to stop fighting. They, you know, they're willing to make a deal which seeds 20% of their country to the Russians, but they are going to keep the other 80%.
>> And by the way, to me, that seems like the single biggest change in Trump's perspective on an issue since he's been president is his shift on Russia-Ukraine to accept that reality.
>> He seems to have accepted it rhetorically, in terms of what he says. My own view is that Trump really doesn't like Ukraine. Ukraine was, remember, he tried to blackmail Zelensky in the first term, and Zelensky would.
>> For domestic political reasons.
>> And Zelensky would not be right. So that's the operative part. Like Zelensky stood up to pro-Trump, it then caused his impeachment. Ukraine is bad memories for Trump. Um, and he has this fantasy that he's going to have a great deal with and a great relationship with Putin, which isn't happening.
>> Right. So I think that the, you know, the, the Russia-Ukraine one is one where Trump's, Trump's sort of impulses have are so at odds with reality that, you know, he just went about it the completely the wrong way. The, the, the right way to have been would have been to put pressure on Russia and and force them to come to the negotiating table rather than putting pressure on Ukraine and forcing them to make more and more concessions. Uh, on, on the Middle East. Um, I think, as always, is more complicated than it seems. The, the economy, you know, look, Trump has for 40 years had one consistent, uh, ideologically coherent position.
>> Right? He is a protectionist. And he has finally, Trump won the, the Republican establishment, the Paul Ryans and the Gary Cones of the world stopped him from doing it.
>> This time he's unconstrained. He's going to do it. Um, you know, we'll see the effect. In my own view, it's going to have a, a big effect on the shape of the, of the global economy going forward. What do I mean by that? The US was the beating heart of the, of the free trade movement. The United States was the country that forced all the other countries in the world to open their markets. It reduced.
>> Even China, to the extent that it happened. Yeah.
>> And China is much more open. Most people don't realize China is a much more open economy than India or Brazil. I mean, and that was because of US pressure. I think that it, it moves the world economy in a bad place. It moves it towards much more political interference, much more corruption. Every time you have politics in the economy, it's a question of are you, are you friendly with the government? Do you, do you bribe the government to get a special exemption, a special tariff, a special protection? All that is going to multiply. And in the US, we're going to become, we're less globalized than the rest of the world. Only 15% of our economy is is exposed to trade. 85% is domestic. But it'll cause inefficiencies. It'll cause, look, why does America, why is America been so innovative and so able to, you know, to kind of be at the frontiers of technology? It's because we have allowed and invited competition from the world's best. The American car industry would be, would be a shadow of itself today if we had not let in the Japanese competition in the '70s and '80s. When we let that competition in, we realized our companies were sclerotic. They were making lemons. It, you know, we then shaped up and had to, had to find a way to compete against them. If you, if you, um, shelter your best companies behind 15, 20% tariff walls, they're just not going to be as competitive. And that's what I worry because the, because America's great strength, you know, we don't have the well-functioning state and welfare system and market economies of the northern Europeans. What we have is we know how to let the economy go gangbusters. We know how to make, you know, innovate at the highest level. And then we have a debate about how much to redistribute, and we, you know, we should be red.
>> And we have the best universities. We invest in the most research. All of these things.
>> And we have that feedback loop, right? So, it's, it's all directed towards massive innovation. Take on the best and the bright, you know, find the best and brightest from the world, recruit them, get them to universities, have them start the companies, let them compete at the highest end, open competition with the rest of the world. If we move to something else, I think we lose that edge. And so much of the debate, uh, in the United States over the past decades is lots and lots of Americans feeling like, despite all of that, they've not been a part of it. Trump speaks to that. Elon speaks to that. Um, Mani speaks to that, right? I mean, all of it. Um, do you see, I mean, if you look 20 years ahead, do you think America is still going to have the kind of robust innovation with a political system that supports it that it has for you and me growing up?
>> You want to maintain this extraordinarily powerful economy that can innovate at the highest level, at the frontiers of technology, produce at the best level, >> but how do you buy in citizens? And then you want to redistribute. And then you want to redistribute in a variety of ways. Some of it is just straight-out welfare, like universal basic income, maybe. Or the, I might prefer the earned income tax credit because it rewards people for working. Some of it is massive investment in training and apprenticeship. Much greater emphasis on, on education for everyone. We do very well at the elite level, but we don't do well for the bottom third of the United States, either in public or in private education. So that's where I would spend the money to make sure that people who get left behind, who get dislocated, have lots of avenues both to live decent lives, but also to find new ways to be productive in the economy. Instead, what we're doing is we're slowing down the system in rather bizarre and episodic and idiosyncratic ways. So, for example, you know, at the most fundamental level, we're saying, "Oh, manufacturing is good." Now, right now, 80% of the economy is, right, 80% of Americans work in services. 8% work in manufacturing. Actually, only half of them work on the factory floor because half of all manufacturing employment is services. It's marketing. It's branding. It's sales.
>> Right. Exactly.
>> So, you're, you're basically taxing and complicating life and slowing down the service economy that employs 80% of Americans to subsidize the 4% of Americans who are on the factory floor because you have this nostalgic view that we kind of need to make stuff, right? And there's going to be a lot of that kind of thing. We still, we do a version of that with farming. We, we subsidize the 1 and a half% of Americans who still work in agriculture because we think, you know, there's a kind of nostalgia about that.
>> Even though most of the farming that's done in America is actually massive agro-business, it's huge business. And that's what I mean when I say it's weird. It's idiosyncratic. I mean, think about the no tax on tips. You're suddenly giving a, a tax break to the waitress, but you're not giving it to the cashier, the person at the cash register in a retail store. You're not giving it to the person driving a truck who might be making the same amount. Why? Well, because idiosyncratically Trump decided he wanted to help those people, and maybe because Nevada employs a lot of them, and he wanted to flip Nevada. Um, you know, so there's, there's going to be a lot of these kind of weird inefficiencies that seem to speak to an emotional issue here or there. Uh, you know, such as, you know, uh, tax deductions for auto loans. Like, why auto loans? Why not refrigerator loans? People, people also need refrigerators to live decent lives, right? So, to me, that's the, the tragedy of this kind of, the rise of this kind of right-wing populism instead of saying, "Let us recognize that we are, there are people being left behind, and they're being left behind not just on the issue of income and, and, and employment, because we have, we are running a full employment economy. They're being left behind in terms of dignity and self-sense of self-worth." And what do you do about that? To me, that's the national conversation we should be having. How do we, how do we create a sense of community and civic-mindedness and productivity and purpose? Because the thing we haven't talked about, Ian, is AI is going to do this to everyone.
>> Yes.
>> To the white collar, the white professionals. It's going to do it to the kids that are graduating. Really interesting question to ask is, what profession does AI not affect? Right? And so then, how do you find, what are you going to do to give people a sense of purpose, to give them a sense of commitment, to give them a sense of, you know, occupation? Uh, and, and, and so we have a kind of a much bigger meta question to solve. And my own views, we will be much better off if we have money to solve that problem than if we don't. That's why I say, run the economy hot, innovative, productive, and let's have a serious conversation about how we fill the gaps and what we do and what programs we come up with, rather than doing the, these various episodic, emotional, political interventions that are actually going to slow down the economy and slow down the innovation, because you're going to be hit by the tsunami of technology and AI anyway, and then we end up with a, with less money to do something about, uh, to, to remedy it.
Fared Zakaria, thanks for being on, man.
>> Such a pleasure, Ian.
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