What I Learned This Week

Will America's unilateralism backfire?

After eight weeks of traveling around the world in May and June, the answer is—it could. Three reasons come to mind. First, unilateralism may unleash capital wars and America may not be the ultimate winner, as we have written in two WILTWs this quarter. (Please see section 15.) Second, it seems unwise for America to launch trade wars with its major trading partners when it owes foreigners a net $8 trillion, currently accounts for 75% of major-country government borrowing, has an extremely-low national savings rate and for decades has been dependent on foreign capital. Third, with its unilateralism, America is threatening the “rules-based international order”, which it helped to mold and has…

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