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The Contrarian View: Why Trump's Foreign And Trade Policy Benefits The U.S. Economy And Markets

This article is more than 6 years old.

I recently had a conversation with David Mazaheri, who explores the contrarian view of Trumpism. The critics regard Trump as a populist president and a rudderless vessel, but Mazaheri argues that his policies are the organic evolution of foreign policies before him. Looking at parallels from successful and well-respected past U.S. political and economic regimes, Mazaheri distills that Trumpisms are beneficial for the U.S. economy. Its main element is the belief that American foreign policy should be conducted within the contexts of self-determination, self-preservation and, when necessary, self-sufficiency to advance and protect its self-interest.

Katina Stefanova:  David, you have a unique perspective given your experience in the national security establishment and your background in international finance.  What is unique about the current President’s foreign policy and its impact on markets?

David Mazaheri: As Harry Truman, once a haberdashery owner in Kansas City, was the most consequential foreign policy president of the United States after World War II, Donald Trump, the former real-estate developer from New York City, might be the watershed leader who defines American post-Soviet diplomacy for the years to come.

The administration released its National Security Strategy in December, the document that outlines how it intends to deal with security threats and matters of foreign policy in the years ahead. While not surprisingly dismissed by many, the strategy is as close as anything has come so far to defining Trumpism, meaning a philosophical underpinning of the president’s foreign policy thinking.

Stefanova: Trumpism, as an idea, is often dismissed by the president’s critics with no real consideration. His proponents, meanwhile, have also not adequately defined it. Why do you think investors should look beyond the controversial personality of President Trump to better understand what is changing in American foreign policy and how that would impact global asset prices?

Mazaheri: The critics regard Trump as a populist president and a rudderless vessel, but his policies are the organic evolution of foreign policies before him.  Trumpism can be described as a multi-faceted metamorphosis of preceding American foreign policies, with an economic underpinning, as reflected in the National Security Strategy’s heavy emphasis on promotion of “American prosperity.”

Stefanova: One of the highly criticized elements of Trump’s foreign policy is the resurgence of protectionism.

Mazaheri: Trump’s withdrawal from the 12-member Trans-Pacific Trade Partnership was not based on economic protectionism but rooted in concerns that the draft agreement heavily favored Asian industries. The George W. Bush Administration took a similar approach, pursuing trade agreements in Latin America on a bilateral basis, despite a multilateral push from Brazil. The results were trade pacts with Chile, Columbia, and Panama, which would have been impossible to reach on a multilateral basis.

The Administration’s imposition of the newly announced tariffs on imported aluminum and steel are market corrections within the scope of the efficient market hypothesis in the context of the trade.

China’s overproduction and refining of industrial base commodities in 1990s depreciated the prices of industrial commodities, which over time produced ample market share for the Chinese industries, with the advantage of pricing benchmarks in the secondary production markets. The tariffs announced by the Administration are correcting tools with the impact on multimarket paradigms: commodities market, manufacturing market, labor and job market; and corporate valuations in respect to the listed equities. I would argue that the tariffs are addressing monopolization of the commodities market as a whole and create a greater self-sufficiency for the United States with positive impact on the overall American economy.

An unstated cornerstone of Trumpism, and highlighted by the National Security Strategy, is economic supremacy of the United States, expressed as geoeconomics. Just as the Republican platform in 1980 promised “to achieve overall military and technological superiority over the Soviet Union,” Trumpism promotes freedom of trade, and subsequently its byproducts, freedom of navigation, access to credit, respect for intellectual property, and overall security. As Reagan prized military power, Trump focuses on economic power and competitiveness. “We stood by while countries exploited the international institutions we helped to build,” the National Security Strategy states. “They subsidized their industries, forced technology transfers, and distorted markets. These and other actions challenged America’s economic security.”

Trumpism is not isolationism, protectionism, or nativism, but an abrogation of the international order that has evolved since the establishment of the United Nations.

Stefanova: Is Trumpism unique or do you see precedents in previous political regimes?

Mazaheri: Trump’s approach to foreign policy is well proven and with strong pro-American market and economic impact. Ronald Reagan, whose foreign policy is still hailed as a golden age of conservatism, also built on the major policies that preceded him. Reagan’s approach to Lebanon was informed by George Washington’s Farewell Address, which warned against permanent alliances, the invasion of Grenada invoked James Monroe’s assertion of an American sphere of influence, and his rhetorical confrontation with Moscow followed the path of Soviet containment charted by Harry Truman.

Stefanova: Is there something to be said about a more assertive foreign policy and the benefits to U.S. economic growth and markets?

Mazaheri: Definitely. America foreign policy might have swayed too far not necessarily adequately protecting our national and economic interests. Since the collapse of the Soviet Union American foreign policy has arrived at a plateau characterized by a reactive interventionism derived from the skeletons of Truman’s policies and adjusted for free-market pronouncements, experiments in democratization, and human-rights niceties. The vicissitudes of post-9/11 world compounded those reactive policies, until the election of Trump.

Stefanova:  Are you saying that is it wrong to write off President Trump as a controversial president and perhaps to look deeper to understand the benefits of his foreign policy approach?

Mazaheri:  The foundation of Trumpism is based on classical American values of independence and self-actualization. As the first major articulation of American foreign policy, the Monroe Doctrine established self-determination and self-preservation as foundational principles. Authored by the Secretary of State John Quincy Adams, the Monroe Doctrine asserts the hemispheric independence of Americas against colonialization by any European Power.

In its first part, Trumpism reasserts the rights of the United States to self-determination and self-preservation globally. “Make America Great Again” in the context of foreign policy is the expression of Monroe Doctrine principles. The National Security Strategy, which reflects the president’s prolific Tweets and public statements, is a clear criticism of previous administrations’ negotiations, including “bad deals,” like the Iran nuclear agreement, the North American Free Trade Agreement, and the Paris Climate Accord. Those criticisms are based on his concerns that such pacts constrain American self-determination, which is why the new strategy emphasizes achieving “better outcomes in multilateral forums.” In Trumpism, multilateral agreements, whereby the self-determination of the United States is abdicated to international collectivism, is akin to accepting colonialism in the American hemisphere.

The Trumpist approach to the Israeli-Palestinian issue follows this policy of self-determination. By recognizing Jerusalem as the capital of Israel, Trump upended the status quo. By recognizing Jerusalem as the capital, Trump implemented a codified act of the United States Congress, the Jerusalem Embassy Act of 1995, despite the protestation of the international community, asserting the sovereignty of the United States.

Stefanova: Another criticized aspect of Trump’s foreign policy is his stance on immigration and refugees. Do you agree with that criticism?

Mazaheri: The president’s views on immigration are more complex than what some may consider as a simple antipathy to Latinos and Muslims. More than one million legal immigrants move to the United States annually, contributing to every element of the American society.

Migratory patterns that started post-World War II and escalated in recent years by denizens of all stripes to majority OECD countries is the new age Völkerwanderung. This modern global migration has many root causes: economic, social, political, and conflict driven. As with the original Völkerwanderung each group of migrants bring their own unique art, culture, and identity. Trumpism is indifferent towards the cultural identities of the new wave of immigrants to the United States, and focuses instead on sovereignty, self-determination, and enhancing the self-sufficiency (there are, not surprisingly, over two dozen references to the concept of sovereignty in the National Security Strategy).

Stefanova:  How would you think about the proposal to build a wall at the U.S. southern border.  This has also been a very controversial proposal?

Mazaheri: The wall is a notional, and to some, a practical assertion of U.S. territorial integrity and sovereignty. The Trump wall is the pinnacle of sovereign assertion of the United States and traces its’ roots back to decades of executive authority, from Monroe and Polk to Theodore Roosevelt and Reagan.

Countries which rely on international organizations to enhance their influence, have been critical of Trump’s immigration policies. Some OECD countries, like Germany, facing a shrinking population and future labor shortages, have pursued open-door policies with respect to refugees. The United States, on the other hand, is the largest economy in the world, with a robust labor market. Rejection of international pressure to accept refugees is the Trumpism assertion of self-sufficiency of the United States.

Stefanova:  What are the economic impacts of Trump’s foreign policy?

Mazaheri: The final part of Trumpism, is an economic open-door corollary that combines the trading rights of the United States globally, while maintaining the option to impose economic and trade punitive measures such as sanctions and tariffs on countries that abridge U.S. economic interests.  First articulated by Secretary of State John Hay in 1899, the open-door policy was submitted to the imperial nations of Britain, China, Germany, Japan, and Russia, proposing joint trading rights between the United States and their countries, so long as they didn’t establish a trade monopoly in any part of China. Trump’s interpretation of open-door policy extends the geographical boundary from Hay’s original policy to a global scale.

As a presidential candidate, Trump pronounced his eagerness to make a deal with any country, asserting that it’s in the interest of the United States to have as many trade agreements, and taxation treaties, with as many countries as possible.  This is beneficial to the U.S. economy and U.S. markets.

David Mazaheri is the managing partner at Intellaine, LP. He is a subject matter expert at the nexus of finance and risk for the U.S. national security establishment.