Globalization As We Knew It, Is Over

By Michael Every of Rabobank

The signal and “What’s that noise overhead?”

As discussions over who said what over Signal swirled among US politicians and journalists — on Signal — US consumer inflation expectations leaped to 6.2% y-o-y, which is hardly the anchored level the Fed keeps telling us is the signal they are receiving. Worse, prices paid in the Philly Fed services survey hit 36, the highest since November 2023, with a plunge in activity to -32.5, the lowest since May 2020 in Covid lockdown. In other words, sinking like an anchor. As is a lot else.

The US insists a Russia-Ukraine Black Sea ceasefire has been agreed, lifting restrictions on Russian agri and fertiliser exports in response, even as Russia says it first wants the full lifting of sanctions on its banks in SWIFT, which would require EU approval. If that’s forthcoming, where does it leave EU statecraft: buying Russian gas again, or –sarcasm– Russian weapons? If Europe says no, what if the US is even more incentivized to just leave and leave Europe the bill, as we saw from that Signal chat? Worse, reports also have US intel saying Russia and Ukraine may prefer a longer war to a quick settlement unsatisfying to either; the US also still sees a risk that Russia may resort to nuclear weapons. In which case, it’s on Europe again.

One point that didn’t get enough emphasis in the “make Europe pay for the Houthis” hoo-ha was that EU strategic autonomy is about more than just guns for Ukraine: it also needs a blue-water navy equal to its global trade ambitions. As we’d warned in Fortress America”, arguing the headline-grabbing statements we are getting there could actually be about China if one thinks about strategically.

Also note the US just added around 70 Chinese entities to its export control blacklist to prevent them helping Chinese AI and military development.

Moreover, the White House nominated an ex-navy staunch advocate for rebuilding the US merchant marine to lead the US Maritime Administration MARAD, suggesting more impetus towards US shipbuilding despite industry complaints about the USTR’s proposed port fees on Chinese-built and operated ships, and quotas for carrying US exports on US-flagged, crewed, and built vessels. (More USTR feedback sessions will be held on that today.)

On things fiscal:

• President Trump signed an Executive Order enabling the Treasury to modernize its payments systems to reduce waste, fraud and abuse (and another making US election day just that). Naturally, both will end up in court.
• Australia’s budget has just seen pre-election tax cuts and populist spending increases, such as more energy rebates; and no sign of any economic statecraft telling us what its GDP is *for*, other than ‘trying to win an election’. Aussie monthly CPI today was slightly weaker than expected at 2.4% y-o-y headline and 2.7% trimmed mean, which despite being way above the Reserve Bank’s 2% target, and against an expansionary budget, and signs of rising global inflation, and looming tariffs, naturally had some cock-a-hoop at the idea of, you guessed it, “Rate cuts!”. After all, what is any national GDP for if not its property market?
• The UK will today have a gloomy Spring Budget Statement filled with austerity, because “the world has changed.” Yes – largely towards military Keynesianism elsewhere, if not in the UK for all the recent Churchillian narratives. (And, meanwhile, an apparently existential UK-EU defence agreement is being held by over French demands over fishing rights in UK waters. It smells fishy, but it’s apparently true.)

Summing things up, HSBC says “globalization as we knew it is over”, news to those thinking asset prices go as high as smoothly as they used.  Showing politics and markets as we knew them are certainly over too in some respects, the Trump family are offering a stablecoin backed by US Treasuries to go with their meme coins backed by their surname.

More seriously, the head of the US Council for Foreign Relations argues in Foreign Affairs that ‘ Washington may have forged the open, liberal rules-based order, but China has defined its next phase: protectionism, subsidization, restrictions on FDI, and industrial policy. To argue that the US must reassert its leadership to preserve the rules-based system it established is to miss the point. China’s nationalist state capitalism now dominates the international economic order. Washington is already living in Beijing’s world… Washington having failed to convince Beijing to change its predatory economic policies or to move forward with an alternative trading bloc to counterbalance China, was left with one option: the US had to become more like China.”

However, Branko Milanovic in this week’s ‘Tyler Durden Wed, 03/26/2025 – 10:25

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