The Trump Legacy

The effect was compounded by the president’s announcement of a sharp rise in tariffs on imported goods to their highest level in very nearly 100 years. Bloomberg’s chief economist stated the new tariffs amounted to a declaration of “the most aggressive trade war the world has ever seen”.

Reams have been published on what this means for the US economy and polity, with growing expectations of recession, higher inflation, a constitutional crisis, and much more. The possibility of all three, and more, coming together is not ruled out.

In short, a sea-change is predicted that will affect business, trade, and politics throughout the USA. As the world’s most significant economy, what happens in America will have far-reaching implications for the rest of us also.

President Trump’s inauguration marked a sharp reversal in the previous strength of the US dollar. It fell below a trading range that had persisted for over two years; economists and currency analysts expect it to weaken further. Normally, this would not raise any special concern: foreign exchange markets can be volatile, after all.

This time is not normal. Even before the latest setback, other nations - and investors in general - had started to reduce their holdings of both the dollar and US Treasury bonds. The currency constituted around 65 percent of the world’s non-US national reserves in 2014. The effect that this has on commercial interest rates is still to be determined, as they have remained fairly steady, as finance institutions wait in some arears to see how all this plays out.

That’s fallen to 58 percent now, while overseas holdings of Treasuries have slumped from 50 percent to about 33 percent of the total issue. In May, Moody’s, one of the four leading credit agencies, downgraded the bonds from AAA to AA1. Meanwhile, monthly flows of official overseas investment into US equities have taken a severe hit.

For the Trump administration, this was good news. They believe the dollar’s reserve status had created such demand for the currency and US assets generally that it was overvalued, undermining US trade competitiveness. It is, they claim, the root cause for the proportion of American workers in manufacturing crashing from 24 percent in 1974 to just eight percent today.

That argument is both ironic and incorrect. Not only had the currency lost a significant level of international acceptance even before the Trump inauguration, but the US economy had, until then, been more vital, resilient, and competitive than most of its competitors. It was those very strengths, not the dollar’s reserve status, that attracted record levels of overseas buying of American equities, bonds, and the currency itself during the previous decade.

In short, the lack of certainty, created by a wilfully ignorant administration that constantly changes direction, strikes hard at the most fundamental underpinning of any currency - indeed, of any financial market - which is trust.

The US dollar has been the cornerstone of the world’s economy and trade since the end of the Second World War in 1945. That status enabled the country to enjoy a much higher standard of living than would have been possible if the rest of the world had not had such trust in the currency. Foreign investors financed America’s spendthrift ways by purchasing its government assets voluminously and continuously, especially its revered Treasury bonds.

Under the Trump administration, that trust has become so attenuated that the possibility of an end to the dollar’s status as the world’s principal reserve currency has become an active topic of discussion.

Even so, the dollar’s loss of favour among central banks and other investors has not benefitted the euro, its nearest rival, so much as other, less significant, currencies which together constitute only a minority of central bank reserves. Even if their small share were to rise significantly, they would still not threaten the dollar’s continuing reign.

Nonetheless, for several analysts, the persistent strength of the yen, the Canadian dollar, and the ‘all others’ (represented by the red line on the chart, above) indicates that cracks are appearing in the post-war economic order. That conclusion is reinforced by the surge in central banks’ purchases of gold since the Great Financial Crisis (2008-09), the biggest upturn in demand for the yellow metal since the 1950s and 1960s.

The buying spree suggests - strongly - that the world has been losing confidence in the dollar since well before either of Mr Trump’s presidencies. While that does not necessarily presage its demise as the prevailing currency of choice for trade and investment, if taken in combination with the previous chart, it does indicate clearly that priorities are shifting.

Nowhere is this more evident than in China, whose declared long-term strategy is to reduce its dependence on the US currency. That has caused a dramatic rise in the volume of Chinese foreign trade financed in yuan, the national currency, from 20 percent a decade ago to 56 percent in 2024.

Fear, and the uncertainty it creates, has also permeated international trade and investment since Mr Trump’s second inauguration. The uncertainty makes any forecast little more than a best guess, but the actual result seems more likely to be worse than forecast, not better. That is because the trend of business investment, which is the lifeblood of future economic growth, has weakened significantly.

In 2021, immediately after the worldwide pandemic shutdown, investment recovered strongly but tailed off thereafter. Donald Trump’s second inauguration has led analysts to forecast a more prolonged downturn.

The post-pandemic recovery not only failed to regain its pre-2020 peak, but the renewed weakness has already spread internationally. It is especially pronounced in Germany, the biggest EU economy. Partly, at least, that reflects a national loathing of borrowing to boost growth, especially when there is an active inflationary threat such as that caused by the post-covid consumption boom. The inflation-stoking Russian invasion of Ukraine in 2022 has only added to that reluctance.

Meanwhile, in the wake of President Trump’s on-off approach to tariffs, the World Trade Organisation (WTO) issued revised forecasts for the international trade outlook. It even coined a new acronym, TPU (‘trade policy uncertainty’), in order to emphasise that its updated analysis is more tentative than usual “since there has been no directly comparable event in recent history”. 

At first glance, the forecast does not look so bad. After slowing in 2025, growth is expected to resume its previous pace, or nearly so, in 2026. That’s pretty much what Mr Trump himself has said he expects.

On the other hand, the unprecedented nature of current circumstances, emphasised by the WTO, undermines the credibility of any forecast, especially one, like this, made so soon after the events of which it tries to take account.

More cynically, one might note also that the USA is nearly $26 million in arrears on its share of WTO funding. That would hardly encourage the organisation to paint the biggest source of its income in an unfavourable light.

On the geopolitical front, much has been made of the door Mr Trump is opening for China by abandoning America’s post-war role as the world’s biggest buyer and investor.

There can be no argument over China’s expanding influence in the world. For example, although it began to reduce its African investment inflows in 2019, it has been by far the biggest financier of that continent’s development for well over a decade.

Simultaneously, China has been advancing its Belt and Road Initiative, launched in 2013. This is a world-spanning investment project, designed to develop rail, road, power, and technology infrastructure with any nation that signs up to it.

So far, some 165 countries have done so and, as a result, have borrowed about $1.3 trillion from China to out into effect the improvements they require. In what has been termed ‘debt-trap diplomacy’, that has not only made China the world’s biggest creditor, but has enabled it to spread its economic influence and ‘soft power’ across much of the low- and middle-income world – and even among some richer countries. 

Domestically, too, China has been going from strength to strength. In 2015, wishing to reduce its dependence on foreign investment, expertise, and technology, it launched its Made in China 2025 programme. It has increased greatly the volume and quality of goods designed, developed, and made domestically.

One notable result is that China has become by far the world’s biggest maker and exporter of electric vehicles (EVs). It is also the biggest market for EVs, representing 59 percent of worldwide sales in January 2025. Additionally, it now owns or controls several well-known car manufacturers or brands, namely, Volvo, Polestar, Lotus, Smart, and MG, as well as exporting its own BYD brand of EVs.

These initiatives have propelled the Middle Kingdom into not just the top tier of world economies, but to its peak. After adjusting for differences in the purchasing power of their respective currencies, China overtook the USA more than 10 years ago to become the world’s largest economy, relatively if not absolutely.

Other than a bruising and ultimately self-destructive tariff war, Mr Trump’s response to this real and present threat to already-waning American dominance has been notable only for its absence.

Consequently, China has been left free to fill the gap left by America’s reduced international profile. In response to what he described as Trump’s “power politics and bullying”, Xi Jinping is drawing closer to Russia, as well as seeking to repair old enmities or create closer friendships with, variously, South Korea, Vietnam, Indonesia, and even India, despite the latter’s renewed conflict in Kashmir with Pakistan, China’s “ironclad friend”.

On the economic front, too, the lines are being redrawn. In May 2025, for example, the 10 members of ASEAN (Association of Southeast Asian Nations), plus China, Japan, and South Korea, expanded a rapid financing facility designed to support member countries who face urgent balance of payments difficulties. For the first time in its decade of existence, the $240 billion pool downgraded the dollar in favour of regional currencies, especially the Chinese yuan.

Meanwhile, as he imposes exceptional tariffs on China, President Trump has persistently appeased Russia despite Vladimir Putin’s aggression in Ukraine, his open hostility towards Europe, and his apparent ambition to expand his country’s territory to its former tsarist borders. In effect, the Russian bear has been given an American carte blanche to do whatever it likes and as forcefully as it wants.

America’s disruptive tariffs and ‘hands-off’ foreign policy have already driven its major trading partners, especially Europe and China, to boost their domestic manufacturing capacity, shorten their supply lines, and increase defence spending.

The 2022 Russian invasion of Ukraine had already fostered a significant rise in the EU’s military budget. However, Mr Trump’s second term, especially, perhaps, his defence secretary’s leaked opinion that Europeans are “pathetic” and “free-loaders”, has driven a further increase as the union wakes up to the fading of US support.

Again, China looks like being the main beneficiary of this deglobalisation. Spurred by a succession of US bans on technology exports, then by the Trump trade war, it has developed its domestic resources to the point that it now threatens to overtake America as the world’s technology leader.

Some of the recent evidence for that includes a claim from BYD, China’s biggest EV maker, that it has the ability to recharge its cars’ batteries to full capacity in just five minutes. There is also DeepSeek, a Chinese AI tool, which is said to be as powerful as OpenAI’s GPT-4, the American equivalent, but was developed at a fraction of the cost and uses one-tenth of the computing power.  

Meanwhile, Pakistan’s new J-10C jet fighter, designed and built in China, proved more than a match for India’s French-made Rafale machines in a May 2025 dogfight between the two – and the Chinese navy is now the world’s largest, by far, in terms of numbers of vessels.

On a broader front, UNIDO, the United Nations Industrial Development Organisation, has predicted that China will account for 45 percent of the world’s industrial production within the next five years. It expects the US contribution to be just 11 percent.

On almost any count, therefore, President Trump’s main legacy will be the diminution of America’s prestige, power, and influence across the globe, while China, especially, will go from strength to strength.

All of that is the historical way of the world. Empires rise and fall, nations expand and shrink, trade patterns shift. Such changes have been and still are inevitable, even continuous. However, there is one aspect of the Trump legacy that is not part of this cycle, and that is the damage he has done to democracy, to respect for evidence and truth, and to trust.

From the chart, above, it seems that Mr Trump has grasped fully the significance of Mark Twain’s remark: “A lie can travel halfway around the world while the truth is putting on its shoes”. However, whereas Twain was rueing a sad fact of life, Trump has exulted in the cynical twist to that observation supposedly made by Joseph Goebbels, the Nazi propaganda minister: “If you tell a lie big enough and keep repeating it, people will eventually come to believe it”.

It’s not the lies themselves; voters are long-inured to the mendacity of politicians. Rather, it’s their profusion and, above all, their deliberate use as grounds for disruptive, self-interested, and injurious policy formulation and decision-making.

For example, Mr Trump’s rationale for his “beautiful” tariffs is based on mercantilism, an economic theory that fell out of favour, if not into utter disrepute, over 200 years ago. His latter-day espousal of it has shut factories, emptied supermarket shelves, and lost jobs across the world and even in the USA that it was supposed to benefit.

One might argue he was ignorant, rather than a liar, but those advisers who had his ear surely knew better. However, they - and he - put their own interests first, and the most important of those was preserving their access to power.

For Donald Trump, that meant demonising foreigners, inflating American exceptionalism, and other forms of grandstanding for his supporters. For his advisers, his cabinet, and his family, it meant ensuring that their patron knew of and appreciated their unswerving loyalty.

When asked in an interview whether he is required to uphold the constitution, President Trump replied: “I don’t know”. Yet, if a president ignores that instrument and replaces the heads of federal agencies with people loyal to him rather than to the constitution, then the entire foundation of the laws that bind, even characterise, America is corrupted.

Ignorant throughout, Donald Trump has shown a persistent readiness to defy due process, for example, when deporting persons he considers undesirable, when withdrawing federal funding from organisations and government bodies which could challenge his authority, or when arresting a judge.

A similar disregard for the proprieties, if not actually the law, has enabled Mr Trump, his family, and his friends to use their proximity to power to negotiate favourable business deals and enrich themselves. One of the most egregious examples of this was his launch, shortly before his second inauguration, of $TRUMP, a cryptocurrency. The value of all of the tokens issued is estimated at $5.5 billion. He owns about 80 percent of them.

Equally blatantly, his two elder sons used their father’s May 2025 trip to the Middle East to strike a series of deals for new Trump-branded golf courses, hotels, and other ventures. The two men were at pains to emphasise that their father had stepped away from the Trump Organization, the family’s holding company, when he became president, but the conflicts of interest, the greed, and the corruption were plain.

So plain that the British Sunday newspaper, The Observer, made it the lead story for their 11th May 2025 issue, describing the Trump family as “the firm”, ushering in “the new age of corruption”. The photograph shows them on the steps of a church, recalling a similar embrace of religion by the Mafia and other criminal organisations in order to shield their wrongdoing behind a veneer of respectability.

Corruption, then, will surely be one legacy of the Trump presidencies. If it were confined to sly backhanders from business lobbies, or government jobs for friends and family, it would be no worse than has been experienced in some other administrations (that of the much-loved John Kennedy, for example).

However, Donald Trump has made it almost a centrepiece of his tenure. For example, he suspended enforcement of the Foreign Corrupt Practices Act, which outlawed giving and receiving bribes by US companies operating overseas, then openly accepted the gift of a $400 million aircraft from Qatar.

Similarly, he placed the biggest contributor to his election campaign in charge of an ad hoc group that was charged with improving government efficiency. In a single month, over 290,000 employees at federal agencies were evicted from office, thereby destroying the effectiveness of many of those bodies.

Overall, the nation which former president, Ronald Reagan, quoting the Bible, called “the shining city on a hill”, has become the chief enabler and promoter of tyranny, deception, theft, and outright criminality across the world.

This will affect the status of America at its very core. No longer can there be the previous level of respect for the US institutions, procedures, and instruments that uphold good order and justice. No longer can an injured citizen be sure of swift and fair judgement in American courts.

No longer can the desperate and the disenfranchised, fleeing war-torn countries or despotic regimes, expect to find refuge in America. No longer can a beleaguered nation, its borders threatened by a hostile power, expect help from the former ‘world policeman’.

In short, no person and no country can trust America any more. That is the legacy of a president who, in stark mockery of his claim to be “the greatest”, will surely be the most significant of this century.