Economic Statecraft in the Age of Trump 2.0

Will Donald Trump subvert his fondest policy tools?

Photo by Marco Zuppone on Unsplash

Last month Henry Farrell and I had a productive exchange of views about what to expect from Trump 2.0. You can read what I wrote at the time, but the quick-and-dirty recap:

• I initially posited that Trump possessed relatively clear and coherent foreign policy preferences and would pursue those ends — unfettered by any adults in the room in his second term — in a transactional manner.

• Farrell countered that “[Trump] doesn’t really care about goals in the ordinary sense of the term. All he cares about is getting other people to pay attention to him, and ideally to show him obeisance. The policies he adopts at any point in time will be the policies that allow him to strengthen his personal authority and dominance.” In other words, Farrell predicted far less foreign economic policy coherence than I dis.

• I countered by suggesting that Farrell will likely be correct in arenas of foreign policy that do not interest Trump but not those areas that impinge on his (for him) core convictions — in particular, foreign economic policy.

This week Foreign Affairs published a review essay by Farrell in which he advanced his points even further.

Washington’s ability to surveil vast troves of financial data and keep money and technology out of the hands of its rivals could be hamstrung by infighting and by Trump’s tendency to change his mind on a whim. U.S. economic security policy is primed to become a battleground in which China hawks, tariff warriors, Wall Streeters, and Bitcoin bros compete to sway a president who comes up with policy based on the advice of whoever he last talked to….

The one area in which Trump shows unwavering determination is his enmity toward technical expertise. His promised efforts to immediately fire “corrupt actors” in the national security and intelligence apparatus will lead to years of lawsuits. Yet even if they do not fully succeed, they will hinder the ability of the economic security state to get things done. Economic security officials with decades of experience will question whether they want to stay in an unpredictable workplace.

Farrell elaborated on his thesis over at Programmable Mutter:

We saw a lot of crazy in Trump I, but there are reasons to believe that the chaos will go much deeper in Trump II.

First, the kind of people in Trump I, who wanted more orderly foreign policy decision making (including, perhaps surprisingly, John Bolton) are not around any more. We can expect a lot more chaos, and a lot more unpredictability, as many of the processes that damped down Trump’s unique style of decision making disappear. Instead, we will see a lot more knife-fights between different factions trying to control policy, and disorder as Trump lurches from one position to another, depending on who he has last talked to.

Second, it will be harder to administer what policy there is well. The Trump administration is profoundly hostile to what it calls the “deep state,” and is eager to dismember what other people might call state capacity, because they believe it gets in the way of what they want to do. That is a problem for economic security making, which can’t work well without orderly process and skilled bureaucrats. Even if they fail in their ambitions, a lot of people are going to want to get out, or will be too worried about displeasing one or another faction to take real decisions.

My initial reaction to Farrell’s essay was to agree about Trump’s hostility to technical expertise, suggesting that, “the odds are excellent that Trump will subvert the coercive economic tools he loves to brandish.” And there is no denying that Trump 2.0, like Trump 1.0, will have its own factions. The difference is that none of the factions will resemble the “adults in the room” caucus that James Mattis or H.R. McMaster occupied in the first term.

Thinking about it a bit more, however, I am less certain that Farrell is correct. For one thing, I am unconvinced that Trump’s coercive economic statecraft will be subject to the whim of the myriad MAGA factions and advisors. As David Milne recently pointed out in Foreign Policy, it has never been clear that Trump’s advisors had much of an effect on his decision-making: “Trump’s ultimate pick as national security advisor, secretary of defense, and secretary of state will be himself.”¹ Trump’s transactional approach and genuine indifference to most foreign policy might make much of Trump 2.0 resemble Trump 1.0. But the reportage so far suggests that does extends to either tariffs or sanctions. Economic power is an area where Trump’s pre-industrial era reasoning might be blinkered but his convictions have calcified.

This relates to another noteworthy point about Trump 1.0: while his White House ran roughshod over a lot of the national security bureaucracy, his caprice did not extend as deeply with the economic bureaucracies. Steven Mnuchin managed to serve all four years at Treasury, as did Robert Lighthizer at USTR and Wilbur Ross at Commerce. When Trump-appointed Fed chair Jay Powell refused to step down during Trump’s first term, Trump’s response was limited to tweets. His transition team signaled no interest in removing Powell prior to his term expiring. Scott Bessent, Trump’s nominee for Treasury Secretary this time around, has already bent the knee on tariffs, thereby reducing the need for Trump’s White House to interfere in Treasury’s inner workings.

To be sure, Trump’s interference was still awful in places, like the 2020 Census. Furthermore, Trump attacked the economic statistics agencies during the 2024 campaign. But I cannot find instances of Trump or his White House taking aim at Treasury, USTR, or Commerce. For reasons that I will get into next week, Trump is loathe to do anything that roils the stock market too much. Mucking around in Treasury or the Fed qualifies as roiling activity.

Farrell might well be proven correct here — as previously noted, his prediction for chaos will likely find validity across broad swaths of Trump 2.0. My hypothesis, however, is that Trump will not interfere too much in the economic security state because this is a part of the government that he wants to function.

Contra recent GOP claims, Trump’s track record on economic statecraft was piss-poor during his first term. There is little reason to expect much in the way of improvement during the second term. But neither is there a compelling reason to believe he will destroy the machinery that enables him to threaten sanctions and tariffs and export controls so readily.

We will have to see whether this supposition holds for the next few years.

1. Though see MSNBC’s Hayes Brown and the New York Times’ Peter Baker on the sources of Trump’s Greenland fixation. Hint: it involves a billionaire friend!