Deconstructing Trump’s Asia policy – it’s the border tax, stupid!

But those who watch President Trump’s showmanship carefully will detect method to his erratic messages. They drive his opponents mad because they seem to disregard facts, logic or context.  But the simple tweets convey an even simpler message to his followers: that he is delivering on his promises – a Strong America and America First. 
Trump is the first national leader to use 21st-century technology to deliver his messages directly to the people, bypassing the traditional media, intellectuals, bureaucracy and establishment – or what his chief strategist Steve Bannon calls the “swamp”.  
Trump’s tweets reduce complexity to simplicity – appealing to the gut. He diverts attention by making outrageous, politically incorrect points in order to gain tactical advantage.
Whether what is promised can be delivered is less relevant than whether the tweet strikes a political nerve. The social media is all about instant gratification. 
The “Thirty Six Stratagems”, a Chinese text dating back to the Warring States period (475-221 BC), offers more clues to Trump’s strategy.
The first of the 36 stratagems is titled “Crossing the Sea by Fooling Heaven”. The parable shows how to achieve your objectives by deluding the masses and diverting their attention with your public actions. The theme of the stratagem is that the best secrets are those in plain sight – you signal left and turn right.
However outrageous, preposterous and seemingly illogical, Trump and his team have been consistent in one key message – he will deliver on his promises to supporters. The more sound and fury against Trump, the more the media and the Democrats makes the man.  
Steve Bannon, the White House chief strategist, stirred emotions a fortnight ago when he spoke of “deconstructing the administrative state”. There are three vertical buckets in his strategy – the delivery of stronger defence and homeland security; the economic nationalism of “reconstructing” trade arrangements, including rejecting TPP; and deconstruction of the administrative state by winding back regulations and bureaucracy. 
All these appeal to the right wing Republicans, who reject a liberal order that increased the size of government and bureaucracy, creating more regulations and welfare that sapped the power of what Bannon calls “enlightened capitalism” – the freedom to do business unshackled from high taxes and red tape.   
So far, the financial markets are cheering Trump’s administration, even though most of its promises are yet to be delivered.  The reason is because all its major proposals appear to be pro-business – cutting income tax, spending $1 trillion on infrastructure, boosting the defence budget by $54 billion, hacking welfare costs (Obamacare) and kicking out illegal immigrants (“bad dudes”). If delivered (and it’s a big if ) these policies are promising for short-term growth, inflation and job creation. 
Meanwhile, the more the Democrats argue against these proposals, the more they set themselves up as the scapegoat if Trump fails to deliver on them.     
Politics aside, how will these ambitious plans be paid for?  The answer is the border tax. 
Most believers in free trade and the current multilateral system forget that the Trump administration is moving towards a series of bilateral negotiations. In other words, the multilateral system will be “deconstructed” by starving it of new resources, such as US foreign aid, Environmental Protection Agency budget and the like. 
Trump’s team is cleverly co-opting the cross-border tax idea, pushed hard by Republican Speaker Paul Ryan, to finance their policies. The tax works on making import costs non-deductible, which according to a Peterson Institute study, is equivalent to a 25-per-cent subsidy on exports and 25-per-cent tax on imports. In the short-run, this will reduce the US trade deficit, which is consistent with the “Make America Strong” theme. Furthermore, it will fuel inflation – exactly what is required to reduce the US debt burden. 
Meanwhile no one on this side of the Pacific should be lulled by Trump’s U-turn to endorse the “One-China Policy” regarding Taiwan. The main victim of a border tax, which is almost certain to come, will be China and Asia, because they are the largest source of American imports outside neighbouring Canada and Mexico. The border tax might not be aimed at Asia, but its effect will be the same everywhere.  
Thus, to dismiss as “noise” what appear to be chaotic and conflicting messages from the White House, is to miss the deep threat of the Trump signal – he will restore American exceptionalism by deconstructing the multilateral balanced order.
The biggest threat to Asian growth is the border tax.
Philosopher of science Stephen Toulmin (1922-2009) argued that our journey from modernity to post-modernity is by two paths – one forward-looking to the future, and the other nostalgic and backwards toward old ideas of religious purity and nationalism. Trump’s rise does not signal the “End of History”, as forecast in 1990 by Francis Fukuyama, but the Return or Revenge of History, in which American nationalism and protectionism is returning to its historical roots. 
To manage this tumultuous change in political course we need to tap all the wisdom contained in Asian classics. When the elephant charges, the last of the 36 Stratagems may be the best advice for many: “To run is the best stratagem.”  The trouble in our increasingly small world is that you can run, but you can’t hide.