Davos Debate: Trump’s Leverage Politics vs Lasting Trust (Full Transcript)

[00:00:00] Speaker 1: Here's my take. You can say yes, and we will be very appreciative, or you can say no, and we will remember. That's what Donald Trump said here at Davos, laying out Europe's choices on Greenland. When I asked a senior European leader whether there was relief that Trump had stepped back from the threat of military action, he answered, yes, but we've now seen a pattern in his dealings with us. He treats us with contempt. And even if this crisis gets resolved, we will remember. Trump's approach to leadership is primarily transactional. He begins by asking, who has more leverage? If the answer is him, he pushes as hard and as publicly as he can, not simply to win, but to dominate, extracting the maximum price. For him, diplomacy is the art of the squeeze. Trump enjoys using America's vast strength, built over generations, almost for sport. He placed tariffs on Switzerland, he explained, and then raised them sky high because the then-Swiss president rubbed him the wrong way, in his words. He relished recounting how quickly the Swiss came to him, seeking relief. This was less strategy than a power play. Last year, NATO Secretary General Mark Rutte appeared to jokingly liken Trump to a daddy intervening in a schoolyard brawl. And Trump has repeated that line with evident pleasure, including at Davos. He seems to enjoy even insincere flattery because it shows that he is so powerful, people have to fake their admiration for him. The Europeans shouldn't take it personally. Trump uses the same style on anyone he perceives as weak. In Ukraine, his irritation has often fallen less on Russia, the aggressor, than on Ukraine, for refusing to accept subordinate status. In dealing with countries like Brazil or South Africa, he is quick to lash out over policies he dislikes. But with China, he often sounds deferential, because Beijing possesses tools that could impose real costs on the United States. And of course he adores the Gulf monarchies, because they are swimming in cash, a form of strength he respects. This is the opposite of how American leadership has worked in the modern era. The United States has been the dominant power in the world for close to a century. But its leaders understood that primacy is not only about coercion. It is also about legitimacy, reassurance, and voluntary cooperation. They grasped a basic truth. Power is more sustainable when it is exercised with restraint, and influence is larger when allies feel dignity rather than fear. Think of Franklin Roosevelt. America was the indispensable arsenal for the Allied cause. Without American aid, Britain and the Soviet Union would have lost the war and fast. Roosevelt could have summoned Churchill and Stalin to Washington like petitioners. Instead, despite being confined to a wheelchair and gravely ill, he traveled for hours and hours to get to Casablanca, Tehran and Yalta to meet them as equals, demonstrating in physical form the idea that partnership matters. Donald Trump crowed more at Davos about winning World War II than did the man who actually did the winning. Or consider George H.W. Bush watching the Berlin Wall fall. The United States had won the Cold War, and Bush could have crowed. He deliberately did not. He said he did not want to dance on the wall, in part because he didn't want to steal the moment from Eastern Europeans who were winning their freedom, and in part because he didn't want to humiliate Soviet leader Mikhail Gorbachev, who was allowing it to happen. Bush understood that how you win matters, and that humiliating a weakening adversary can produce backlash and ruin the peace. Or consider India. Over the last quarter century, the U.S. treated India as an important world player, even when it was still, by the numbers, a very poor country. That respect was not charity. It was an investment that helped build strategic cooperation. Trump sees only the balance sheet. India's economy is much smaller than America's. Therefore, America can squeeze it by slapping prohibitively high tariffs. This is the art of the hustle. Use the leverage you have, bake the other side, pay the highest price, and treat bruises as proof of success. It may work in a one-off real estate deal. It is not how to build enduring businesses, let alone lasting global influence. Since World War II, there have been many places that the U.S. has considered strategically vital. Western Europe, Norway and Finland, the South China Sea routes, the Persian Gulf, the approaches to Japan. But in that time, America has never concluded that strategic importance requires actual annexation. It has created security through alliances, access agreements and forward presence. Greenland fits that tradition. The U.S. already has a base there and it can expand its capabilities easily through cooperation rather than coercion. Whether or not Trump gets his piece of ice, as he now calls Greenland, he's already accomplished something that will outlast the headlines. He's taught America's allies a lesson. They will still work with Washington, of course, because power is real. But they will trust it less, hedge more, and quietly plan for a world in which America no longer leads by lifting others up, but by reminding them they can be squeezed. As that European leader put it, with the same cold clarity Trump thought belonged only to him, we will remember. To talk about Davos and everything around it, I'm joined by Martin Wolf, chief economic commentator at the Financial Times. So, Martin, what was your takeaway from this rather unusual Davos?

[00:06:32] Speaker 2: Well, it's sort of shocking. But what's strange is the completely abnormal has suddenly become normal. We've been in this period now for a year. We had, of course, Trump won. It wasn't quite like this. But I did hear him when he came to speak in that term. It's sort of a freak show in normal terms. The way he talks, the way he presents himself, his obvious megalomania, the way he makes things up, all that is something we've just got used to. If you step back from that and look at what has actually happened, well, he's withdrawn from the trade war we thought we were going to be in by now over Greenland, or is it Iceland? So relations seem to have sort of been calmed down by Mark Rutter and so forth. That was a really big worry. He's got some sort of peace board, which I think actually might even be relevant in the Middle East. He might actually be the only person who could conceivably do something about the Middle East. And so when I look at it all, the economy is doing okay, in fact, rather better than we feared. So despite all this noise, the incredible commotion around him, things seem quite normal and not so terrible.

[00:07:43] Speaker 1: And despite the circus of the politics, as you say, what's striking, and we saw this at Davos, everybody's bullish about America and AI. Do you think, what explains that, a world where the politics seems to be roiling, but the economy is humming?

[00:08:01] Speaker 2: What we're benefiting from is the capital, knowledge, skills that have been built up across the economy in the last 20 years. China has a phenomenally effective economic machine. America has a phenomenally effective economic machine. There's technological innovation happening everywhere. So we can be fixated on the noise and the sound of the fury, but what I tend to say is build on the base of what we built up over 200 years, but particularly since 1945. The economy of the world is a fantastic momentum machine, and stopping that, that's beyond the powers of these powers.

[00:08:40] Speaker 1: Do you think, you've talked to so many officials, has trust been eroded?

[00:08:45] Speaker 2: Oh yeah, trust is gone. So this relates to the long-term costs. So will countries, businesses be prepared to bet their future on trade in general, that's a very big question, but on trade with the U.S. in particular, given not only the uncertainty about policy, but these trade deals were extortionate, literally extortionate. They took hundreds of billions of dollars out of this. Secretary Luttony was congratulating himself and America on how much money they'd extracted from all their allies. People know all this. So the way I put this is everybody now, be it in private sector or in government, has to hedge. And that was the essence of what Mark Carney said in his wonderful speech. When everybody hedging is costly, it means there are risks you won't take. You're not going to bet on a proposition which depends on access, stable, secure access for many, many years, which is what the GATT-WTO was designed to give in America. Will you do that? No, because the deal could be changed overnight. So the cumulative costs of the degradation of principle, the degradation of predictability of law, international and domestic, in my view, are bound to be very heavy. But we'll see it slowly. And Dieter Koopman has been saying this, a very important point, former chief economist at the IMF, that if you look at Brexit, we now know the costs have been cumulative. After 10 years, we can see them. It's very wrong to look at the costs of what is being done here in terms of the shock in the day. The markets will show some of it because the markets are forward-looking. But the effects we will see, and I'm sure they will be there, will be of opportunities lost showing in slower growth, maybe offset by the technological innovation. I'm not sure.

[00:10:41] Speaker 1: Martin Wolf, pleasure to have you on. Pleasure.