The Eurasia Group founder Ian Bremmer says the world is facing greater political risks this year than in any since he founded his company in 1998.
“I would say that part of it is the US election, but a lot of it is structural,” he says.
Even before Donald Trump’s US election victory, he says, American voters had become less willing to support “globalisation in all of its manifestations”, seeking a more limited role for the country both in terms of its global policeman status and as a defender of free markets.
This is partly a reaction to events such as the September 11 attacks on US cities, as well as subsequent wars in Iraq and Afghanistan, but also a result of a “hollowing out” of its middle class, Mr Bremmer says.
Yet risks have become much more pronounced since Mr Trump took power, he believes.
Already, he says the US-China relationship “is worse than it was under Obama”.
“Part of that is Trump’s orientation on trade and his continual feeling that the Chinese are taking advantage of the US on intellectual property, on market access and on trade conditions more broadly.”
Even the relationship between the US and Russia, which at the end of the Obama administration was “at the worst point since the Andropov era in the early 1980s”, looks unlikely to improve in the short term.
“There are good reasons for the US and Russia to be closer together than they are. Certainly, the Syria policy – if the Americans don’t really want to do anything in Syria and the Russians do, then it doesn’t make a lot of sense to have an ‘Assad Must Go’ policy.”
Yet the spotlight that has been placed on links between current and former members of Mr Trump’s team and the Russian government means the US administration is currently “incapable” of building bridges.
“A combination of leaks, investigations, Congress, media and the Russian reaction is going to prevent it from happening,” says Mr Bremmer.
Already, he says, the signals coming from Moscow are that Russia is becoming more antagonistic towards Mr Trump’s team, with the recent parking of a surveillance ship off the US coast and coverage in Russian government-backed media such as RT and the news agency Sputnik changing “pretty dramatically”.
“That’s the big thing that has changed within the risk environment. Frankly, you would have expected US-Russia to be less risky than under Obama, now it looks like it is going to be more risky.”
And even before the Trump administration’s withdrawal of its controversial healthcare reform bill, Mr Bremmer feels there was an element of over-exuberance in financial markets.
He says he understands why the recent rally in equities has been so strong, as it is expected that Mr Trump’s government will make big investments in infrastructure while cutting corporate and individual taxes, and rolling back regulations governing the finance and energy sectors.
“I think the markets are overly excited, because it takes a much longer time to get these things through in the US than it would in a lot of other countries, and they get watered down. That’s even true with a Republican majority, and that’s probably a little more true with a Trump administration that doesn’t have a lot of experience and, as a consequence, will probably make some missteps and mistakes.”
Monica Malik, the chief economist at Abu Dhabi Commercial Bank, says that following the Trump administration’s failed attempt to repeal the Affordable Care Act (ACA), planned tax reforms could be affected.
“The failure to repeal the ACA will not provide the fiscal savings expected [more than US$330 billion over a decade] to partially support tax cuts and has already raised questions over divisions within the Republican Party,” she says.
mfahy@thenational.ae
Follow The National's Business section on Twitter
