After a month of Donald Trump's "chilling effect" style transformation, the US stock market has begun to react. The main New York stock index – the S&P 500 – began to fall on February 19, 29 days after Trump took office. Currently, the index has fallen by more than 6%, while the more volatile Nasdaq is close to a technical correction, with a drop of nearly 10%.
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03-10, 2025It is not surprising that investors are uneasy about the uncertainty of tariffs and the prospect of a trade war. Many economists are now predicting a slowdown, or even a recession, in the US economy. Because US stock prices reflect expectations of endless growth, they are very vulnerable. However, Trump's reaction to the stock market decline is what is truly noteworthy.
When asked if the stock market decline was caused by his tariff policies, President Trump blamed it on "globalists." "Well, many of them are globalist nations and companies, and they won't do so well because we're taking back things that were taken away many years ago. I think the globalists see how rich our country is going to be, and they don't like it," he said, using the term multiple times during an hour-long press conference in the Oval Office.
It is unclear whether "globalists" refers to investors or companies, or whether he is using the word in the way described by the American Jewish Committee, namely "a code word for Jews, who are seen as international elites trying to use their international connections and control of large companies to undermine or destroy 'Western' society." In any case, what matters most to Australia and the entire Western world is that the United States has fallen into the hands of anti-globalists who are carrying out a profound regime change in the manner of an autocratic regime change.
Ironically, Trump, in the name of "Make America Great Again," is subverting the 80-year world order that has actually made America great. The United States convened a meeting at the Mount Washington Hotel in Bretton Woods, New Hampshire in 1944, establishing the post-World War II international financial order, which was dominated by the United States with the dollar at its core. Then in 1949, the United States led the establishment of NATO, an alliance that ensured peace in Europe and ultimately ended the Cold War. To make America great again, Trump is now dismantling what made it great.
During his first term, he spent a lot of time attacking globalism, but the foreign policy establishment remained stable during those four years, and not much changed. Subsequently, under Joe Biden, the United States' leadership role in the world continued. This time, Trump is emulating the tactics of Hungarian Prime Minister Viktor Orbán, purging and controlling government bureaucracies while "de-globalizing" them.
Kim Lane Scheppele, a constitutional scholar at Princeton University and an expert on Hungary, described in an interview with economist Paul Krugman over the weekend three things that Orbán has done and that Trump is emulating. First, he "moved quickly to take over the constitutional court, and the constitutional court is the referee of the whole process. If you control the referee, you can do all kinds of unconstitutional things, and nobody's going to tell you." Trump controlled the US Supreme Court during his first term, and then on July 1 last year, the Supreme Court ruled 6-3 that the president has absolute immunity for actions taken during his presidency.
Scheppele said that Orbán's second step was to purge the bureaucracy, "replace them with all your cronies so that the state is completely responsive to your orders from top to bottom. That's crucial. Along with that comes a massive centralization of the executive branch." Trump is installing loyalists in the US government while strongly opposing DEI (Diversity, Equity, Inclusion) in favor of performance-based hiring. He may not be doing DEI, but his appointments are definitely not based on performance, but on loyalty.
Finally, Orbán used the power of money: "He looked at every place where the state budget was supporting people who might oppose him. And then he defunded them," Scheppele said. Trump's Department of Government Efficiency (DOGE) – run by the world's richest man, Elon Musk – is doing just that. But unlike Hungary, the United States has been the most important funder of many global institutions, such as the World Health Organization and the UN Framework Convention on Climate Change (UNFCCC), not to mention global humanitarian aid through USAID. US support for these things, as well as funding for domestic liberal organizations such as universities, is also being abandoned.
Now there are two immediate questions: First, will Trump's transformation collapse due to its own incompetence? Second, will there be an effective opposition/resistance to stop it? The incompetence stems from "common sense." In his address to Congress last week, Trump described what he is doing as "a common sense revolution that is now – because of us – sweeping the world." Who can oppose common sense? Sounds good, right?
Well, yes, but in reality, it means that decisions and executive orders are not based on data, surveys, or science, but simply on Trump's ideas. For example, the US Treasury Department did not conduct a survey and report on the impact of imposing a 25% tariff on Mexico and Canada, and the result was – among other things – that General Motors told him that they would be bankrupt in three months, so their parts had to be exempted. In fact, the entire tariff adventure has turned into a messy series of U-turns and exemptions because it was based on common sense, not careful consideration. This is also a major reason why the US economy faces a significant slowdown risk.
Of course, abandoning efforts to reduce fossil fuels and address climate change – in favor of "drill, baby, drill" – is not based on science, but simply on his "common sense," and the "common sense" of others on the right, that the energy transition is expensive and meaningless. The result will be what science predicts, and it won't be good.
As for effective opposition, the Democrats have offered none. In fact, from a distance, the official opposition in the United States appears to be The New York Times, but there is only so much it can or should do. There are currently 110 lawsuits underway trying to block government action. But Erwin Chemerinsky, dean of the University of California, Berkeley School of Law, asked in an op-ed in The New York Times: "What if Trump defies the courts?"
Chemerinsky said that it is no exaggeration to say that the future of American constitutional democracy now depends on this question. "For those who hope that the courts can control the Trump administration, the harsh reality is that the Constitution does not give judges the power to enforce their rulings – ultimately it is the executive branch that enforces judicial orders. If the president decides to ignore judicial rulings, the courts may become powerless."
It is unclear whether the financial markets will join the resistance. Last week's stock market performance was not dramatic enough, and the so-called "bond vigilantes" have so far remained on the sidelines – although they are showing strength in Europe, with German long-term interest rates rising sharply. But a stock market crash, or a massive sell-off of US bonds leading to a sharp rise in interest rates, may be harder to ignore than the courts.
Perhaps the bigger question is what will happen in four years. Viktor Orbán has now been in power for 15 years. He is only 61 years old and shows no signs of leaving – he controls the government and the information available to voters. Trump often talks about running for a third term. But he will be 82 years old by 2028, and while you can't rule him out, he probably won't risk violating the Constitution at that age. But by then, his government should be in complete control of the election machinery as well as social media. Therefore, Trump will be able to install a successor – perhaps JD Vance, or start an imperial dynasty: Donald Trump II, and then Barron, who is now 18 years old.
