How Trump Sees Economic Survival at the Heart of National Security

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2:04I'm Stephanie Flanders, Head of Government and Economics at Bloomberg, and this is Trumponomics, the podcast that looks at the economic world of Donald Trump, how he's already shaped the global economy, and what on earth is going to happen next.

2:20Well, this week, we're looking at what we really learned from a 29-page document published by the White House in the middle of the night on December 5th. You might have heard about it. The document in question was Donald Trump's national security strategy. Every administration has one, but we haven't seen many quite like this. And what it said about Europe, as you've probably heard, what it didn't say about Russia, caused uproar in European capitals and many other places. We might get into some of that controversy, but what's been less discussed in the days since it came out is the economics that's sitting within the foreign policy that it describes.

2:57I thought was a bit odd because if there's one big takeaway from the president's time in office, it's that economics is almost all there is. It's certainly the part that the president cares most about. It might be called a national security policy, and it might be written largely by State Department officials with a wide range of objectives, but the economic and business interests of the US are at the centre of nearly every big strategic goal identified here. And where security is a focus, it's the security of national borders and America's immediate neighbourhood. It's America's economy first, and indeed, America's economy best.

3:37Well, we've got some great Bloomberg talent to help unpick all of this and maybe also get into a broader conversation about what these documents, who they're written for, and why they might be useful. One of our guests has contributed to these kinds of documents in the past. He's joining from Washington, D.C., Adam Farrar, who's now the Senior Geoeconomics Analyst for Asia Pacific at Bloomberg Economics, but was previously the director for the Korean Peninsula in Mongolia in the US National Security Council under Biden and the Trump administrations. And before that, also an advisor to Kamala Harris.

4:11Adam, thanks for joining us. Great to be here. And also joining from DC, we welcome back Sean Donnan, who is, of course, a senior writer with Bloomberg reporting on the US and global economy. Sean, thanks for coming on again. Wonderful to be here. And sorry that I don't have the experience of having written one of these things before. Well, I don't know. Maybe it would have been better if you had written.

4:35We can sort of use your inside perspective, Adam. Just tell us a little bit about how these documents get written and what this national security strategy has been like in the past. So it's interesting to think about this type of document because it's rather different from many other documents the United States government puts out. To start with, it's actually congressionally mandated. And so in addition to being a useful exercise for administration to work through its potential policy objectives and to lay that out not only for itself, but for the international community, it also is required to do this to meet congressional requirements.

5:16And as a result, basically, when administration comes in, they set out a specific team, usually a small team at the White House, to go forward and write a document that reflects how they view the world and how they view the United States role in it and what they expect to do and prioritize over their time in office. What's a little different here with the Trump administration is that team is almost always at the White House and sequestered in the strategy and planning office at the White House. But in this case, it was actually at the State Department where much of this initial draft was supposedly written separate from the guidance of the formal National Security Council and is probably a reflection of how this administration, President Trump have sought to spread out these powers and authorities of national security writ large outside of the White House itself and diminish the power of that National Security Council.

6:04And I guess the people who would have written it are just not there. I mean, it's been shrunk a lot, right? The National Security Council. Well, that's exactly right. The council itself has been shrunk. And certainly after the turnover and decision to bring in Secretary Rubio and Duhl had him as a national security advisor, I guess it made sense to them that they could leverage... and quite a few other jobs as well. That's right. He has many, many, many jobs. And apparently shepherding this through with his staff at the State Department was one of them. And what's intriguing about all of that is that what we're left with is a very different document than we traditionally see coming out of a White House.

6:40One aspect of that, honestly, is just how this document was shared with the world. As you highlighted, this document didn't come out at a large think tank event with a speech from the National Security Advisor or the Secretary of State. It came out at 10.45 p.m. on a Thursday night with little fanfare and remains hard to find on the White House website, which is certainly worth us discussing a little more later as to why that's the case. But moreover, the tone and direction of the document is political and ideological at its core. And while all documents coming out of administration certainly are political in nature, this one is distinctly so.

7:14And it's very direct in its language and direct in its approach and skews from traditional foreign policy and national security writing. It talks far more about U.S. domestic interests, economic interests in particular, as opposed to how it perceives its role in different parts of the world and moreover, how it's going to interact with other countries. We're recording this on Tuesday morning, U.S. time. Sean, you wrote at the start of the week one of your regular pieces. You said if you want to give President Donald Trump credit for a revolution in strategic thinking, the most enduring one is likely his view of a world in which economic security drives national security.

7:53It is the signal change in the last few years that I noticed, especially in sort of national security settings or kind of summits that are nominally about NATO. if you're a European country that doesn't promise to do X on defense spending, then Y on trade and tariffs is going to happen. I mean, we've got used to that, but actually it is. It's a fundamental shift that's entirely associated with Donald Trump. Yeah, and it's a rewriting of the global rules, right, as well. There used to be this national security exception in global trade rules. In times of war, global trade rules went out the window.

8:29Well, what Donald Trump did very early on in his first term was essentially invoke national security for everything and create this idea that economic security is national security. And you read this document, and I spend my weekend reading through it a few times, and it is really striking how central the economy is to this all. And it's even more striking when you think of it as something that was written over at the State Department, where usually they are thinking about great power competition and small wars and the Korean Peninsula and nuclear proliferation and things like that. And here they are talking about free trade and actually putting unfair trade practices on the same level as a military attack, espionage, drug running, and so on.

9:18I find it a really remarkable document in that way. I think there's lots of other ways it's remarkable, but that is the core of Donald Trump, right? It's the economy. This is a business transaction, his relationship with the world. At one point, they say every embassy in the world essentially needs to be a sales office for American corporations, which, you know, that's not something many American diplomats would be comfortable with. Many other countries would say that commerce has always been much more front and center of U.S. policy. But I guess we saw, supporting your view, Sean, we did see overnight the news that rather bore this out, that the president has granted NVIDIA the permission to ship those H200 advanced semiconductor chips to China in exchange for a 25 % surcharge.

10:13That's a great reminder of how Donald Trump, in some ways, is willing to cast aside his strategy. This strategy says part of our strategy is to limit China's access to American technology and to have this competition with China in the world over economic primacy and technological leadership and so on. And this is the shipping of chips is something that a lot of national security types in Washington are really uncomfortable with. They really see this as handing China some of America's crown jewels when it comes to AI leadership and so on. I think that's a reminder that this national security strategy is valuable in that it's kind of the only document that we have that lays out a strategy on the economic front for the Trump administration, other than lots of social media posts.

11:06And at the same time, it's something that we should take with a grain of salt because President Trump is always going to do what he wants. And he's always going to put commercial priorities or is often going to put commercial priorities ahead of national security priorities. So talking about NVIDIA and the chips, Adam, Sean referred to as the crown jewels. I guess there is another level of sophistication of chip. There's the Blackwell chips, which as far as we know, I think Donald Trump has suggested that they might also be sent to China, but that's not happened yet. And even these ones, I guess there was quite a lot of discussion leading up to it.

11:45But how do you read that decision? And I guess more generally, the way the China policy is described in this document. So I think up front, it's fair to say that it was a big decision and a surprise decision by the president to allow the H200 chips to be sold. And certainly there is big pushback, as Sean said, from the national security establishment and those in the tech side of things in the United States who really worry about the loss of U.S. leadership in these key arenas and particularly in the AI race. It is fair to say the H200 is both not the highest level chip, as you said, it's not Blackwell chips, but at the same time, it would be the most advanced chip that would have ever been sold to China.

12:23So I think what's intriguing there, as Sean alluded to, is the fact that this does not seem to align with the policy, even the very general policy put out in this document that labels China as the United States' key economic competitor. And then goes on to actually try and lay out a plan for bringing other partners and allies together to push back on Chinese economic dominance, something that I think explicitly the administration is not doing right now. The document seems to be a moment in time that is far more correlated with the beginning of the administration when many thought the China hawks and the approach that Trump had at the end of his first administration would maintain.

13:05And that's not what we're seeing today. And really, again, I think it raises real questions about the value of this document and whether or not we should take it at its word as to how the administration plans to move forward. To be fair, we should say that in the document, they do say that the U.S. should aim to have its standards for AI and quantum computing and other things be dominant in the world. And there is an argument inside the White House. You heard from David Sachs, the cyber and AI advisor, that export controls haven't really worked. In fact, they've accelerated China's move to independence in terms of chips and so on, and they've been counterproductive.

13:47So it isn't a complete departure from what's laid out in this strategy, but it does reinforce the kind of commercial interests here. No, that's why I think it's interesting is I think if a central objective of foreign policy is that the US sustain its commercial and business supremacy with benefits for American workers and the broader US economy, then arguably this is the approach you would take because you're not being animated by a fear of a sort of rival political system gaining power in the world. You just want to have that because you and you don't really mind that there's a big non-democracy that's going to get more and more powerful as long as the U.S.

14:29is continuing to lead and continuing to be the country that other countries have to buy their tech from. Sean is absolutely right that there is an argument and one that has taken over parts of Washington and seems to have taken over the Oval Office that binding China into the U.S. tech stack and keeping them tied to U.S. companies is advantageous to U.S. dominance and certainly advantageous to the bottom lines of U.S. companies. But others argue, and I think rather persuasively, that is an incredibly short-term view of the problem. It puts forward an idea of profits today without a real thought process as to what that competitive environment looks like both geopolitically but also just commercially in just a couple years.

15:11By feeding into China's AI race and giving them better tools by which they can theoretically advance their models faster, it actually makes their companies more competitive. And their price point is already well below American AI companies in terms of delivering services. And so you have this potential where you're actually speeding up their ability to meet or exceed USAI company capabilities and models and then take market share globally, particularly starting in countries that have the ability or don't have the ability to spend as much money on these models, but eventually spreading more broadly.

15:47And so we shouldn't just take it at its word that over time the United States will remain dominant commercially under this strategy.

15:59Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy. Bond markets are massive, murky, and let's be real, lots of firms throw a couple flashy funds your way and call it a day. But not Vanguard. At Vanguard, institutional quality isn't a tagline. It's a commitment to your clients. We're talking top-grade products across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders. These folks live and breathe fixed income. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself at vanguard.com slash audio.

16:41That's vanguard.com slash audio. All investing and subject to risk, Vanguard Marketing Corporation Distributor. Hello, I'm Michelle Hussain, and for more than 20 years, I was at the BBC. But all the time I was delivering the headlines, I wanted to go further than the news of the day. To spend more time with the people shaping our world. And that's what I'm doing here on this podcast. Speaking to people from Nigel Farage, Russia needs to be taught a lesson, to tech journalist Kara Swisher. And the tech industry is running wild. You know, they've gotten what they wanted and they've seen a huge run up in their stock prices.

17:21This will be a place where every weekend you can count on one essential conversation to help make sense of the world. So please join me, listen and subscribe to The Michelle Hussain Show from Bloomberg Weekend, wherever you get your podcasts. You certainly ask interesting questions.

17:51Documents like this have tended to be much longer, certainly appeal to much more lofty ideals and sentiments, and maybe have not always borne much relation to what administrations did when faced with tensions between lofty ideals and US business interests. So I guess one argument you could make is even if there's inconsistencies here and indeed in the administration's approach, there are inconsistencies that have always been there in U.S. foreign policy. And the administration is in some sense is just much more transparent about it, much more like a quote unquote normal flawed country. Adam, you're laughing as I say this.

18:37Yes. I mean, I think you're right. They're very clear that they seek transparency in this – both in this document and in how they communicate what they're trying to do. The inconsistencies, the contradictions, while always present in foreign policy and how countries interact, particularly the United States, raise questions again as to the value of the document as a whole. that they spend a huge amount of time trying to highlight how non-interventionism will be a key tenant of this administration. And then they spend the remainder of the document talking about how the United States needs to dominate its near abroad in the Western Hemisphere, you know, return to an aggressive form of the Monroe Doctrine, you know, the Trump Corollary, which is a direct reference back to the Roosevelt Corollary, which basically said the United States would act aggressively to maintain its own interest in the Western Hemisphere.

19:30Yeah, the Monroe Doctrine, we should say, was actually about there not being a colonialism in South America rather than it should be the U.S. muscling in. Correct. And I think they're picking and choosing the parts of that that they want to push forward, particularly keeping foreign powers out. But, you know, in addition, the simple reality is that they also had to find a way to wedge in references to what's actually occurring. The references to President Trump's efforts on peacemaking globally don't align with this document. In fact, in general, those efforts seem to be the exact opposite of the United States putting its nose and interests – or interacting in an area where its direct interests don't necessarily apply.

20:16I also, I just, I do think it is important to say that there are major international, national security and defense issues that are just not mentioned at all. It is stark to see that, you know, there is no reference whatsoever to North Korea's nuclear program and its threat to both Northeast Asia and key US allies and the directly of the United States, or even what President Trump plans to do in terms of his engagement with North Korea, which he continuously talks about. There's no reference at all to the authoritarian alignment we've seen between China and Russia in particular, but also China, Russia, North Korea, and to some extent Iran, which is driving the war in Europe and changing the dynamics globally in international institutions.

21:01Cyber, which has been a massive threat to Americans and to the global community as a whole, makes very few appearances and only in passing. And so, you know, I just I've raised this to say that, again, this document from a security standpoint is in many ways unserious. But at the same time, certainly does focus on the issues the administration thinks are more important to it. And maybe that is something to take away. Adam, you're being a bit unfair because they do have various get out clauses. For example, they say for a country whose interests are as numerous and diverse as ours, rigid adherence to non-interventionism is not possible.

21:37So that sort of allows you to intervene in other places. To me, one of the big themes that's in here, which is at odds with this kind of idea of non-intervention, is there's a kind of desire here to export America first. I think we often think of the Trump administration as inward looking, as isolationist potentially, and so on. And here they are, they're saying to Europe, first of all, there's this kind of reference to shared Western norms. And I think a lot of people in Europe would question whether the norms are still shared anymore. But there's also the desire to export trade policy where they say, hey, allies, you guys need to follow our lead and actually put tariffs in place and limit imports from China.

22:19So, I mean, there's a lot of telling the rest of the world how they should be running their economies in this document as well. But I think it's along with the kind of only semi-coded stuff on migration that feels like it comes out of a populist far-right party in Europe in some ways that will make people bristle. I mean, I'm slightly pulling out some of the sentences out of context, and Adam talks about it being non-serious. I mean, you could say that all this has been is sort of an invitation to critics to show all of their worst qualities of kind of snobbery and contempt for what is actually a very kind of populist approach to explaining foreign policy.

23:05I mean, if you're this administration in particular and a lot of your voters didn't really want you to talk about foreign policy at all, this is the kind of document you would write to explain to them why this stuff matters. It reads like, and not necessarily in a bad way, reads like a high school, high schoolers approach to what is foreign policy. You know, even the headings, you know, what should the United States want? What do we want overall? What do we want in and from the world? What are America's available means to get what we want? I mean, I look at this, Adam, and I think they're actually trying to get to the guts of what foreign policy should be about, rather than sort of just wishing that other countries behaved in a different way.

23:49I think you're absolutely right that this was written for a different audience. And the international contingent of foreign policy experts and security officials and world leaders were just not the primary audience for this document. That's a bonus that European leaders got very upset about it probably. Absolutely a bonus and certainly something this is not unintentional in its direction. And certainly on that issue, we've seen the administration double down and the president double down in his Politico interview that came out this morning. but nonetheless it is very clearly targeting the trump voter and elements of trump support base to explain to some extent how the united states plans to move forward and why it's going to continue interacting in the international space and that how that is beneficial theoretically to the united states itself but what's continues to be strange is how the administration seems to have been unable to figure out kind of where it feels this document falls, right?

24:52Because what we just went through, arguing that this is a useful and interesting way to communicate the administration's objectives to its voters and to its supporters, would argue that they would draw some more attention to it. Yeah, they're burying it in the back of the website. Right. And so I think, again, that just maybe speaks to broader dysfunctions in how this document it was made and personnel turnover and just how the administration ended up deciding to throw this out in the middle of the night and just move on. Yeah. And Sean, just to sort of put a bow on it, I think that you've identified probably the core feature.

25:27I mean, you had written in your piece about it shows the absolute primacy of the economy and how the economy is being put before national security. But then your recent point that it's America first, but America first for the world. And all the kind of tensions embodied in that sentence, given that America First is supposed to be often about non-interventionism, I think is very much captures the heart of it. And will be driving policy going forward. I think there is definitely this effort to kind of have a populist or popular security strategy here, right? The second sentence of the first section is, All Americans need to know what exactly it is, what we are trying to do and why.