Live from Singapore: Keeping Globalization Alive Amid 'Geopolitical Climate Change'

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1:02Bloomberg Audio Studios. Podcasts, radio, news. China is not able or willing to replace the U.S. as the underwriter of globalization. So we are, to quote my prime minister, in an interregnum, a state of messy transition from a world in which there was an underwriter and enforcer. And that underwriter and enforcer has now decided to become disruptor-in-chief for domestic political reasons.

1:41I'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. This week, I'm sharing a conversation with Singapore's top diplomat, Vivian Balakrishnan. If we look back at the global economy in 2025, much of what we might have expected from a second Trump term has happened, and then some. A rupture in the Western alliance, a withdrawal or stepping back from multilateral decision-making fora like the G20 and the COP.

2:19A more aggressive stance towards enemies in America's backyard. It's all there, but one thing we haven't seen is a global trade war. Though the US, we know, has imposed hefty tariffs on all of its trading partners, those countries, with the notable exception of China, have not fought back. Instead, in effect, they've said, we don't like this, but we're darned if we're going to make it worse. The US might wish to raise high tariff walls around its economy. The rest of us are going to keep on opening up and, if possible, do even more trade amongst ourselves. That is a big good news story from this year that we shouldn't forget.

2:54and I was reminded of again last week at the Bloomberg New Economy Forum in Singapore, where you sit looking out at the mass of container ships in the Singapore Strait. About 25 % or so of global exports and imports passes through that crucial shipping corridor, giving small but super successful Singapore a very large stake in sustaining a global trading system and, incidentally, a bird's eye view of everything happening in Asia. This country also has a knack of producing rather erudite public servants. So at the start of the forum on November 19th, I sat down with one of them, Foreign Minister Vivian Balakrishnan, to talk about the meaning of the recent trade deal between the US and China, what the shifting global landscape means for Asia.

3:44He was at both the ASEAN and APEC summits, where some of those deals were done. And I began by asking him whether the new trade partnerships that Singapore and others were hoping to build without the US could really reshape the future of global trade.

4:03Well, there's a quote attributed to Ernest Hemingway. How did you go bankrupt? He says two ways, gradually and then suddenly. So hold that thought in mind. This year has been the year of sudden changes. but actually the gradual changes, the pressure has been building up for a long time. The first point I wanted to leave with you is the role of the United States for the last eight decades actually is historically unprecedented. The ultimate winner of the Second World War, 40 % of global GDP, that was his share of global GDP, decided instead of conquering and eliminating the vanquish, rebuilt Germany, Europe through the Marshall Plan.

4:50And it set really a rules-based globalization with economic integration at the core. And this is highly, highly unusual and unprecedented. So that's the first point. It is about the US. Second point is that actually the pressures on the US to give up on this has been building up for a long time. And what I mean, if you think about it, what the U.S. did for eight decades was to provide first the market, second, technology, third, capital, and rules-based economic integration. The first beneficiary of that, apart from Europe, was Japan. And then you had the Asian tigers, Hong Kong, Korea, Singapore, and then the rest of Southeast Asia.

5:42But the real winner of rules-based free trade has actually been China. And the US is only 249 years. It has never met a peer competitor with the scale, the ability, and the willingness to reorder the world in a way that's favorable to it. But the point is that China, if you look at its per capita GDP, it's still a middle-income country. And China is not able or willing to replace the US as the underwriter of globalization. So we are, to quote my prime minister, in an interregnum, a state of messy transition from a world in which there was an underwriter and enforcer. And that underwriter and enforcer has now decided to become disruptor-in-chief for domestic political reasons.

6:39Because after eight decades of providing capital, technology, and markets, what the middle class in America has seen is deindustrialization, rust belts, hopelessness, and middle income stagnation. And guess what? Elections are local. So it is a completely legitimate question for the American voter to say, wait a minute, why should we underwrite in blood and treasure this system which seems to have profited the rest of the world and especially a big peer competitor? And I think we need to pull back. So you see my point about gradually and then suddenly, you know, it's like an iceberg or a continental ice shelf falling, but actually the climate warming was predated that.

7:32So my point is, what we're witnessing today is not just a change of weather. This is real climate change, geopolitical climate change. So that's context setting. I think it's historically unprecedented also to have a single global superpower almost voluntarily step back from a lot of its obligations, not be forced to do so, not lose a war, but just decide, I don't want to do this anymore. Yes. It's unusual to have such a benign hegemon in the first place. And for us now to say, where did that hegemon go? I'm saying if you take a longer view of history and geopolitics, the point is this was a unique period.

8:15I've tried to go back and I can't find another period in history when we had such a benign hegemon. When you just think back even just a few years ago, and then we would have been on this stage talking about decoupling. Yes. And that may be the climactic change to distinguish from the change in the weather, as you've said. But the Biden administration, I think for many of the US allies, it felt that the US was asking countries to choose between the US and China. And that was obviously challenging nowhere more than here. President Trump has had a much, many people would say, less consistent, certainly more freewheeling, unilateralist approach.

8:57It feels a little bit like the world is less divided between U.S. and China now and more the U.S. and the rest of the world just left in a mess. Is that easier or harder for you? Well, first of all, the American ambassador is here, so I'm not here to be an apologist. But I would say President Trump as a person, in fact, has been uniquely consistent for decades. What do I mean? Watch the interview with Oprah Winfrey back in 1988. His views on war, anti-war. His views on free trade, it's an avenue for America to be taken advantage of. His views on business in a main street, real estate way, as opposed to Wall Street and financial engineering.

9:43His views on immigration actually have been remarkably consistent. And I think people don't give enough marks for that point. So he is consistent. It's just that his methodology, his presentation is somewhat novel and people react to that. But my point is, American policy under President Trump, in fact, is reflecting long-held, deep convictions. I think you are right. I guess the exception to that, and I'm interested in whether you read it the same way, you've been at the recent meetings with your prime minister in Malaysia and Korea, where we did see this deal between the US and China. Yes. But it will not have been lost on many of the people around the table that China was ending up with a relatively better position than many of the other countries in the region who had thought that they were going to be an alternative to China for US manufacturers.

10:36That feels a little inconsistent with wanting to wean American industry off Chinese manufacturers. Well, again, I would distinguish between strategic and tactical. I think what we've witnessed so far is a tactical pause. The fundamental problem with the US and China is almost complete lack of strategic trust. And that means each side has to assume the worst of each other. And even if you're taking precautions, it's viewed as escalatory. Both sides have identified pain points. And I think what you've seen so far is not a strategic realignment or a sudden dawn of strategic trust. It's that both sides have decided they need time.

11:19you need a tactical pause whilst you get on with the real business. And the point about decoupling is worth unpacking because what we are witnessing in the world right now is a couple of phenomena. Number one, you have witnessed the weaponization of everything. Weaponization of the dollar, weaponization of finance, weaponization of critical minerals, global supply chains. Interdependency used to be a good thing. Now it's a vulnerability. But my point about weaponization of everything, you know, Newton's third law applies in diplomacy too. For every action, there's an equal and opposite reaction.

12:00So the weaponization of everything has led to an erosion of trust, has led to a need to assume the worst and to prepare for it. And in the absence of trust, it's very hard to actually have strategic alignment. So that's the first point. What you're witnessing now is a tactical pause. The strategic problem remains. The next aspect of what's going on now is the fracturing of supply chains. And it's not an ideological point, but I think especially during COVID, you found that even simple things like making a mask, which is not rocket science, but the essential components were not within reach, and everyone was panicking and you didn't have access to it.

12:43So the factoring of supply chains in the name of national security and in search of resilience actually means a world which hitherto has been based on efficiency is now building supply chains on a basis of nearshoring, onshoring, friend-shoring. Economically, what that must mean is some inflation because you're no longer choosing the cheapest and the best, most efficient. you're now having other considerations. So watch that bout on inflation. The third point is the global commons. I've been involved in this game long enough. So I'll give you an example. The Paris Climate Change Agreement. The only reason that got done is because America and China were on the same side and were able to drag the rest of us an imperfect but important agreement.

13:37Today, if the two main players are not in the same room, And it goes further than that. In fact, it's not just a matter of picking up your marbles and leaving the game, but you're actually disrupting the game. And my worry is that we're going to be unable to deal with the global commons. It means climate change, pandemics, the challenges from AI. We won't be able to respond adequately to it because the two key players either are disrupting actively or are spoiling for a fight and are certainly not willing to restrain themselves with multilateral rules imposed by Lilliputian countries, big and medium and small elsewhere.

14:26I hope that's not too depressing.

14:40It just seems a muddier picture than the decoupling as team U.S. No, it's messy. But as far as you're concerned, the long-term trend... Yes. I mean, someone has likened it to a couple saying, we're going to divorce in 10 years, but we have to live together before then. You still think the long-term trend is decoupling between the U.S. and China? I think without strategic trust, the logic for decoupling, at least partially, in the name of national security and anxiety over competitiveness will continue to play out. And that's what we're witnessing. But if I can come back to where you started with a piece of good news, why hasn't the rest of the world retaliated?

15:27I think a couple of reasons. Number one, they're a far bigger elephant or eagle than the rest of us. So what's the point of retaliating when, in fact, the little guy will be the ultimate loser? So that's the first thing. Second, and I'm coming to your good news. If you leave aside the two big powers, and if you think, if you open a world atlas and draw a diagonal, No, Europe, the Middle East, South Asia, Southeast Asia, Australia, New Zealand. And then you draw two spokes, one to Northeast Asia, particularly Japan and Korea, and another spoke Southwest to Africa and South America. Guess what? In fact, there is still a majority of countries, and even I would say the majority of global GDP, that still wants to operate on supply chain efficiencies, on economic integration, on rules-based globalization.

16:28The only thing is the enforcer-in-chief is no longer there. And there is a need, therefore, to assemble a coalition of the willing. So what you're watching now, all that scurrying around by medium and small economies, is to keep globalization alive, reform what needs to be reformed. And there's a lot that needs reform. But to work together in a more collegiate way, knowing full well that the underwriter, the enforcer, is not going to be doing the heavy lifting. So that's where I think there is a glimmer of hope. And that's why, you know, my prime minister and I have been scurrying around to regional and international conferences.

17:08And the good news, I agree with you. The majority of people, in fact, want some order, some stability and some benefits, economic benefits, from working together, from interoperating. And what we are hoping ultimately is that when things settle down between the two big boys, they will then rediscover the benefits of globalization. One of the initiatives that you had in the summer was with the Gulf and the GCC. Do you see that moving forward? Well, if you look earlier this year, when we had an ASEAN summit, we included the GCC and China. In Singapore, we're members of both the CPTPP and RCEP, which are big, mega free trade deals.

17:55We're trying to convince the European Union, who is also a reflexly pro-trade, pro-rules entity. Are they going to join? No, I think that's a bridge too far. But can we get a partnership between the European Union and the CPTPP, especially a CPTPP, which is expanding? You've got to think of a better name. I know, I know. In fact... I think that's why no one talks about it, honestly. I know. But if you strip aside the labels and the names, I mean, the point is, is there benefit from globalization, from efficiency, from interoperability, from standards, from peaceful resolution of disputes, including trade disputes?

18:41The answer is unequivocally yes. But we need to do it now and everyone needs to chip in. So I think the EU is a natural partner with the CPTP. So think of the EU and the Pacific. Can we construct something that cuts a diagonal across the globe? And is Africa keen on this? I think they are. South America, I mean, you may be surprised, even little Singapore, we've signed free trade deals with Mercosur, which is Argentina, Brazil, Ecuador, Paraguay, Uruguay. We've even signed a free trade agreement with the Pacific Alliance, Mexico, Colombia, Chile. So the point is, you'd be surprised, the appetite for economic integration remains.

19:27And that's what Singapore is working. Now, of course, I'll tell you, of course, we are biased. This is Manhattan without upstate New York. Or this is one-fifth of Rhode Island without continental United States. Or if you want another uncomfortable analogy, Singapore is just twice the size of Gaza, but with three times the population. So we're a tiny place in which our trade volume is three times our GDP. So I hope you understand when we promote free trade, it's lifeblood. It's not a negotiating point, right? And when we say rules are better than the alternative, because the alternative is right is might, big is beautiful, and small is irrelevant.

20:11So I will confess, this is a self-interested argument. But you've talked about the importance of rules, but also of countries working together. Yes, absolutely. Should the Southeast Asian economies, even the ASEAN countries, have worked together more in negotiating these trade deals with the US. You talked about bilateral arm wrestling you described. Yes. No, I don't think that was necessary. Certainly not at this stage. I mean, if you look at ASEAN as a whole, the tariffs range from 10%, 19%, maybe 20%. And those numbers keep changing anyway. My point is, don't overreact to the headline of the day.

20:54Understand what's going So if you now bring your Zoom lens to ASEAN, have we systematically brought down our trade barriers, non-tariff barriers? Is ASEAN fulfilling its mission of becoming a single production zone, a single investment zone? Has there been economic growth in ASEAN? What are the prospects for ASEAN in the next two decades? We think we can double or combine GDP. If you add up the combined GDP of ASEAN, which, by the way, has a population slightly larger than the EU, we're about number five. And because half our population is below the age of 35 and our middle class is growing, the long-term prospects are bright.

21:37So long as we don't overreact, we don't do stuff that actually boomerangs back on us. And if you just look at what we did this year, we upgraded the ASEAN agreement on trade. in goods within ASEAN. We upgraded the ASEAN-China Free Trade Agreement, and we're still looking at building more bridges across the world. So my point is that, in fact, Southeast Asia is a zone of hope and growth. The key thing is to focus on the long term. And what does long term mean? It means technology, bearing in mind that we've got three technological revolutions going on in real time simultaneously. AI, biotech, renewable energy.

22:21And we're focusing on building up the infrastructure for that. We're focusing on educating a workforce, work ready for that kind of world, the world of AI and robotics. And we're focusing on integrating. We can still increase our intra-ASEAN trade significantly. And what about ASEAN Africa, ASEAN South America? You know, Some people call it South-South. I don't really like the term. But my point is there is still a majority in favor of this. I would also point out the CPTPP began as four tiny states. Singapore, Brunei, New Zealand, and Chile. And it only became TPP when America and Japan came in.

23:08Now, we knew by the time Hillary Clinton had to withdraw from her support from the TPP, which in fact she had a lot to do with starting, that the cause of free trade was in political problem. And I think all of us in this room, who I would say are probably instinctive free traders, need to realize that we didn't make the political case for it. and you have to convince your local electorate that jobs and wages and opportunity come from free trade. Otherwise, if you don't understand the political reality that for every free trade agreement, there are winners and losers, you need to put seatbelts on.

23:55You need to have compensatory mechanisms. And whilst you don't expect governments to choose winners and losers at the enterprise level, but governments do need to be activists. Infrastructure, education, pro-enterprise regulatory environments. You do need an active government. But what you don't want is completely state-directed capitalism where you pick winners and losers. We think that's ultimately a dead end. So anyway, my point is, watch this space. That's why there's still buzz in this part of the world. We're going to run out of time, so I want to just quickly ask you, I started talking about the US.

24:36I mean, you have said, obviously, trade is the lifeblood of Singapore, and you're absolutely at the centre of looking at this. The one country that, despite all these tariffs and trade wars by the US, the one country that has managed to increase its export growth this year is China. And we see that country in many ways doubling down on a focus on manufacturing, on export-led growth, when many economists might have said long-term they have to be on a different path. How destabilizing is that for this region, especially now they have a slightly more... Well, I think what you're referring to, you're being too delicate, you're referring to overcapacity.

25:16Actually, the world has had unsustainable imbalances for some time. If you outsource all manufacturing to China, you outsource all energy to Russia, and you outsource security to America. I'm referring to the EU. That's not a sustainable model. And if the EU wants strategic autonomy or independence, it needs to get a grip on manufacturing, on its industrial capacity, on its defense, and on its energy policies. I'm just giving you one example. In the case of China, it's worth also reflecting, because China became the manufacturing center and enjoyed economies of scale, and by the way, I must say, Chinese workers happen to be really hardworking and efficient.

26:08I don't think you can fault China for that. But a world in which all manufacturing is accumulating on one half, trade surpluses accumulating there, but those trade surplus are being recycled. It used to be recycled into T-bills. What it meant is for a while, the Western consumer enjoyed low inflation, low interest rates, high quality goods at affordable rates, but actually were consuming beyond what they were producing. And we should not be surprised that this system, based on imbalance was not sustainable. Now, if you imagine that America shuts its market to the productive capacity of China and the EU also follows suit, I mean, and think of automotives as an example, then the question will be, will China be able to expand its domestic consumption to match its capacity or will it still try to export its way out?

27:08And if it does, where will it export to? But that is what they do. No, I think, but I'm saying let's, without being pejorative or making value judgments, just ask yourself, do you need domestic changes to the economic structure of China? I think we do. What does Southeast Asia, Africa, and South America want? Do we need infrastructure? We do. Is the productive capacity of China for the development of that infrastructure, particularly green energy, AI, and even biotech, which, by the way, speaking as a doctor, the Chinese are no slouches in that area too. So what I'm saying is watch this space.

27:53I am sure adjustments will occur, both domestically and across borders and across zones. And the opportunity will be to try to catch these waves, catch these new tides, and wins so that we maximize opportunities for the rest of us. So I'll come back to the hopeful note in which you started. Not all of us have lost our heads and reacted in panic or even acted on sense of retribution. But we've tried to take a longer-term view of the imbalances and of the trends and to seek opportunities in these interregnums. That's the basis of arbitrage. For 60 years, Singapore's been fairly good at that. Yeah, but 60 years is, you know, in Asia, 60 years is far too early to tell.

28:43So we never take our survival for granted. Dr. Van Kushen, thank you so much for joining us and for starting us off on a hopeful footing. I hope so. So don't lose your head. You know, understand what's going on. Look for opportunities. There are opportunities.

29:09Thanks for listening to Trumponomics from Bloomberg. It was hosted by me, Stephanie Flanders, and I was joined by Singapore's Foreign Minister, Vivian Balakrishnan. Trumponomics was produced by Samasadi and Moses Andam with help from Amy Keene. Sound design was by Blake Maples and Kelly Gary. And Sage Bowman is Bloomberg's head of podcasts. To help others find it, please rate and review this podcast highly wherever you listen. Thank you.