Destroying America's Brand

Losing the world's trust, and a lot of money too

Last week Mark Carney, having won the Liberal Party’s leadership election, became Canada’s Prime Minister. And it looks possible that he may hold that position for a while. Not long ago the Liberals seemed headed for an electoral wipeout, but they’ve seen an amazing surge in the polls:

Source: The Economist

The secret behind that surge is, of course, Donald Trump, who has not only imposed tariffs on Canada without any justification but keeps doubling down on his completely insane demand that Canada become the 51^st state. Every time Trump or his minions repeat that demand, they strengthen Carney’s hand against Pierre Poilievre, the Bitcoin-loving, Trumpy-sounding Conservative leader.

And one of Carney’s first policy moves as PM was to order a review of Canada’s plan to buy a substantial number of U.S.-made F-35 fighter jets. This means that Canada is joining European nations that are similarly reconsidering their dependence on U.S. weapons.

This turn away from military dependence on the U.S. is understandable. America is no longer a reliable ally to the world’s democracies; indeed, between Trump’s turn toward Putin and his talk of annexing Canada and Greenland, we don’t look like an ally at all. Rumors that U.S. jets have a “kill switch” that would allow Trump to disable them at will are probably false, but sophisticated military equipment requires a lot of technical support, so you don’t want to buy it from a country you don’t trust.

And this observation got me thinking. How much economic damage will America suffer because it has become a rogue nation? Of course, there’s much more than money at stake here. Still, becoming a nation that can’t be trusted to honor agreements or follow the rule of law has to have monetary as well as political and diplomatic consequences. How big are these monetary consequences?

Well, I’ve been exploring the available data, and U.S. exposure to foreign revulsion looks quite large.

Start with those military sales. U.S. sales of defense equipment to foreign governments have gone up a lot since Russia invaded Ukraine; much of the increase has gone either to Ukraine or to European governments supporting Ukraine, but there is also a general trend toward rearmament as we learn that the world is a more dangerous place than we realized, and pre-Trump that rearmament meant a lot of U.S. exports. In 2024 U.S. military exports were $318.7 billion; that was roughly 15 percent of total U.S. goods exports. It was also almost twice our agricultural exports.

How much will these sales shrink now that foreign governments know that we can’t be trusted? Given some time to find replacements, the likely answer is “a lot.”

Military hardware isn’t the only export likely to suffer from our new rogue nation status. Our trade deficit in goods is partly offset by a surplus in services trade, but several of our major service exports will definitely be hurt by America’s turn to the dark side.

One of these is education. Many foreigners come to America to study, attracted by the quality of our colleges and universities. In 2023, the most recent year for which data are available, they spent more than $50 billion. But if you were a foreigner considering study in the U.S. next year, wouldn’t you be worried that you might find yourself arrested and deported for expressing what the current administration considers anti-American views? I would. So we can expect a hit to higher education, which, although we rarely think of it this way, is a major U.S. export.

Personal travel — basically tourism — was even bigger, more than $100 billion. But you can be sure that we’ll be seeing a lot fewer Canadians this year and next. And it won’t just be Canadians reconsidering their plans. Salon reports that

A number of tourists from European countries have been detained by ICE in recent weeks when attempting to enter the United States, their planned vacations instead turning into long stretches in detention. Experts say their arrests are an apparent escalation in enforcement action as President Donald Trump’s immigration crackdown rages on.

Like many people who travel frequently, I avoid nations with authoritarian regimes that sometimes arrest visitors on trumped-up charges (double entendre unavoidable.) Is America now one of those places? I fear that it may be becoming one, which won’t be good for the tourist trade. And I’m not alone in my fears. From the Washington Post:

Finally, think about U.S. foreign debt, which if you include both foreign-owned bonds and loans amounts to more than $18 trillion. I don’t think we’re vulnerable to a Greek-style debt crisis, or at any rate policy would have to get even worse to put us in that range. But even a modest rise in borrowing costs, driven by incoherent policy and talk of forced conversion of short-term into long-term debt, would significantly increase the cost of servicing that debt.

Just to be clear, I’m much more worried about the threat Trump poses to democracy than his bad economic policies. And even in purely economic terms, self-inflicted damage from tariffs and deportations, plus explicit foreign retaliation, are probably more important than the costs imposed by foreign loss of trust. Yet those costs are real.

One way to think about this is to say that Trump is doing to America what Elon Musk is doing to Tesla, destroying a valuable brand through erratic behavior and repulsive ideology. Did I mention that Tesla sales in Europe appear to be cratering?

True, there are differences between a private business and a nation-state. I don’t think people visiting Tesla showrooms are subject to random arrest, or that Musk will kill your car if you say something he doesn’t like (although to be honest I’m not entirely sure on either count, especially since Musk seems to be running much of the government.) On the other hand, Tesla depends a lot more on buyer goodwill than the United States as a whole does.

Still, Trump’s belief that America holds all the cards, that the rest of the world needs access to our markets but we don’t need them, is all wrong. We are rapidly losing the world’s trust, and part of the cost will be financial.

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