The world in flux and Trump’s role in a new equilibrium - Stephen Kotkin Lecture - Apr 25
What this covers
The second Trump administration has so far brought a lot of things: market shocks, volatile trade policies, and turbulent foreign relationships. But beyond the chaos, renowned geopolitics expert Stephen Kotkin said Trump has an unwitting role to help the world rebalance and reach a “new equilibrium” in the global order.
Professor Kotkin, who is a senior fellow at the Hoover Institution at Stanford University, said the initiatives Trump set in motion signals that the US is retreating from the world, but it is not about the world’s largest economy giving up its position as the world leader.
“This is about a rebalancing of the costs and benefits, and it’s happening, and it’s a mess, and Trump’s version of it is going to maybe even fail to produce a new equilibrium, but it’s going to break the current equilibrium that needed to be broken.”
In this live recording from the Fiduciary Investors Symposium, hosted by Top1000funds.com in Singapore in March 2025, Professor Kotkin unpacks what’s next for the US and the world in conversation with Conexus Financial founder and managing director, Colin Tate.
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The US-led global order is undergoing a necessary but disruptive rebalancing driven by unsustainable costs; Trump, though an imperfect instrument, is forcing this realignment while simultaneously threatening the global commons that underpin international commerce and stability.
- US cannot indefinitely sustain 50% of global military spending with only 5% of population while allies shirk defense costs and adversaries gain relative power
- Fiscal insanity (4.6T to 7.6T federal budget in one generation) and institutional capture require destructive correction before new equilibrium emerges
- Abandoning the US-led order without a superior alternative risks collapse of global commons—undersea cables, shipping lanes, financial infrastructure—with catastrophic consequences
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Only Americans elect the US president, and only 50% of eligible voters participate, with 30% voting for one side and 30% for the other, meaning a minority selects the leader of the global order that affects everyone.
“I understand that only Americans elect the president. And by the way, 30% elect 30% elect with a 49.8% non- majority and 40% don't vote and the other 30% vote against and the rest of the world doesn't vote at all. That's always been the flaw of the US-led order.”
Medicare spending is dominated by end-of-life care for the Baby Boom generation—40% of Medicare expenditure goes to care in the final year of life—and this structural cost will persist until the entire generation has died, making it impossible to meaningfully reduce Medicare costs through policy alone.
“Medicare which is the largest expense the health care for almost half the population. Almost half the population. It's huge expense. 40% of it is last year of life. That's where the money's going. It's the baby boomers hanging on for another couple of months in intensive care beds. Yeah. Until they're all in the grave.”
US populism is a recurring historical pattern since the nation's founding, not abnormal; what is abnormal is a populist leader emerging while the US leads a global order, creating unique complications.
“The US has experienced episodes of populism since its founding. It's just normal for the US. This is not abnormal. What's abnormal is the fact that the US leads the international order and is having these internal convulsions.”
The US is 5% of global population, 25% of global GDP, and 50% of global military spending, a burden that has become unsustainable and requires a rebalancing that has been overdue for 15 years.
“The US is 5% of global population, 25% of global GDP and 50% of global military.”
Sweden and Finland maintained armies despite not being in NATO because they had no choice, demonstrating that non-NATO countries can develop military capability; Europe with 17% of global GDP could certainly do likewise.
“I mean, I think they could. There are countries with a lot less than 17% of global GDP, like Russia with 2%. That have a military. So, I could do a lot with 17%. Remember, the Swedes have an army and an air force. Why? Why do the Swedes have an army and an air force? They were not in NATO. They had no choice. Why do the Finns have a land army? They were not in NATO. They had no choice.”
During the 2008 financial crisis, the Federal Reserve provided dollar swap lines to European banks even though no statute authorized it to backstop the European banking system, demonstrating that the Fed's role extends beyond its mandate when necessary.
“When Europe in the global financial crisis, Europe, Europe asked the Federal Reserve for drawing rights. There's no statute in the United States that enables the Federal Reserve to backs stop the European banking system. Doesn't exist. Not part of the mandate. And the Fed said yes. The Europeans felt that their banking system might go under without the Federal Reserve backs stop.”
China will not take direct confrontation with the US because history shows this strategy (Nazi Germany, Hirohito's Japan, Soviet Union) fails; China instead strikes at vulnerable US allies (Australia, Canada, South Korea) to isolate them, which is more effective strategy.
“When Trump does tariffs to get China, he does something whether it's tariffs or something else. What does China do? Does it go tit for tat against America? Never does. It goes after Australia. It goes after Canada. It goes after South Korea. It goes after the vulnerable allies of the US that are smaller and tries to isolate them and hurt them”
The rebalancing of the US-led order predates Trump and was attempted by Obama, Bush, and Biden in their respective ways, but all failed due to political constraints; Trump, despite his personal unsuitability and chaotic methods, is succeeding in breaking the old equilibrium even if he cannot construct a new one.
“for 15 years at Kexus and for quite some time before that with another organization uh I've been talking about how the costs of the US-led order have been rising and a rebalancing was coming and Obama tried in his way and the first Trump tried and actually Bush you could argue tried and but had the 911 episode and Biden”
The US represents 5% of population but shapes world through 95% of world; given this asymmetry, doesn't the 95% outside the US have legitimate grievance that the US order is arrogant and oppressive?
“However, Stephen, you did say earlier it was 5% of the population. So do you not think with 5% of the population representing that scenario, the 95% that's uh experiencing the flip side of that scenario that can break global agreements, allies, and piss a lot of the world off. And frankly, it occurs as arrogance and oppression for many.”
American populism is not abnormal—it recurs throughout US history (Andrew Jackson's era is cited as precedent)—and Trump is neither unusually crazy relative to historical American populists nor the first to challenge the liberal international order, though he is the first populist to hold power while the US is leading that order.
“The US has experienced episodes of populism since its founding. It's just normal for the US. This is not abnormal. What's abnormal is the fact that the US leads the international order and is having these internal convulsions.”
Russia's economy is minuscule in global terms (2% of global GDP), but it has a colossal military budget due to overinvestment in repression and defense; this is the opposite of Germany, whose military is inadequate for its economic weight, and of Europe broadly, which privileges social spending over defense.
“Russia has a minuscule economy in global terms and has a colossal military budget because it overinvests in repression and the military. It's the opposite of Germany. Germany's army resembles Costa Rica”
When Europe faced banking system collapse in global financial crisis, it requested Federal Reserve drawing rights even though no US statute authorized Fed to backstop European banking; the Fed said yes because it understood systemic risk.
“When Europe in the global financial crisis, Europe asked the Federal Reserve for drawing rights. There's no statute in the United States that enables the Federal Reserve to backs stop the European banking system. Doesn't exist. Not part of the mandate. And the Fed said yes. The Europeans felt that their banking system might go under without the Federal Reserve backs stop.”
The US is 5% of global population, 25% of global GDP, and 50% of global military spending, a distribution that has been sustainable for 150 years but is now unaffordable because allied military capacity has declined and allied demographics have deteriorated.
“The US is 5% of global population, 25% of global GDP and 50% of global military. Yeah, it's been 25% of global GDP since [Music] 1880, almost 150 years.”
The Pentagon doctrine has been progressively reduced: under Bush it was 2 major wars in 2 theaters, under Obama 1.5 wars in 1.5 theaters, and under Trump 1 major war in 1 theater—but actual US commitments remain in Europe, Middle East, and East Asia (3 theaters), creating unsustainable mismatch.
“The Pentagon doctrine uh previously was not that long ago, this was under Bush, was two major wars in two major theaters simultaneously. Under Obama, that was reduced to 1.5 major wars and 1.5 major theaters...And then Trump finished the job and he reduced the 1.5 to one. So official Pentagon doctrine is one major war in one major theater at any given time. Is that what US commitments look like? We're committed in Europe, the Middle East, and East Asia.”
Medicare's largest costs come from last year of life spending, with 40% of costs going to baby boomers in intensive care beds extending life by months; this is politically impossible to cut but is the core fiscal problem.
“Medicare which is the largest expense the health care for almost half the population. Almost half the population. It's huge expense. 40% of it is last year of life. That's where the money's going. It's the baby boomers hanging on for another couple of months in intensive care beds.”
One man (Xi Jinping) can make a $100 trillion decision about world war, representing an enormous concentration of power and opacity in global governance.
“One man is making a hundred trillion dollar decision about everything and anything. One guy has the power to do that. The global economy is a hundred trillion more or less and he can go to war with the US if he so decides. What kind of world did we get ourselves into that one man can make that decision?”
The global commons—the interconnected systems for maritime trade, undersea cable communication, and financial infrastructure—are almost entirely dependent on US-led institutions and cannot be replicated by BRICS or other alternatives; loss of the global commons in a US-China war scenario would incinerate global portfolios and environmental systems.
“Global Commons. Everything you do, you're free writing on the Global Commons. You don't pay for it. It's not part of your cost structure, but it's a colossal part of your revenue structure. The global commons, the global commons is what some people are calling the US-led international order, the rules-based order. It's the fact that you can sail a ship on the sea and have your stuff on it and get it delivered. It's the fact that you have undersea cables, 82% of which were built by the US and its allies and about 18% built by Huawei Marine.”
Trump galvanized the Europeans to take defense seriously after they had spent 30+ years depending on US security subsidies; this galvanization is positive for America because allied strength (Canada, Australia, Europe standing up) benefits US interests by distributing the burden of maintaining the global commons.
“Lo and behold, Trump did what nobody else could do. Putin couldn't even do this. He galvanized the Europeans. Amazing. And now the Europeans are having these crisis meetings about what to do. 17% of global GDP. Can they protect themselves? I mean, I think they could.”
China will not confront the US directly but instead targets US allies (Australia, Canada, South Korea) to isolate them and hurt them as retaliation, because direct confrontation with the US has never worked in history (Nazi Germany, Imperial Japan, Soviet Union all failed).
“When Trump does tariffs to get China, he does something whether it's tariffs or something else. What does China do? Does it go tit for tat against America? Never does. It goes after Australia. It goes after Canada. It goes after South Korea. It goes after the vulnerable allies of the US that are smaller and tries to isolate them and hurt them in getting back at the US.”
There is unlimited demand for American power and not unlimited supply, creating constant pressure; the US cannot satisfy all demands from allies for additional security guarantees, defense treaties, and military support.
“There's an unlimited demand for American power and there's not an unlimited supply. So Ukraine into NATO, that's another demand on American power. a security treaty with the Saudis. That's another demand on American power. It's just endless demands on more.”
BRICS nations cannot create a functioning alternative currency or international order because they lack the tech transfer capacity, FDI networks, and (in China's case) trust to collaborate; BRICS countries would need the dollar and Federal Reserve if crisis hit.
“People talk about a bricks currency. Yeah, go right ahead...If it was doable, would have been done long ago...Go right ahead. Form a bricks currency and let's see how it works...Where you going to get the tech transfer in the FDI? Where do the BRICS countries get the tech transfer in the FDI from now? They don't get it. They don't have it. They don't get it. They can't give it to each other.”
Europe has been pocketing $350 billion per year in US security assurance for more than 30 years while spending that money on their own quality of life and social programs instead of defense, and this subsidy is no longer affordable for the United States.
“Europe is 7% of global population, 17% of global GDP, and almost 50% of global social spending. Yeah. How long could that keep going? It went way longer than we thought. Europe has been pocketing $350 billion dollar a year in US security assurance for more than 30 years spending instead on their quality of life.”
The WTO is dead and won't come back; it should never have existed as GATT was fine; future agreements will resemble GATT, though when and how they emerge remains unclear.
“WTO is dead. That's all over that. Epoch is dead. It's not coming back. It never should have happened in the first place. The GAT was fine. The GAT was totally fine. And something like the GAT will be a new equilibrium in the future. When I have no idea how messy global agreements on tariffs and trade, GAT gat predated WTO.”
Trump will not fix the fiscal insanity despite being willing to make cuts; he lacks the strategic understanding to systematically address Medicare, Medicaid, and Social Security, which are the actual budget drivers.
“Now, is Trump going to fix the fiscal insanity? This is the seventh bankruptcy. He had six in the private sector. This is the seventh. This time he's going to walk and the country's going to be bankrupt, right? The previous time the creditors were left holding the bag and when he walked, it's the seventh bankruptcy, but it's necessary. There needs to be a fiscal realignment. The fiscal insanity can't go on anymore no more. So Musk and and and cut this and cut that and they go after the stuff that's defenseless, right?”
Democratic Party faces a struggle between two failed options from recent years and must rise to the occasion with political entrepreneurialism to offer coherent alternative to Trump.
“And there's a struggle for the soul of the Democratic party between two failed options uh over the past several years. And we'll see how that comes out. But you know from Australian politics, right, that things can be revived, things that look hopeless can come around again, that political entrepreneurialism is possible, that politicians with skills can remember those skills like Albo did with the cyclone response. So, it's quite possible the Democrats can get their act together, get their mojo together, get some leadership, get some type of coherent vision, and therefore offer the electorate an ability to punish Trump midterm.”
JD Vance is attempting to clear the Republican field of primary contenders to establish himself as anointed successor for 2028, but this strategy is speculative and depends on something special from Vance.
“JD Vance is trying to clear the field of all Republican primary contenders. Why is JD Vance more ma than the MAGA? He wants to slay them all before 2028 so that he is the anointed successor. You think that's going to work? We'll see. I'm a little bit skeptical. It would take really quite something special from JD Vance and I haven't seen it yet.”
One man (Xi Jinping) has the power to make a hundred trillion dollar decision about everything and can decide to go to war with the US unilaterally, creating an unprecedented concentration of risk in global system.
“One man is making a hundred trillion dollar decision about everything and anything. One guy has the power to do that. The global economy is a hundred trillion more or less and he can go to war with the US if he so decides. What kind of world did we get ourselves into that one man can make that decision?”
Other conflicts (Yemen, Syria, Afghanistan) are serious but not existential like US-China war; they represent bad outcomes but not planetary catastrophe.
“There's a lot of bad stuff going on. We didn't talk about Yemen. We didn't talk about Syria, Afghanistan. That's all Asia, too, by the way. Why is the future Asia? That's all Asia, too. We haven't talked about that. All that's bad. But that's not existential for the planet the way a US China war is.”
There is no substitute for the US-led order except loss of the global commons, making any alternative fundamentally worse despite the order's injustices and democratic deficits.
“There's no alternative to the US-led order except loss of the global commons. Yeah, that's the alternative. That's what we had before, the US-led order. So, the rebalancing is making a lot of people angry, but it's also galvanizing them in very positive ways.”
Andrew Jackson was even more erratic and unstable than Trump, yet the American system survived; Trump is not abnormal compared to Jackson's presidency in the early 19th century.
“You want to understand Trump HW Brand's biography of Andrew Jackson. My god, Trump is nowhere near as crazy as Andrew Jackson was. Andrew Jackson was president in the early part of the 19th century.”
The internet is not in 'the cloud'—the cloud doesn't exist; the internet is literally in the ocean in undersea cables, making physical infrastructure the foundation of global commerce.
“There's no such thing as the cloud. The cloud doesn't exist. The internet is in the ocean. It's not There's no cloud. It's the ocean, dude. It's in the ocean.”
Germany is no longer the third-largest economy in the world and Japan is no longer the second-largest, meaning US allies have declined in proportion to global GDP, a basic empirical fact that changes the cost structure of the US-led order.
“But the costs of the order that it instituted after World War II have skyrocketed because Germany is no longer the third largest economy in the world. Those days are long over. Japan is no longer the second largest economy in the world. The US allies have declined in proportion to global GDP. These are just basic empirical facts.”
US has historically maintained trade surpluses for 100 years (1870-1970) using high tariffs and exporting industrial overcapacity; if the US now imposes tariffs after 70 years of trade deficits, this is a rebalancing that returns to historical norms rather than introducing new protectionism.
“US had 100 years of trade surpluses. Yes. 80 70 1970. Yes. Uh essentially uh exporting its over capacity in industrial production manufacturing. Yes. Essentially for 50 years with high tariffs.”
The left engaged in an ideological campaign to conquer American institutions (Hollywood, universities, media, corporations), which provoked a backlash from normal Americans; Trump is the instrument of that backlash, and a counterrevolution from the right is now underway—but ultimately institutions in America always win against both extremes.
“The left went on an ideological jihad to conquer American institutions, not just Hollywood and universities and media, but the corporate world, the whole shebang. And it was quite extremist and it bothered normal Americans. And Trump comes along and he's the instrument to try to stop what was to stop the madness of the leftist revolution, radical revolution to conquer American institutions.”
North Korea possesses 60 nuclear weapons, which is a problem for the US (not for Singapore, Australia, or other regional powers), making it a Trump administration concern; this illustrates how different countries have asymmetric threat perceptions and therefore different incentives regarding US alliance commitments.
“North Korea has 60 nuclear weapons now. Like whose problem is that? It's not Singapore's problem. It's not Australia's problem. Guess who's that's Trump's problem.”
Russia has a minuscule economy in global terms ($2 trillion, roughly 2% of global GDP) but maintains a colossal military budget through overinvestment in repression and military, the opposite of Germany which has an army resembling Costa Rica.
“Russia has a minuscule economy in global terms and has a colossal military budget because it overinvests in repression and the military. It's the opposite of Germany. Germany's army resembles Costa Rica”
The US federal budget increased from $4.6 trillion under Bush to $7.6 trillion under Biden in a single generation, driven by the Iraq War, the Global Financial Crisis, COVID spending, and green transition spending; this fiscal trajectory is unsustainable regardless of economic growth or inflation rates and requires a rebalancing.
“when I started just a little bit before I started with Colin and Amanda, the budget of the United States of America was about 4.5 trillion dollars at the federal level, which was a huge number. This is under Bush, about four and a half trillion, 4.6 trillion, right? Under Biden, it was 7.6 trillion. In a single generation, it went from 4.6 6 to 7.6 trillion. I mean, seriously, where was that going to come from? Who who thought that that was possible?”
Roe v. Wade was bad jurisprudence (as acknowledged by Ruth Bader Ginsburg), and overturning it returned abortion decision-making to the states where it should have been; since the overturn, abortion access has actually increased because state referenda in states Trump won by 30+ points have voted to preserve abortion access, showing that majority American opinion (~75%) supports abortion with restrictions.
“Row versus weight, which found a constitutional right to abortion that doesn't exist, was considered bad juristprudence by most of the legal profession, including by Ruth Bader Ginsburg, who criticized Row versus Wade as bad juristp prudence. Yes, she did.”
Common-sense voters (low-information voters not on social media, not watching cable news, not reading newspapers) are the decisive swing demographic in US politics and voted for Trump to end institutional madness, not because they support his methods.
“I'm one of those people who thinks that common sense is important. What we call the lowinformation voter. Those are people who are not on social media, don't watch cable television, don't read newspapers, and they're common sensical and they vote. And they brought Trump to end the madness.”
The US federal budget doubled from 4.6 trillion under Bush to 7.6 trillion under Biden in a single generation, an increase driven by Iraq war, financial crisis, COVID, and green transition spending that is fiscally unsustainable.
“when I started just a little bit before I started with Colin and Amanda, the budget of the United States of America was about 4.5 trillion dollars at the federal level, which was a huge number. This is under Bush, about four and a half trillion, 4.6 trillion, right? Under Biden, it was 7.6 trillion. In a single generation, it went from 4.6 6 to 7.6 trillion.”
Three-quarters of the American population supports abortion with restrictions, and in every state where abortion rights were put to referendum—including states Trump won by 30+ points—voters chose to protect abortion access.
“almost threearters of the American population is in favor of abortion with restrictions. So returning abortion to the states means you're returning it to a solid majority that's only growing. And that's the end of abortion. And every single state where there was a referendum to make abortion legal or illegal with some of which Trump won by 30 plus points voted to retain abortion”
The US-led order is an imperfect system in which a small percentage of the global population (the US electorate) makes decisions affecting the rest of the world; this is acknowledged as unfair, but the alternative outcomes (multipolar disorder, inability to enforce rules, loss of global commons) are worse, so the correct strategic posture is to manage US power rather than destroy it.
“only Americans elect the president. And by the way, 30% elect 30% elect with a 49.8% non- majority and 40% don't vote and the other 30% vote against and the rest of the world doesn't vote at all. That's always been the flaw of the US-led order. You don't get to choose who runs it on your behalf. And so people chafe under that. Everybody wants to have a say, a voice.”
The US is not in decline—it still has 25% of global GDP, the world's largest innovation ecosystem, energy superpower status, and almost 80 voluntary mutual obligation treaties with other countries (a unique achievement in global history)—but it is undergoing a rebalancing of the costs and benefits of the order it created.
“So the US is not in decline. It's still 25% of global GDP. It still has the largest innovation ecosystem on the planet. I live there in Silicon Valley. It still is an energy superpower. There is no country with the energy resources at the prices we're talking about like the US. Canada could one day be and we can all hope and then soft power and I could go on the dimensions and alliance power almost 80 treaties with other countries that are voluntary mutual obligation treaties. Who in global history has ever had anything like that before? Nobody.”
Midterm elections will likely punish Republicans if the economy weakens without recovering, especially if Trump's policies cause stagflation; voters who rejected inflation will punish whoever is blamed for economic pain.
“In less than four years there's going to be an election in the United States. Our so-called midterms when the president is not at stake, the presidency is not at stake, but part of the Senate and all of the House is at stake. The American public did not vote for this. They didn't vote for stagflation. They didn't vote for economic uncertainty. They voted for the opposite. They were trying to punish the Democrats for the inflation, the overregulation. And so it could well be that the voters punish the Republicans for what Trump is causing.”
The left conducted an ideological jihad to conquer American institutions (Hollywood, universities, media, corporate world) with extremist tactics that bothered normal Americans, prompting Trump to emerge as an instrument to stop the leftist revolution.
“The left went on an ideological jihad to conquer American institutions, not just Hollywood and universities and media, but the corporate world, the whole shebang. And it was quite extremist and it bothered normal Americans. And Trump comes along and he's the instrument to try to stop what was to stop the madness of the leftist revolution, radical revolution to conquer American institutions.”
The idea that the US is losing Europe is bunk; trade volume, tech transfer, FDI, and cultural ties will persist across Trump's presidency, with adjustments in balance and equilibrium rather than decoupling.
“The idea that US is losing Europe or Europe is lo is just bunk. What a bunch of bunk. Do you have any idea what the trade volume is, what the tech transfer is, what the FDI is, let alone the cultural ties. Do you think that's going away? Because Trump is going to be in the White House for a few years. No, none of that's going to go away. It's just going to come out the other side with a different balance, a different equilibrium.”
People criticize the dollar and propose BRICS alternatives, but in crises they revert to dollar holdings because there is no superior alternative to the US dollar and Federal Reserve system.
“You don't like the dollar? Fine. Use something else. And then the first hint of trouble, I'm gonna see what you're gonna do. Like every single time, the first hint of trouble. Why don't you have only euros? Why don't you have just yen? How big are your holdings in yuan? You got deer homs and rupes? Go ahead. Who's stopping you? You can load up on as many of them as you want. Nobody's forcing you to use the international financial system as currently configured. You're using it because you don't have anything better.”
Xi Jinping is completely opaque in decision-making; even second-echelon Chinese officials don't know what's happening; he lives alone in Western Hills and doesn't live with other officials, making his preferences and intentions unknowable.
“I have no idea what Xi Jinping is thinking...the system is opaque. He doesn't tell us how decisions are rendered there. And even the people in the second echelon in China don't know what the hell is going on there. And Xi Jinping doesn't live with them. He doesn't live in Jung Nanhai. He lives by himself in the western hills.”
Being the dominant currency comes with privilege (financing deficits at lower rates) but also comes with cost (Fed must backstop global system); the question is whether US dominance is 'fair' or just 'price to pay for privilege.'
“Regarding what you were saying as being a cost for the Fed to provide the US dollar...that's the price to pay when you are the dominant currency...you have privilege with that...you can easily finance your deficits at a lower a lower rates and there's many other privileges.”
If Trump ends US support for Ukraine, this is not betrayal of rules-based order but reallocation of US military resources from overcommitted position; Pentagon doctrine is one major war in one major theater but US is committed to three theaters (Europe, Middle East, East Asia) simultaneously, creating unsustainable doctrine-commitment gap.
“The Pentagon doctrine uh previously was not that long ago, this was under Bush, was two major wars in two major theaters simultaneously. Under Obama, that was reduced to 1.5 major wars and 1.5 major theaters... And then Trump finished the job and he reduced the 1.5 to one. So official Pentagon doctrine is one major war in one major theater at any given time. Is that what US commitments look like? We're committed in Europe, the Middle East, and East Asia.”
Trump is ignoring court orders and creating a constitutional crisis, which explains why the Wall Street Journal—'the bastion of conservatism'—is criticizing him for ignoring the rule of law; the institutional struggle will get very ugly.
“Trump with the courts and ignoring the court orders and the constitutional crisis and the Wall Street Journal, the bastion of conservatism is after Trump for ignoring the rule of law. So you know it's going to get ugly.”
Abortions have increased since Roe v. Wade was overturned, contradicting narratives that ending the federal constitutional protection would eliminate abortion access.
“They repealed Row versus Wade. And there's no more abortion in the United States. Right. Abortion is up. Yeah, abortions are up since Row versus Wade was repealed.”
Trump is trying to reorient global trade order to disadvantage China, forcing other countries to choose between disadvantaging China with the US or being on the receiving end of US pressure; countries cannot stay neutral.
“He's trying to reorient the whole global trade order to disadvantage China. And the countries can either disadvantage China along with the US's attempt to disadvantage China or they can be on the receiving end. That's what's going on with Trump.”
The rebalancing will be chaotic but ultimately positive; trade volumes, tech transfer, FDI, and cultural ties between US and Europe will not disappear because Trump is in office for a few years—they'll emerge with a different balance and equilibrium.
“The idea that US is losing Europe or Europe is lo is just bunk...Do you think that's going away? Because Trump is going to be in the White House for a few years. No, none of that's going to go away. It's just going to come out the other side with a different balance, a different equilibrium.”
Roe v. Wade was considered bad jurisprudence by most of the legal profession including Ruth Bader Ginsburg, and the Democrats had supermajorities in Congress for decades but never passed a federal abortion law, then lost the issue when Ginsburg refused to step down.
“Row versus weight, which found a constitutional right to abortion that doesn't exist, was considered bad juristprudence by most of the legal profession, including by Ruth Bader Ginsburg, who criticized Row versus Wade as bad juristp prudence. Yes, she did. Oh, yeah. Facts that are easily findable if you're looking for them. The Democrats for decades had very significant majorities in the House and the Senate to pass any federal abortion law they wanted and they didn't.”
The WTO and USMCA trade regimes are dead and will not return; the future equilibrium will be something more like the GATT—bilateral or regional agreements rather than a universal rules-based system—but when and how that transition occurs is still mysterious.
“WTO is dead. That's all over that. Epoch is dead. It's not coming back. It never should have happened in the first place. The GAT was fine. The GAT was totally fine. And something like the GAT will be a new equilibrium in the future. When I have no idea how messy global agreements on tariffs and trade, GAT gat predated WTO.”
The Trump administration's budget cuts under Musk are targeting defenseless agencies like USAID rather than the major entitlements (Social Security, Medicare, Medicaid); this is politically convenient but economically insufficient to address the fiscal crisis, revealing that serious fiscal rebalancing will require difficult choices about entitlements that the Trump administration is not willing to make.
“Musk and and and cut this and cut that and they go after the stuff that's defenseless, right? USAID... there are a lot of victims who are undeserving of victimhood in the process but then there are some victims who had it coming but that's just the easy right let's see what they do with social security with Medicare and with Medicaid”
China used the rules-based order cleverly and brilliantly, following rules when they suited China and not following them when they didn't, demonstrating the need to rewrite the rules.
“the Chinese cleverly, brilliantly, you could say, bent it to their advantage. Using the rules when it suited them, not using the rules when it didn't suit them.”
Managing the short run by avoiding US-China major war is 'the game'—everything else (Yemen, Syria, Afghanistan) is bad but not existential for the planet the way US-China war is; short run is the problem, long run solves itself.
“It's in the short run that we have this problem that we're all dead which is US China major war...So it it's it's prolonging the short run to make it the long run. That's the geopolitical game...There's a lot of bad stuff going on. We didn't talk about Yemen. We didn't talk about Syria, Afghanistan. That's all bad. But that's not existential for the planet the way a US China war is.”
The key geopolitical challenge is avoiding US-China major war in the short run; if major war is avoided, institutional corrective mechanisms can work through convulsions and reach better equilibrium.
“In the short run, we're all dead. What are we going to do in the short run? In the short run, we're all dead. I give the lecture called in the short run, we're all dead. You see, in the long run, we're all good because our system is superior. It has corrective mechanisms. It can go through convulsions and it's not existential. We can come out the other side. It's in the short run that we have this problem that we're all dead which is US China major war. So it it's it's prolonging the short run to make it the long run. That's the geopolitical game. No decision major war between the US and China.”
The global commons—undersea cables (82% built by US and allies), shipping lanes, financial infrastructure, and communications networks—are the foundation of international commerce and are at risk if the US-led order collapses.
“Global Commons. Everything you do, you're free writing on the Global Commons. You don't pay for it. It's not part of your cost structure, but it's a colossal part of your revenue structure. The global commons, the global commons is what some people are calling the US-led international order, the rules-based order. It's the fact that you can sail a ship on the sea and have your stuff on it and get it delivered. It's the fact that you have undersea cables, 82% of which were built by the US and its allies”
Trump's destruction is creative destruction—intentional because he's an angry person who resents everyone—but institutions like FBI will come out the other side better because they needed reform (FBI 'was not highly efficient and required reform').
“This is creative destruction, part of intentional because Trump is just an angry sob and resents everyone and everything. He's going after people that he perceives as enemies. The FBI, the FBI was not a highly efficient organization and it required reform and instead of getting reform, it's getting Trump. It's going to come out the other side though and I hopefully it's going to come out better”
The US had 100 years of trade surpluses (until 1970) exporting overcapacity in manufacturing with high tariffs, then 70 years of reverse history (deficit), so asking US to 'pay back' through current deficits is question of whether rebalancing now is unfair after US benefited for century.
“US had 100 years of trade surpluses. Yes. 8070 1970. Yes. Uh essentially uh exporting its over capacity in industrial production manufacturing. Yes. Essentially for 50 years with high tariffs. We've been through 70 years of reverse history.”
Trump will lose and the left will lose in the institutional struggle, and the institutions themselves will win because this is what happens in America repeatedly; the struggle will be messy and people will become more hysterical, but American institutional corrective mechanisms will ultimately prevail.
“And so the left is going to lose and the right is going to lose and the institutions are going to win because that's what happens in America again and again and again.”
The US is not in decline; it still has 25% of global GDP, the largest innovation ecosystem on the planet (Silicon Valley), energy superpower status, soft power, and alliance power with nearly 80 voluntary mutual obligation treaties with other countries—unique in global history.
“The US is not in decline. It's still 25% of global GDP. It still has the largest innovation ecosystem on the planet. I live there in Silicon Valley. It still is an energy superpower... And then soft power and I could go on the dimensions and alliance power almost 80 treaties with other countries that are voluntary mutual obligation treaties. Who in global history has ever had anything like that before? Nobody.”
North Korea has 60 nuclear weapons and is not Singapore's or Australia's problem—it's Trump's problem, illustrating how US strategic commitments create asymmetric burdens.
“North Korea has 60 nuclear weapons now. Like whose problem is that? It's not Singapore's problem. It's not Australia's problem. Guess who's that's Trump's problem.”
Every American embassy abroad displays both large anti-American protests and the longest lines for visas the world has ever seen; this paradox (widespread opposition combined with overwhelming demand for access) is the essence of American power and demonstrates why the US cannot simply withdraw from its role without leaving a vacuum.
“Every American embassy abroad has two things. I say this every speech. One, an anti-American protest, which is large and justified. And the other, the longest line for visas you've ever seen. Yeah, that's right. That's exactly right. That's American power. There's never enough.”
Both unlimited demand for American power and insufficient supply of American power exist; every American embassy abroad has both massive anti-American protests and the longest visa lines, representing this paradox.
“There's an unlimited demand for American power and there's not an unlimited supply... Every American embassy abroad has two things. I say this every speech. One, an anti-American protest, which is large and justified. And the other, the longest line for visas you've ever seen. Yeah, that's right. That's exactly right. That's American power.”
BRICS countries cannot provide technology transfer and foreign direct investment to each other; if they have it (as China does), they only share surveillance technology to maintain control of communications networks.
“Where you going to get the tech transfer in the FDI? Where do the BRICS countries get the tech transfer in the FDI from now? They don't get it. They don't have it. They don't get it. They can't give it to each other. And if they do have it, in the case of China, they're not giving it to the others except surveillance technology. They'll give that because then they control their communications networks.”
Trump is an unwitting instrument of history who does not fully understand the rebalancing he is executing, but the rebalancing predates him and would have happened under Obama or Bush if done differently.
“So the rebalancing is going to continue. This is not about America retreating from the world. This is not about America giving up its role in the world. All of that is social media rubbish. This is about a rebalancing of the costs and benefits. And it's happening and it's a mess. and Trump's version of it is gonna maybe even fail to produce a new equilibrium, but it's going to break the current equilibrium that needed to be broken. So again, he's an unwitting instrument of history”
America is a 30-30-40 country: 30% left, 30% right, 40% neither, and the institutional struggle between hard left and hard right leaves the 40% center unrepresented.
“America is a 3040 country. 30% left, 30% right, 40% neither. Neither. Yeah. And that's the 40% that's not represented in this.”
Trump has galvanized Europe to recognize it must stand on its own militarily rather than rely on US security guarantees, and Trump has revived Canada, Australia, and other middle powers that had been dormant or underperforming.
“Lo and behold, Trump did what nobody else could do. Putin couldn't even do this. He galvanized the Europeans. Amazing. And now the Europeans are having these crisis meetings about what to do. 17% of global GDP. Can they protect themselves?”
Trump's Panama Canal rhetoric is actually about preventing Chinese dominance through the Belt and Road Initiative; Panama was part of BRICS, so Trump's pressure forced Panama to divest from Hong Kong ports and exit BRICS.
“Panama was part of Barri and the American administrations didn't like that. They didn't like Panama where we built the canal being a part of the Chinese Barrier. And they said, 'We don't like this. can you do something about it? And Panama said, 'No, we'll go flip the bird.' No. And so Trump comes along and says, 'Well, okay, we'll take the canal back.' And within weeks, Panama, they're selling the two Hong Kong ports on either side of the canal to an American company and ending their participation in Barri.”
Lee Kashing, a Hong Kong billionaire and major port operator, sold his interests in Panama ports without consulting Beijing to extract his wealth before the deal changed, illustrating how even aligned actors have conflicting incentives.
“It's Lee Kashing. We have the Lee Kushing professor, Professor Qua. Lee Kashing owned those ports and he sold them without even consulting with Beijing to get his money out. And and now Beijing is trying to undo the deal of the sale of those ports owned by the Lashing conglomerate, the Hong Kong based conglomerate.”
Musk and Trump are revealing where government money has been going, which was previously hard to see; this transparency is valuable even if the cuts are crude and cause undeserving victims.
“But they're also revealing a lot about where the money goes, which was very hard to see. And so Musk for all his South African Africans nationalism is again another unwitting instrument of history. Some of the things that they revealed just mind-blowing of where money has been going.”
Middle powers need to deepen horizontal relationships with each other rather than focusing solely on what the US will do; Australia should build deeper ties with Japan rather than waiting for US direction.
“middle powers deepening horizontal relationships. So there was a Japan table and nobody from the Australia table walked over to the Japan table. It was all about what's the US going to do? What can we expect from US behavior? And my point was there's no substitute for a deep and abiding treaty relationship with the US. But there is the possibility which nobody's preventing you of having deeper horizontal relationships with any countries of your choice including Japan.”
Europe has been pocketing $350 billion per year in US security assurance for more than 30 years, spending instead on social programs, a deal that is no longer affordable by the United States.
“Europe has been pocketing $350 billion dollar a year in US security assurance for more than 30 years spending instead on their quality of life. I would have taken that deal and they took that deal because the Americans gave them that deal. That deal is no longer affordable by the United States.”
A US-China war would devastate the global commons: oil tankers in the Strait of Malacca would be destroyed, the strait would become unnavigable, natural gas pipelines from Russia to Asia would burn, creating environmental catastrophe and collapsing global commerce.
“US and China go to war? Yeah. US and China go to war? What do you think is going to happen? Every oil tanker in the straight of Malaa is going to blow. And that's not going to be navigable anymore. And you're going to see an oil slick like you've never seen before. You want to talk about environment, atmosphere, carbon. Yeah. US and China go to war. The straits of Malaa is an ink. Well, it's just black and you can't navigate it because everything is sunk there. Persian Gulf. Yeah. Same thing. Those gas pipelines in northern Russia that go to Asia, they're going to burn. They're going to burn. All of them are going to burn. They're going to be sabotaged.”
No major power has successfully confronted the US militarily in modern history (Nazi Germany, Imperial Japan, Soviet Union all failed), so Xi Jinping would be foolish to engage in direct military confrontation despite his control over a $100 trillion economy.
“Does it go tit for tat against America? Never does. It goes after Australia. It goes after Canada. It goes after South Korea. It goes after the vulnerable allies of the US that are smaller and tries to isolate them and hurt them in getting back at the US. doesn't go up against the US because you want to know something that hasn't worked well in history. You can ask Nazi Germany how that worked. You can ask Hirohito's Japan how that worked. You can ask the Soviet Union how that worked. And you can ask Dunia how it worked to be partners with the US as opposed to opposition to the US.”
The rebalancing is not about America retreating from the world or giving up its role, but about rebalancing the costs and benefits of maintaining the order.
“So the rebalancing is going to continue. This is not about America retreating from the world. This is not about America giving up its role in the world. All of that is social media rubbish. This is about a rebalancing of the costs and benefits.”
Middle powers (Japan, Australia, etc.) need to deepen horizontal relationships with each other, not just depend on US; Kotkin observed in war games that Australian and Japanese leaders never consulted each other, only asked 'what will US do?'
“the point of the game which everybody failed in the room was uh middle powers deepening horizontal relationships. So there was a Japan table and nobody from the Australia table walked over to the Japan table. It was all about what's the US going to do?...my point was there's no substitute for a deep and abiding treaty relationship with the US. But there is the possibility which nobody's preventing you of having deeper horizontal relationships”
The rebalancing process is positive even though it is chaotic and unpleasant; it is far better than the alternative of indefinitely maintaining an unaffordable order that would eventually collapse anyway.
“And so it's this is a positive story. Something was unaffordable, couldn't continue, and there's a rebalancing underway, and it's going to be very difficult to get from one from point A to point B.”
Trump is engaging in creative destruction, not because he intends to but because he is angry, resentful, and cruel; destruction will clear dead wood and things will come out better on the other side, but the process is genuinely destructive.
“There's a lot to be optimistic about in this insanity of Trump and chaos and unpleasantness and he's a nasty piece of work. Yeah, that's who he is. He's cruel. He's roing resentment like Musk. He's not pretty, but he's an instrument of processes that are bigger than him. It's going to come out the other side. This is creative destruction, part of intentional because Trump is just an angry sob and resents everyone and everything.”
A rebalancing of US global costs and benefits has been predicted and anticipated for 15 years at Breitbart and longer before that, with multiple administrations (Bush, Obama, first Trump, Biden) attempting it unsuccessfully before the current Trump administration.
“for 15 years at Kexus and for quite some time before that with another organization uh I've been talking about how the costs of the US-led order have been rising and a rebalancing was coming and Obama tried in his way and the first Trump tried and actually Bush you could argue tried and but had the 911 episode and Biden and and and here we are now and the rebalancing is finally underway.”
The Biden administration asked Europe if it would join a US-China war in the Indo-Pacific, and Europe said no—that's America's war, not ours—revealing the imbalance where the US guarantees European security but Europe won't reciprocate.
“when the Biden administration, protransatlanticism, went to Europe and said, 'Geez, if we go to war with China, are you in?' What'd they say? No way. That's right. They said, 'That's your war. We're not getting dragged into that.' So the US is the guarantor of European security visa v Russia, but the Europeans are not allin for the US in the Indo-Pacific.”
Xi Jinping lives isolated in the western hills rather than at Zhongnanhai with other second-echelon leaders, making him opaque and impossible to read; even Chinese officials don't know what decisions are being made.
“He doesn't tell us how decisions are rendered there. And even the people in the second echelon in China don't know what the hell is going on there. And Xi Jinping doesn't live with them. He doesn't live in Jung Nanhai. He lives by himself in the western hills.”
Trump's stated desire to take over the Panama Canal is crazy, but his actual effect (removing Chinese influence from the canal without military action) is strategically sound, showing that chaotic appearance masks effective outcomes.
“Is Trump wanting to take the canal back? Probably. But in the meantime, he did something which American presidents were desperate to do and couldn't figure out how to do.”
Trump did not understand he was reviving Trudeau's party through his '51st state' comment, does not strategically understand his own galvanizing effects, but the outcomes are positive for America regardless because stronger allies benefit the US.
“Does Trump understand that he's doing this? Does he understand that he revived Trudeau's party in Canada with the idiocy of the 51st state? that will never happen. No, of course he doesn't understand that. But is it a potentially really good thing? Certainly. Beyond doubt...It's really good thing for America, too. If Canada stands up, Canada has so much vaster potential than it's realized so far.”
The US will likely face midterm elections in less than 4 years where voters can punish Republicans if Trump causes stagflation and economic uncertainty; the Democratic Party is currently divided between two failed factions but has the opportunity to offer a coherent alternative if political entrepreneurship emerges, as it did with Australia's Albo and the cyclone response.
“In less than four years there's going to be an election in the United States. Our so-called midterms when the president is not at stake, the presidency is not at stake, but part of the Senate and all of the House is at stake. The American public did not vote for this. They didn't vote for stagflation. They didn't vote for economic uncertainty. They voted for the opposite.”
Trump is going after judges because they're liberal and appointed by Obama or Clinton, with the justification being that the rule of law was captured by the left—a partially true but mostly false analysis that will escalate constitutional crisis.
“It's gotten to the point where he's going after the judges because they're liberal and were appointed by Obama or Clinton, right? In other words, the justification for going after rule of law is that the rule of law was captured by the left. That's a partially true, halftru, and therefore mostly false analysis.”
Trump galvanized Canada despite or because of the '51st state' comment, which strengthened Trudeau's position rather than weakening it, demonstrating the counterintuitive effects of Trump's provocations.
“Does he understand that he revived Trudeau's party in Canada with the idiocy of the 51st state? that will never happen. No, of course he doesn't understand that. But is it a potentially really good thing? Certainly. Beyond doubt. It's really good thing for America, too. If Canada stands up, Canada has so much vaster potential than it's realized so far.”
Panama was part of China's Belt and Road, and Trump's threat to 'take back the canal' actually accomplished what US administrations desired: Panama sold Hong Kong ports to an American company (Lee Kashing-owned, sold without Beijing's consultation) and exited BRI participation.
“Panama was part of Barri and the American administrations didn't like that...They said, 'We don't like this. can you do something about it? And Panama said, 'No, we'll go flip the bird.' No. And so Trump comes along and says, 'Well, okay, we'll take the canal back.' And within weeks, Panama, they're selling the two Hong Kong ports on either side of the canal to an American company and ending their participation in Barri.”
Andrew (Australian pension fund) observes that Japan has unique relationship with US due to post-WWII demilitarization arrangement, asking how Japan fits into rebalancing given this constraint.
“uh so I'll ask the question very quickly which is where does Japan because we've spoken a lot about US Europe and less about Asia to some extent which is hard because it just captures you but where does Japan fit into the rebalancing particularly given their somewhat unique relationship with the US from a demilitarization perspective?”
The FBI was not a highly efficient organization and required reform, but instead of getting reform, it's getting Trump, though institutions should ultimately improve the outcome.
“The FBI, the FBI was not a highly efficient organization and it required reform and instead of getting reform, it's getting Trump. It's going to come out the other side though and I hopefully it's going to come out better because it was not in great shape.”
If Trump were smart enough to intentionally cause mild recession then recovery into midterms, that would be good tactical political calculation, but Trump is 'all thumbs literally' and has 'no three-bank shot'—he's all news cycle, nothing strategic, so stagflation is more likely than managed recession.
“if only Trump were that smart. He's gonna he's likely to cause the recession. It's the recovery that's the problem in that scenario. We could end up with stagflation as far as the eye can see...Trump, there's no three bank shot. You know, you where you got to hit three sides before you go into the pocket. That's not Trump. Trump is all thumbs literally and it's news cycle stuff. Nothing strategic at all.”
Trump operates with news cycle instincts rather than strategic planning—there is no three-cushion billiards shot, only immediate, tactile actions driven by anger at perceived enemies.
“Trump, there's no three bank shot. You know, you where you got to hit three sides before you go into the pocket. That's not Trump. Trump is all thumbs literally and it's news cycle stuff. Nothing strategic at all.”
The US is an 'indigenous American berserk' (a reference to Philip Roth) whose internal convulsions are a recognizable part of its character, whether one likes it or not.
“But this is America, the indigenous American berserk, Philip Roth.”
Americans live outside the conjuncture and in long structural trends, allowing them to observe current chaos as necessary historical process; having no portfolio (personal wealth) frees them from short-term trading pressure.
“And you have to live today. I get to live in these long structural trends. I get to live outside the conjuncture. Plus, I don't have a portfolio. I don't have any money.”
Speaker studies history and understands that unintended consequences are normal in historical change, making the current chaos less surprising.
“Again, I study history and that's how history works.”
Kotkin has 'been living in long structural trends' outside the conjuncture and does not have a portfolio, so his perspective is from 40-year historical view rather than short-term financial perspective.
“You have to live today. I get to live in these long structural trends. I get to live outside the conjuncture. Plus, I don't have a portfolio. I don't have any money.”
Speaker has no portfolio and no money, removing financial bias from his analysis.
“Plus, I don't have a portfolio. I don't have any money.”
JD Vance is attempting to clear the field of Republican primary contenders by 2028 to position himself as Trump's successor, but Kotkin is skeptical this will work because Vance has not demonstrated the political skills necessary to control the Republican Party post-Trump.
“JD Vance is trying to clear the field of all Republican primary contenders. Why is JD Vance more ma than the MAGA? He wants to slay them all before 2028 so that he is the anointed successor. You think that's going to work? We'll see. I'm a little bit skeptical. It would take really quite something special from JD Vance and I haven't seen it yet.”