[Salon] Why Western Hegemony is Over

Why Western Hegemony is Over

Jeffrey D. Sachs Interview in South China Morning Post

August 4, 2025

The tariff truce between China and the United States is set to end in August. What do you forecast will happen after that? And what will happen to trade relations between China and the US for the rest of US President Donald Trump’s second term?

The United States learned that it can’t impose its will on China. The rare earths threat by itself was enough to cause the US to reconsider. So, almost immediately after putting on the high tariffs, the US backed down. And both sides know that each has some chokeholds on the other. For that reason, we might expect the two sides to maintain certain limits on the trade frictions in the years ahead. There will be, therefore, some kind of agreement, but it won’t stick in the details, and frictions will continue to wax and wane, with neither side definitively imposing its will on the other. The basic reason is that both sides have a mutual gain from continued trade. I’m hopeful that a measure of rationality will therefore prevail.

The biggest challenge, of course, is the behaviour of the US. The US started this trade war. This is not two sides fighting each other, but rather the US fighting China. We should remember that. The US needs to show some prudence at this point. I do suspect that there is a chastened view among many senior US officials. Trump himself is unpredictable. He has a very short attention span. Agreements with Trump don’t stick. So, I don’t foresee a quiet period, but I do foresee some limits to the competition because each side can do damage to the other and both sides have a strong reason to achieve some cooperation.

Let me add one more point. From a long-term point of view, China certainly should not regard the US as a growth market for its exports. The US is going to restrict China’s exports to the US one way or another. The relationship will not be harmonious. The US will not be friendly to China, or trustworthy. China should just take care that it’s expanding its exports to other markets, and should not be overly focused on trying to break through to the US market, or even to Europe for that matter. The rapid growth of China’s exports will be with Africa, Southeast Asia, South Asia, west Asia, Central Asia, Latin America – not with the US and western Europe.

What is your forecast for the US midterm elections, and will it be a tough battle for Trump? Can you comment on how divided the US is compared to before the election of Trump last year?

I think that the Democrats will likely regain control of one or both houses of Congress, because in midterm elections that is generally the pattern.

Even without getting deeply specific about the current context, the prevailing party that holds the White House almost always loses ground in the midterms, and the Republican majority in both houses of Congress is very small. Having said this, we should also understand that Trump is ruling mainly by executive decree, not by legislation. Even if the Democrats regain one or both houses of Congress, Trump will continue with his decrees.

The US currently does not have a functioning constitutional system in my view. It is one-person rule by declarations of emergencies by Trump. The orders generally start with the statement: “By the authority vested in me as President by the Constitution and the laws of the United States of America, it is hereby ordered”. This is a kind of soft dictatorship, not a constitutional system. The lower courts object, but the Supreme Court lets Trump have his way. The Congress is nearly moribund.

Even if the Democrats regain some control of the House or the Senate, it won’t stop a lot of what Trump is doing. I should also add that while Americans are polarised, they generally dislike both political parties. Most Americans are unhappy about the direction of the country. They’re distrustful of the politicians. Our political institutions are not functioning properly and that’s why there’s a high level of distrust.

Another point that I think is important to understand is that the swings between the Democrats and the Republicans do not change US foreign policy. [Former president Barack] Obama started the anti-China policies in his term. Then came Trump’s tariffs in his first term. Biden kept those Trump tariffs and had a hostile policy towards China. Now Trump is picking up where Biden left off. The deep state drives foreign policy, not public opinion or presidents.

In sum, I don’t have much hope that some change in the midterm elections will change the direction of US politics very much. Even a change in the White House in four years is not likely to change US politics very much. Our problems are deep seated. Our institutional failings are deep. It’s going to take perhaps 20 years to work through this. This is not a Trump phenomenon by itself.

What effect will the One Big Beautiful Bill have on the US economy?

The One Big Beautiful Bill weakens the US in two ways. First, it adds to the already large budget deficits by making additional tax cuts that mainly benefit rich Americans and the corporate class. These tax cuts raise the budget deficit substantially and are partially offset by cuts in healthcare benefits for the poorest Americans. The bill, therefore, is dramatically unfair and unwise in its impacts on the deficit and inequality.

Second, the legislation phases out some of the modest earlier US efforts towards low-carbon energy and modernisation of infrastructure. So, the legislation marks a US retreat from leadership on 21st-century technologies. Basically, the Trump administration is a gift to China, with Trump’s policies saying to China, “China should lead the way on climate safety, low-carbon energy, electric vehicles and all of the green and digital technologies that the world needs, while the US will ignore the future”.

So, none of this is a big, beautiful bill. It is a mess that reflects the failures of the American political system.

What are the implications of the fallout between billionaire Elon Musk and Trump?

Trump doesn’t have long-term relations with any individual other than his immediate family. Trump falls out with everybody. Remember Steve Bannon? He was once Trump’s closest adviser. That came to an end quickly. Almost all Trump advisers get fired at one point or another. Trump is not a person with long-term loyalties to anybody.

The individual feuds don’t mean very much. Breaking with Musk does not mean breaking with Silicon Valley. Silicon Valley put Trump back into the White House with enormous financial backing for Trump’s campaign. There are still tens of billions of dollars of government contracts going also to Elon Musk, Peter Thiel and other Big Tech operators.

The basic relationship between Silicon Valley and Washington remains intact because the Pentagon believes that it needs AI and can’t pursue AI on its own. While Trump has cut support for EVs, including Tesla, the Pentagon will continue to rely on Musk’s SpaceX for many years to come. And the same is true of the Pentagon’s reliance on Big Tech’s AI capacities generally.

You have mentioned in other interviews that Trump lacked a coherent strategy in foreign policy, including his handling of China. Why do you think this? And what do you see ahead for China-US relations?

The most fundamental trend in the world economy is the rapid rise of the non-Western economies, led by China and including Russia, India, Southeast Asia and, in future decades, Africa. The US is flailing about trying to maintain its dominance in a world in which the emerging economies are rising rapidly. The US will not be able to prevent the emergence of multipolarity, but it will try. Trump will try one thing or another, but without success or coherence. Multipolarity has already arrived.

The broad pattern of economic convergence – in which the emerging economies narrow or close the income gap with the high-income countries of the West – means that Western hegemony is over. This is leading to deep frustration, not only in the US political class but in Europe as well.

China vastly outproduces the United States in advanced industrial goods, such as EVs, solar power, wind power, advanced nuclear power, batteries, low-cost 5G and many other key technologies. China incorporates AI into advanced manufacturing processes more than the US.

Many European leaders feel that if they stick with the US against China and Russia, then maybe the Western hegemony will continue. This is delusional in my view, but nonetheless creates a lot of noise, friction and risks of conflict. None of it is a coherent strategy, however.

The US has no strategy to stay ahead of China. In fact, the US can’t succeed in that. We hear a lot of US sabre-rattling against China, Russia and the BRICS countries. This is all dangerous. I think the heated rhetoric by itself can become a self-fulfilling prophecy of war. There are a lot of ignorant people in the US political leadership, and I worry very much about their naivety and delusions.

This, in my view, is essentially the origin of the “trade war”. The US decided during 2010-2015 that China is now a threat to US primacy. The US has tried a lot of things to block China’s continued rise, including: a military build-up in East Asia; export restrictions on hi-tech goods, especially advanced chips; economic sanctions on key Chinese companies; investment restrictions by US companies, and ownership restrictions on Chinese companies in the US; high tariffs against China’s exports; and others. But none of this stops China’s rise. China’s development results from hard work, ingenuity, high rates of saving, high rates of investment, very effective long-term planning and a very skilled, very entrepreneurial generation of business leaders, especially young business leaders. Those fundamental strengths continue despite America’s anti-China policies.

Trump’s policies are accelerating the move of top scientists to China. My overall view is that Trump is creating a lot of noise and some real dangers, but with no real strategy and no likelihood of success in holding back China’s rise. That’s a good thing. The rest of the world benefits from China’s economic success, including the US.

In your last Open Questions interview, you talked about “the deep state”, a complex vested interest group in industry, the military and other spheres. Does the deep state want military conflict with China? And do foreign governments – such as China and Russia – believe in the existence of a deep state, which many dismiss as a conspiracy theory?

The deep state means the permanent security system of the United States and its partners in Europe and in East Asia, including Japan, Korea and other places where the US has military bases and other security institutions. It includes the military, the CIA, the military contractors and the politicians who serve the military-industrial complex.

Does such a deep state exist? Yes. The US has around 750 overseas military bases and many of them are in East Asia. The US has many major military contractors with hundreds of billions of dollars of annual business with the US government. The US fights overt and covert wars pretty much non-stop, some of which are proxy wars (in which the US arms and funds Ukraine to fight Russia), and sometimes open conflicts with heavy US involvement, as in Iraq and Afghanistan. The US has the extensive global networks of the CIA and other intelligence and covert institutions. All of this constitutes the deep state. Presidents come and go but the underlying foreign policy is consistent and set largely out of view of the public, and without any reference to public opinion.

When Obama replaced [US president George] Bush Jr, and Trump replaced Obama, and Biden replaced Trump, and Trump replaced Biden, on the PR level there was alleged to be change, but in fact very little policy change occurred. For example, how much foreign policy change was there when Obama succeeded Bush Jr? Very little. Obama launched many wars, just as Bush had done. Obama’s team actively participated in the coup in Ukraine in 2014 that set the path for the Ukraine war. Obama went to war against Libya. Obama gave the CIA the order to overthrow the Syrian government. All of this was a continuation of the policies of the Bush period.

Trump continued most of the same policies. Trump continued to build up the Ukraine military. The Trump administration dismissed the Minsk 2 agreement that could have prevented the escalation of the Ukraine war. There was not any major change between Obama and Trump.

When Biden came in, their claim again was that there would be a new foreign policy, but it didn’t happen. What did Biden do with China? He continued Trump’s tariffs. He continued Trump’s hardline rhetoric. Biden absurdly divided the world between the so-called democracies and autocracies, which was an incredibly naive approach, as I said from the beginning.

Biden escalated the Ukraine war. He rejected all attempts at peace negotiations, including the Istanbul process that could have ended the Ukraine war in 2022. When it came to the Middle East, Biden was complicit in Israel’s ongoing genocide. So, Biden did very little different from Bush Jr, Obama and Trump before him.

Now, Trump has returned. What’s the real difference? Trump is different in style, in his unpredictability, nastiness, self-dealing and endless flip-flops. Yet, in terms of basic foreign policy, Trump is not very different from his predecessors.

This is the sense in which deep state means an ongoing consistency of the US security institutions that run American foreign policy. American foreign policy is not determined by public opinion, or Congress, or even the president in large part. Look instead to the CIA, the Pentagon and the other parts of the deep state.

The deep state also determines the politics of US vassal states. Many observers consider Japan to be a US-occupied country, with Japan’s foreign policy basically subservient to the US. One can say the same about many other countries. Where the US has military bases, the host countries tend to act like occupied countries, bending their own foreign policy to that of the US.

The US deep state is profoundly arrogant, thinking that it can have its way around the world. The US deep state thinks that it can dominate not only US allies, which is typically true, but also China, Russia, Iran, Brazil and others. When US arrogance becomes too strong, we face the danger of disaster. That’s what happened in Ukraine. The US thought that it could push Russia around to its will. It could not. The attempt to assert US power in Ukraine led to war.

US arrogance deeply worries me. Trump certainly is not a strategist. There’s no long-term plan. The US is playing poker, but not very well or wisely. It often bluffs. The whole approach can lead to war.

China is now drafting its economic policies for the next five years. You have advised many countries before. What is your advice to China in the face of this tension and the global tariff war?

My main advice to China is look to the non-Western world for the strongest partnerships in trade, investment and diplomacy, at least for a while. The US-led alliance (US, Canada, Britain, EU, Japan, Korea, Australia and New Zealand) is around 13 per cent of the world population. China is another 17 per cent. The remaining 70 per cent of the world – in Asia, Africa and Latin America – wants good and strong economic and diplomatic relations with China. That 70 per cent of the world population wants to modernise, and China provides the means for those countries to achieve rapid growth and modernisation. China is key to the global energy transition to zero-carbon energy, especially in the markets outside the US and Europe.

The emerging and developing economies of Asia, Africa and Latin America will be the markets for China’s rapid export growth in the years ahead. China will play a vital global role in these economies in building advanced green and digital economies, using Chinese cutting-edge technologies.

This will be a great win-win for the world because China will continue to grow rapidly while also empowering rapid growth throughout the emerging and developing nations. Sadly, in my view, the US will not play much of a role in that modernisation in the next generation. The US under Trump is withdrawing from green technologies, and from global responsibility.

The US cannot compete with China for the global renewable energy market. The US can’t compete with China for the global digital connectivity market. The US can’t compete with China in fast rail or low-carbon ocean shipping. In all these sectors, Trump is handing world trade and leadership over to China.

Regarding the US markets, China should certainly attempt to make a suitable trade deal with the US but China should not fret too much either way. The US is already a small part of China’s exports – perhaps around 10-12 per cent. That share of China’s exports will most likely decline further.

I hope that I’m wrong and that the US regains some sense and rejoins the global effort for green transformation and re-establishes normal trade with China. Yet, I don’t think that’s going to happen for many years, and I don’t think that China can, or should, base its policies on a return to normal trade with the US.

More specifically, I advocate expanding [China’s] Belt and Road Initiative. I advocate that China should deal with regional groups, including ASEAN, the African Union, the Arab League and the Community of Latin America and Caribbean States (CELAC). China’s relations with these regional groups can be very strategic, as the regional groups can, and should, spur the interconnectivity of infrastructure among all the members of the group. For China, it will be easier to interact with regional plans rather than one country at a time.

In fact, no individual state in ASEAN, or the Middle East, or Latin America can modernise on its own without strong links with its neighbours through trade, finance and infrastructure. With ASEAN, for example, there really is the need for an ASEAN-wide energy system, not separate energy systems for Laos, Cambodia, Vietnam, Thailand, Malaysia, Indonesia etc. These countries need an interconnected power grid, and China will play a key role in achieving an ASEAN-wide grid. Therefore, China-ASEAN diplomacy is strongly win-win.

I also believe that Hong Kong will have a huge and indeed unique leadership role in the global transformation. Hong Kong is vital for China’s growing links with ASEAN, the African Union, and beyond. The Greater Bay Area (GBA) combines Hong Kong’s world-class leadership in international finance, higher education and global management, with Shenzhen’s leadership in cutting-edge technologies, and the advanced manufacturing of Dongguan, Guangzhou and other GBA cities.

Put these strengths together, and the GBA becomes the beating heart of the global green transformation, in zero-carbon energy, robotics, AI-based manufacturing, digital connectivity and much more. All of this will help to fuel China’s – and Hong Kong’s – rapid growth for the next generation.

This year marks the 80th anniversary of the end of World War II. How is the post-war world order changing and what will the new world order look like?

There are three scenarios.

One is that we create a truly multilateral world. For that, we need a United Nations 2.0. We need an upgraded international system in which all the major powers agree to invest in the international rule of law and peaceful resolution of conflicts. This will require an upgrade of the UN Security Council, and UN institutions more generally.

I’d love to see a major UN campus in China, to help lead the green and digital transformation worldwide. I’d love to see China and India working together closely at the UN, including towards India’s seat in the UN Security Council. I’d like China to support the African Union to play a much larger role in global governance. I’d like to see China, Japan and Korea end the geopolitical divisions and form a strong alliance in northeast Asia. Most importantly in this scenario, the US and Europe accept the rising role of China, India and the rest of the non-Western world.

A second scenario is that the Western world hunkers down. It goes protectionist and the US tries to divide the world into camps. This is perhaps the likely US strategy, but I think it is significantly worse for the US and the rest of the world than the first scenario. I think the US absolutely should abandon the idea of building competing camps.

The third scenario is that we don’t have a global system at all, but rather increasing chaos from climate change, wars and geopolitical conflicts. This dire scenario is a real possibility.

Any of these three trajectories is possible. We should be aiming for the first. The United States and Europe should take a deep breath, sigh and welcome the non-Western world into a shared global leadership. The major powers – the US, Europe, Russia, China, India – should agree to prevent confrontations.

The US should stop NATO enlargement and should stop providing armaments to Taiwan. Such actions are provocative and lead to great-power conflicts that threaten the safety and security of the whole world.

In short, the West should stop asking “Who is Number One?” and instead ask, “How can the whole world work together for the global common good?” In my experience, China, Russia and other nations would enthusiastically back such a global, cooperative effort that is based on mutual respect and mutual security.

https://www.scmp.com/news/china/diplomacy/article/3320575/jeffrey-sachs-says-us-sabre-rattling-china-can-become-self-fulfilling-prophecy-war?module=inline&pgtype=article