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President Donald Trump’s manifest desire to reshape America’s role in the world is highly controversial and widely misunderstood. Most analysis describes his strategy in old strategic terms: isolationist, “America First,” and modified internationalist. These terminologies tend to conceal as much as they reveal because they fail to account for the business frame of reference that dominates Trump’s thinking.
Trump clearly sees the old alliance system as one where America bore all the risks, and the allies made the bulk of commitments that triggered the bill laid at America’s doorstep. This is the way health insurance companies do business, and it is profitable only if the risks are properly assessed and the cost is laid on the insured through premiums and co-pays.
The trouble with that is America neither properly assessed its risks, understating the chance that Russia or China could effectively threaten America’s or its allies’ interests, nor charged its allies the appropriate premiums and co-pays in terms of those nations’ defense spending and commitments to shared projects.
Indeed, the trade deficits the United States ran with many of these allies compounded the country’s financial burden. America Defense Insurance Incorporated effectively was paying the claims and subsidizing the premiums its customers paid.
Any company that did that would go bankrupt rather quickly. That is, in fact, Trump’s assessment: Continuing this model would make America less safe by overstretching its military and sapping its finances.
Trump is replacing that model with a reinsurance model. Reinsurers only take on risks when the original insurer encounters financial difficulties. The initial burden of paying claims falls on the insurer, meaning reinsurance can be highly profitable, provided the company chooses its clients wisely.
America Defense Reinsurance Corporation operates in this manner. The old allies are told they must now effectively self-insure against their foreign policy risks, which include building robust, effective militaries and strong economies that are independent of constant American subsidies.
If they do this, America will view them as sound risks and reinsure them through a mutual defense pact. If the burden proves too much for them to handle on their own, America comes to the rescue just as a reinsurer would for a struggling insurance company.
The American-Israeli alliance is a prime example of how this works in practice. The U.S. has long supported Israel with military aid and tight cooperation. However, Israel has also consistently maintained its own robust capabilities. The Israel Defense Forces is the region’s premier military force, and the Jewish state’s intelligence agencies, Mossad and Shin Bet, are world-class in obtaining the information needed to assess and reduce threats.
Israel has thus proven itself time and again as a sound client. It knows it faces existential threats and prepares prudently for them. When the time comes, it also uses its power to defuse or eliminate the threats.
Against that backdrop, America only needs to provide direct support in extreme cases. This summer’s bombing of the Iranian nuclear sites is an example of America, the reinsurer, using its power to do only what Israel, the prudent self-insurer, could not do on its own.
That doesn’t mean Israel is America’s lackey. Israel has regularly angered or disappointed American presidents with its self-interested actions that run contrary to America’s preferences. That is a feature, not a bug, of the relationship, and in fact perversely proves that Israel is a good risk for America to support.
Trump’s controversial national security strategy, coupled with his demands for Europe, Japan, and the other Pacific allies to dramatically increase their defense spending, is actually a global challenge to the allies to be more like Israel.
The Pacific allies rightly believe China poses an existential threat to them, yet none currently allocate even as much as 3% of their GDP to defense. Their militaries are effective, but too small to meet the threats posed by China and North Korea. Even Taiwan, which China openly threatens to forcibly conquer, only plans to increase its defense spending to more than 3% next year after pressure from Trump.
America’s NATO allies are in even worse shape. While countries bordering Russia, such as Poland and the Baltic States, have dramatically hiked defense spending since Russia invaded Ukraine, most have not. It will take years for many of these countries to rebuild their militaries, which have been allowed to decay.
This is especially galling for Trump because Europe should be able to meet a conventional threat from Russia on its own easily. The European NATO allies have significantly more people than Russia, with a comparative population of 513 million to 146 million, and their GDP outpaces Russia’s so substantially that Germany alone has a larger economy. Properly mobilized, they should easily be able to deter Russia from launching an ill-advised war.
Even Trump’s focus on the Western Hemisphere can be understood with this framework. The U.S. does not face a peer power that requires an ally to face, but it does face several security threats from nations such as Venezuela and drug cartels. In our hemisphere, America is its own self-insurer and can handle its own threats with its own firepower.
Here, it only needs cooperation from neighboring states to help crack down on the drug cartels and terrorist groups that operate within their territories. Where those nations lack the strength or will to erase these malicious bands, Trump only needs their permission for the U.S. to do the job.
There is only one exception to this rule: the Arctic Ocean. Warming seas mean Russia and China are trying to become the dominant maritime powers in this region. The shape of the globe also comes into play: any assault either power would launch on the U.S., whether conventional or nuclear, would likely cross the polar region and the Arctic.
That makes Canada and Greenland, which possess most of the coastline in the Arctic region of this hemisphere, essential to America’s defense. Trump’s admittedly crude and offensive statements about annexing both nations reinforce the view that America will do what it takes to ensure its security in its own neighborhood.
Trump’s trade regime also reinforces this theory. Reducing America’s trade deficits with its allies essentially reprices the security risk that all face collectively. It also gives him leverage to push the allies to adopt the optimal security strategy for themselves and the U.S.
If the allies adopt this outlook, they will find that America will be a loyal ally. This approach enables America to deploy its limited yet powerful forces as needed, rather than overstretching them across the globe. Like with Israel, America can supply its allies in times of need.
Traditional conservative foreign policy theorists will object to this approach. They have grown used to American global primacy and are loath to give it up. But the fact is that our adversaries are much stronger compared to the U.S. than the Soviet Union was during the Cold War. America would need to increase its defense spending dramatically to maintain that primacy today.
THE CAMPUS VIBE SHIFT IS AN ILLUSION
It cost the U.S. up to 6% of GDP during the 1980s to maintain its defense primacy and win the Cold War. It would likely take at least that, and likely more, to maintain its traditional role as the global security insurer today. America currently spends about 3.7% of its GDP on defense. There is no constituency for doubling that amount; not even the conservative primacists are willing to tell Americans what their preferred policy would cost.
Trump’s strategy is radical, but it is a rational way to approach the threats we and our allies face. If they can understand the new approach and act accordingly, Trump could replace the 20th century’s Pax Americana with a 21st-century Pax Occidentalis, the peace of the West.
