America’s Allies Want to Bypass Washington

Uncle Sam used to be the life of the party. Now he’s the jerk no one invited.

That’s my reading of a line from—and the resulting impact of—Mark Carney’s speech at Davos, Switzerland, back in January, when the Canadian prime minister told the world’s most powerful business and political leaders: “If we’re not at the table, we’re on the menu.”

He wasn’t talking about Canada specifically. He was talking about every nation that isn’t the United States or China—every country caught between two great powers using economic coercion as a weapon.

Since that speech—amazingly well-received globally, by the way—the most significant restructuring of global trade architecture since the end of World War II has begun.

And most Americans have absolutely no idea it’s underway.

Carney is now spearheading negotiations between the European Union and the CPTPP—a 12-nation Indo-Pacific trading bloc that also includes Canada, Japan, and the United Kingdom—to form one of the world’s largest economic alliances.

The pact aims to link EU and CPTPP supply chains so that products made with parts from either bloc can qualify for low tariffs and move more easily across nearly 40 countries.

The goal, as Carney told Davos, is to bridge the Trans-Pacific Partnership and the European Union, creating a new trading bloc of 1.5 billion people… that does not include Uncle Sam’s US of A.

One point five billion people.

Nearly five times the US population.

Organized specifically, deliberately, and explicitly around the goal of building trade routes that don’t require Washington’s participation or approval.

To be sure, the US is deeply embedded in global supply chains, so erasing the US from global trade isn’t going to happen next Tuesday. Or even next year.

Still, the difference between “we can’t cut America out completely today” and “we are actively building the infrastructure to need America less every year” is not a distinction that should make Americans feel comfortable.

Infrastructure, once built, tends to get used. Inertia sets in. If it’s working, why change it?

Trade routes, once established, tend to deepen. Relationships, once formed around shared economic interests (and shared disdain for an abusive overlord), tend to become self-reinforcing.

What Carney is constructing isn’t a wall around America. It’s a highway around it.

And new highways have a way of making the old roads obsolete.

It’s the Route 66-ification of global trade… just with Canada and the others in the emerging bloc as the US Interstate system in this analogy, and Uncle Sam as the route where drivers once got their kicks (if you remember the lyrics to Nat King Cole’s homage to the famous highway).

The longer-term implications for the United States are serious and underappreciated.

Start with the dollar.

The dollar’s share of global foreign exchange reserves has fallen below 57% for the first time since 1995, down from a peak of 72% in 2001. The dollar’s reserve currency status is guaranteed by the fact that global trade is overwhelmingly conducted in dollars, which creates perpetual demand for dollar assets.

Every percentage point of global trade that shifts away from dollar settlement is a percentage point of structural demand for the dollar that disappears—quietly, gradually, and then all at once.

That’s bad because declining demand drives down the dollar’s value, which ratchets up the inflation that erodes your wealth and your paycheck.

Then there’s the question of American exports.

A 40-nation bloc aligned around shared trade rules aimed at low-tariff/tariff-free trade creates a competitive disadvantage for US manufacturers, and that disadvantage compounds annually.

Global companies making long-term investment decisions about where to build factories and establish supply chains are already doing the math to realize that just maybe it makes more sense to build inside the EU/CPTPP blocs to gain low-cost access to those 1.5 billion buyers.

There’s also the geopolitical signal embedded in what Carney is doing that goes beyond economics.

A recent analysis of UN voting patterns found that the number of countries aligned with the United States has declined from 46 when Democrats were in office to just seven during Trump’s latest term.

Seven.

The entire architecture of America’s global leadership — built over 80 years through alliances, institutions, and economic interdependence — has been dismantled. Not by adversaries, but by long-time friends who have simply decided they can no longer afford to depend on Washington’s reliability.

Carney himself was blunt about this at Davos: “When we only negotiate bilaterally with a hegemon, we negotiate from weakness. We accept what’s offered. We compete with each other to be the most accommodating. This is not sovereignty. It’s the performance of sovereignty while accepting subordination.”

To some, the EU and CPTPP hooking up with Carney as madame in the middle is an impossible task for all kinds of structural reasons I won’t bore you with. But I’ll note here that every major structural shift in global economic history looked unworkable to the establishment right up until the moment it wasn’t.

The euro looked entirely unworkable.

ASEAN looked unworkable.

The BRICS bloc looked like a marketing acronym… until it started accounting for 40% of global GDP.

America didn’t lose its position as the anchor of the global trading system because its enemies took it. America is giving away its former dominance, one tariff and one broken alliance at a time, to a Canadian prime minister with a background in central banking (he was a governor for the Bank of England) and a clear-eyed view of what happens to countries that get left off the new trade maps.

The road being built around America will take years to complete. But the groundbreaking has already happened.

And the question for anyone paying attention to their financial future isn’t whether this matters.

The question is whether you’re positioned for the America that exists at the end of that road—or only the one that existed before construction began.

Again, I will say: Own the assets that are going to protect you from all the various shifts taking place in the world right now.

Own gold. Own Swiss francs. Own bitcoin.