How much influence can a single U.S. president have on global economics, foreign relations, and security?
That is a question that many policymakers and observers have on their minds following the events since the U.S. presidential inauguration. President Donald Trump’s outreach to Vladimir Putin, the threats of tariffs and other punitive economic measures against partners and adversaries alike, and the demand for allies to do more have generated concern throughout the international community that major shifts in global geopolitics are afoot. At this point, they know things are changing in fundamental ways—they simply do not know to what extent.
This is not the first time that a U.S. president has called on allies to do more, threatened U.S. protectionism and disrupted the global economy for the sake of “America first” policies, or taken steps to normalize relations with diplomatic pariahs. From 1969 to 1974, there were a series of U.S. policy decisions made and implemented under the Richard Nixon administration that collectively became known as the “Nixon shocks” for the impacts that they had. As the world assesses the potential trajectory for international relations, it is useful to reflect upon the Nixon shocks: what they were and what outcomes they produced.
What is a strategic shock?
To understand the Nixon shocks, it is necessary to review the definition of a strategic shock. When developing strategies, practitioners will operate from a certain set of facts or assumptions (whether conscious of them or not) which underpin their approaches to achieving their desired ends. A strategic shock is an unexpected event that disrupts existing trends and erodes the facts and assumptions upon which current plans and policies are based. The implication when employing the term strategic shock is that it affects a notable segment of the international community, thus affecting the trajectory of global affairs.
Strategic shocks come in different forms. They may be economic, like the Asian Financial Crisis (1997) or Lehman Shock (2008). They could be health-related, such as the COVID pandemic. Sometimes the shocks are diplomatic in nature, such as the fall of the Soviet Union (1991), or they could be security-related like the 9/11 terrorist attacks in the United States (2001) or Russia’s full-scale invasion of Ukraine (2022).
While there is usually time and distance between these sorts of strategic shocks, sometimes they come in waves. In the late 1960s and early 1970s, there were three significant decisions from the Nixon administration that elicited their labeling as strategic shocks: the Nixon Doctrine, the dismantling of the Bretton Woods system, and the normalization of diplomatic relations with the People’s Republic of China.
The Nixon Doctrine
In July 1969, President Richard Nixon and his team stopped in Guam during a tour to Asia. There, he held an informal press conference with the traveling media pool. His commentary to the reporters centered on his administration’s vision for foreign policy and security. Although technically off-the-record, Nixon’s statements formed the basis of what would become known as the “Guam Doctrine,” and later, the “Nixon Doctrine.”
Core tenets of the Nixon Doctrine centered on withdrawing U.S. forces from overseas bases and having America’s allies assume responsibility for their own defense. In his own words, Nixon expressed the following:
…if the United States just continues down the road of responding to requests for assistance, of assuming the primary responsibility for defending these countries when they have internal problems or external problems, they are never going to take care of themselves.
The Nixon administration primarily directed implementation of the Nixon Doctrine toward Asian allies. In particular, he took aim at South Vietnam and directed his administration to end the Vietnam War (albeit while simultaneously approving military action in Cambodia). Nixon’s administration entered peace negotiations with North Vietnam and initiated the withdrawal of U.S. forces from Southeast Asia. While they did in fact achieve a negotiated peace agreement in 1973 that set the stage for the withdrawal of U.S. forces, the combination of a poorly designed peace deal and the absence of third party guarantors allowed North Vietnam to conquer South Vietnam in 1975.
The Nixon Doctrine also produced a notification from the Nixon administration to South Korea of the intent to withdraw a sizeable portion of U.S. forces from the Korean Peninsula. This notification came as a shock to the Park Chung Hee administration who decided it was necessary for South Korea to pursue a clandestine nuclear weapons program. Started during Nixon’s administration but only discovered during subsequent presidencies, the U.S. government only mitigated this nuclear proliferation through deliberate statements of commitment to remain on the Peninsula and the transfer of responsibility for operational control of allied forces to the newly formed U.S.-South Korea “Combined Forces Command” in 1978.
Japan was largely spared from such a major shock given the continued utility of U.S. bases in the country, but there was a call for the Japanese to do more in their own defense as the U.S. realigned its force laydown. The U.S. government engaged in major force posture restructuring across the country (e.g., the “Kanto Plains consolidation plan” in the mid-1970s) and the Japanese government pursued its first “National Defense Program Outline” (now termed the “National Defense Strategy”) in 1976. These changes culminated with the U.S. and Japanese governments’ negotiation and conclusion of the first “Guidelines for U.S.-Japan Defense Cooperation” in 1978 which defines alliance roles, missions, and capabilities.
What do these results suggest about the Nixon Doctrine? There were no substantial benefits to U.S. interests during the Nixon administration based on the shocks it produced, but it did disrupt the status quo in ways that future administrations had to manage–some successfully and others not.
Nixon delivers a presentation on the situation in Vietnam and Cambodia, 30 April 1970 (photo via the White House Photo Office)
Dismantling the Bretton Woods system
The Nixon shock that is most remembered relates to a series of economic measures that upended a decades-old global monetary system. In 1944, the United States and numerous other countries agreed upon a new international monetary system predicated on gold-backed U.S. dollars with other currencies pegged to it with fixed exchange rates. At a conference in Bretton Woods, New Hampshire, forty-four countries acceded to the agreement that would underpin international monetary policy for more than two decades under what became known as the “Bretton Woods” system. The Nixon administration took unilateral action to scrap it.
A series of factors in the late 1960s put exceptional pressure on the U.S. dollar. The U.S. government’s spending on the Vietnam War, growing budget to cover domestic political programs, inflationary monetary policy from the Federal Reserve, outflow of gold from the United States, and trade deficits all destabilized the U.S. dollar.
Rather than take coordinated, measured steps to address the root cause issues, the Nixon administration suddenly announced in 1971 that the U.S. dollar would no longer be backed by gold. Further, to address trade deficits and to ensure more accurate valuations in exchange rates, Nixon imposed protectionist measures such as tariffs to pressure foreign countries into adjusting to his administration’s economic policy interests.
The result was a political victory for Nixon but the building of an economic house of cards. The unilateral and uncoordinated decision disrupted the international economic system and forced ad hoc response measures that could not withstand any additional pressure from world events—a point demonstrated with the 1973 oil crisis. This crisis saw oil-producing countries in Southwest Asia restrict oil sales to the United States following U.S. support to Israel in the Six-Day War, which unraveled many of the ad hoc measures and forced a fundamental reconsideration of how the world’s top economies would address international trade and finance.
The combination of the different economic problems spurred the creation of the organization now known as the “G7,” or “Group of Seven.” Prior to the oil crisis in 1973, U.S. Secretary of the Treasury George Shultz had invited the Foreign Ministers from the United Kingdom, France, and West Germany to the United States to begin discussions on how to stabilize the global economy. Following the oil crisis, they invited Japan to the table, and by 1976, Italy and Canada had joined the group. The core idea was that it is necessary for these countries to work together in addressing trade and monetary policies, not allowing for drastic unilateral decisions that could upend the global system.
While important, the formation of the G7 did not yield an immediate remedy for economic woes stemming from the Nixon shock. It would take nearly a decade before the U.S. economy was able to find new life, and the effects on global monetary system are still tangible today.
Nixon prepares to announce his administration’s economic policies, including removal of the U.S. dollar from the gold standard, 15 August 1971 (photo via the Richard M. Nixon Presidential Library)
Normalizing relations with China
For decades, the United States maintained formal relations with the Republic of China rather than the People’s Republic of China (PRC); that is, diplomatic ties were with the government in Taipei rather than Beijing. This position extended among America’s allies and even the United Nations, to which the PRC had not yet acceded by the time Nixon came into office some twenty-four years after the UN’s founding.
Nixon took a different path towards China, informing his Secretary of State Henry Kissinger to take steps towards rapprochement. Kissinger did just that, delivering signals through other Communist countries at the time such as Romania. By July 1971, Kissinger had made his first secret trip to Beijing, something unknown even among America’s closest allies and partners until after it happened. He followed this up with an additional visit in October 1971 which set the stage for Richard Nixon’s official visit in February 1972.
The logic behind Nixon’s approach was straightforward. The administration intended to exploit the “Sino-Soviet split” that occurred in the 1960s, peeling China further away from Soviet influence and seeking to incorporate the Beijing-led country into the community of nations. In doing so, Nixon sought to ease tensions in the region and increase economic and diplomatic cooperation with an emerging power.
Nixon’s visit to Beijing reversed a quarter-century-old diplomatic paradigm, not only for the United States, but for America’s allies and partners. This elicited strong opposition from critics who argued that the Nixon administration legitimized a Communist regime that eschewed democratic governance and had a deplorable human rights record. Others argued that the rapprochement forced the United States to make significant concessions, including the diplomatic isolation of Taiwan. It also created divisions among allies, particularly in the Indo-Pacific region. For example, officials in Japan were irked because the rapprochement upended their own long-standing diplomatic policies towards China and signaled a shift in U.S. security commitments in the region.
Historians and political scientists will continue to argue the wisdom of this decision with views on both sides of the spectrum. Whatever the argument, the consensus is that this decision was both sudden and epoch-making, and its effects are still bearing out in international relations today.
Mao Zedong shakes hands with Richard Nixon, 21 February 1972 (photo via the White House Photo Office)
Key takeaways from the Nixon shocks
Ultimately, the Nixon shocks demonstrated that a U.S. president has the ability to disrupt the international system but not to control it. America’s retreat from its alliance commitments contributed to abandonment of a partner (South Vietnam) and uncertainty from allies that they might be next. The decision to remove the dollar from the gold standard and willingness to impose protectionist measures to fulfill economic priorities unraveled an international monetary system that underpinned much of the global economy. The normalization of relations with China upended many countries’ foreign policy designs and fundamentally changed the trajectory of international relations across the globe.
What resulted from these policy decisions was a greater number of unintended consequences than intended ones. The Nixon administration did not negotiate the Paris Peace Accords with the intention of South Vietnam eventually being conquered. The decision to withdraw U.S. forces from the Korean Peninsula was not meant to trigger South Korea’s clandestine pursuit of nuclear weapons. The change in monetary policy was meant to bolster the U.S. economy, not bring about a recession. The rapprochement with China was not designed to untether a competitor that would challenge international laws, rules, and norms. Rather than produce victories for American interests, the unintended consequences from the Nixon shocks yielded substantial economic and geopolitical fallout.
In the end, it took collaboration among America’s partners and the efforts of subsequent U.S. presidential administrations to piece things back together. The G7 nations had to work in concert with the international community to formulate new economic policies and ensure that none of its members took further actions that unilaterally disrupted global monetary or trade systems. Alliance managers had to negotiate and conclude new security-related agreements between the U.S. and its allies. For decades, America’s partners have been working to reinforce the rules-based international order and to encourage a peaceful rise in power for China. In some ways, they succeeded, and others they did not, but in all cases, it took cooperation among governments to restore what the Nixon shocks had disrupted.