The first task of the new U.S. administration should be to pull the world back from confrontations that are leading toward a global conflict and a nuclear Armageddon.

Only active peace diplomacy – and a policy of free and fair trade – can open the space to rebuild and stabilize American economy in a more integrated and prosperous world community.

Mantras of “diplomacy from positions of strength” are rehashed neocon delusions of America’s “full spectrum dominance.” Strength in the case of the U.S. is axiomatic. There is no need to alienate the rest of the world with a primitive rhetoric. Creative and thoughtful diplomacy will go much further.

America’s nuclear-armed adversaries have changed. And in a world of MAD (Mutual Assured Destruction), military threats are meaningless. Russia and China have emphatically stated that they were ready to cooperate with the U.S. under conditions of mutual respect and attention to their legitimate national interests.

A listless economy is a road to oblivion

Restoring a sound and steady growth to U.S. economy is a vitally important priority. A weak and unstable economy offers no diplomatic clout that Washington needs.

Here is a brief review of some of the key American economic indicators.

The reported unemployment rate of 4.2% in November is precarious and deceptively small. The number of unemployed (7.1 million) rose 13% from the year earlier, and, over the same period, the number of long-term unemployed (people jobless for more than six months) increased 42%.

And then the unemployment rate nearly doubles to 8% if one adds people working part-time because they cannot find full-time jobs (4.5 million), and people virtually dropping out of the labor force because they cannot find a job (1.6 million).

In spite of that large labor market slack, the core consumer price inflation (consumer prices less food and energy) in November looks stuck at 3.3%, with the core service sector inflation at nearly 5%.

Unemployment and price inflation are the two parameters determining the fiscal and monetary policy settings. Inflation is significantly above the medium-term objective of 2%. That leaves no room for interest rate cuts – unless there is a drastic fiscal restraint via tax increases and large declines in government spending to bring budget deficits down from 8% of GDP, and to stop the soaring public debt of $36 trillion, or 123.5% of GDP.

External accounts, roughly one-third of American GDP, are also showing large and systematic deficits. The trade gap on goods and services is estimated to widen 22% in 2024 to $1.1 trillion (about 4% of GDP) -- with China, E.U. and North America (Canada and Mexico) recording the largest trade surpluses.

The optimal solution to U.S. trade deficits would be to negotiate the narrowing of trade imbalances -- instead of imposing impediments to trade. Indeed, trade tariffs would cause retaliation, which would reduce U.S. exports, raise inflation and preclude interest rate cuts to stimulate growth and employment.

Blessed be the peacemakers … (Matthew 5:9)

The new U.S. administration will also have to address the economy’s structural problems, such as the stock and quality of labor and physical capital because they determine the potential and noninflationary growth, estimated as the sum of the growth rates of labor force and productivity. That is now down to 2% over the last three years. And that kind of growth rate is far from making MAGA (Republicans’ official slogan “Make America Great Again”) possible.

Diplomacy to bring peace to Europe and the Middle East, and to narrow large, and growing, U.S. trade deficits would open the space needed to set the economy on a path of steady and sustainable growth.

Russia, China and the rest of the Global East and South seem eager and ready for such a dialogue.

China would like to maintain a “win-win cooperation” in a respectful big power relationship, but it has red lines which are off limits for any negotiations. President Biden has repeatedly pledged to respect all those red lines, but Beijing complains that his promises were not kept. China’s recent statements show that it is open for wide-ranging talks with the new U.S. administration.

Russia is a more difficult case because its military operations in Ukraine involve the U.S. and the rest of NATO alliance. Moscow wants to conduct peace negotiations in a broader context of the European security to eliminate problems which have led to its “special military operation” in Ukraine. President-elect Donald Trump is fully aware of all those issues, and it is widely expected that he will help to resolve the Cold War legacy problems.

Trump also has a wealth of knowledge about the Middle East conflict accumulated during his previous administration. He will probably bring an immediate ceasefire relief but work toward a more permanent solution will need cooperation with the U.N. Security Council veto power members Russia and China.

The U.S. diplomacy now has an opportunity to initiate a world of peace and prosperity. That would allow to rebalance and stabilize the American economy on a path of steady and sustainable growth.