Global markets witnessed a turmoil following United States (US) President Donald Trump’s announcement to unilaterally impose tariffs on all imports entering the United States.
In the wake of the announcement, over $10 trillion was wiped as of Monday from global equities amid a wave of panic-driven sell-offs. The S&P 500 alone plunged more than 10% over two trading sessions, marking its most severe drop since the end of World War II. Only the crashes of 1987, 2008, and the Covid-19 pandemic compare in scale and severity.
What is Trump’s Endgame?
The immediate question facing economists and global leaders alike is simple yet elusive: Will Trump’s aggressive tariff strategy succeed, and at what cost?
Are we witnessing the end of an era – or the beginning of a new one?
The United States, once the engine of global economic expansion, now stands accused of catalysing a global slowdown. Economists and analysts are united in their concern as the administration attempts to “reset” global trade imbalances, with little in the way of a short-term plan.
While the US does have a valid grievance regarding its trade deficit, the execution of this tariff strategy appears ad hoc, reactionary, and potentially self-destructive.
Paul Krugman, the Nobel economics prize laureate, said the United States was essentially the founder of the modern trade system that had led to lower tariffs over the past decades.
“Donald Trump burned it all down,” Krugman wrote on his popular Substack blog.
Some suggest more cynical motivations: that US is desperate to refinance its staggering $7 trillion debt, and may be engineering a market crash to bring down interest rates.
Others argue it’s a blunt instrument to raise quick revenue for a cash-strapped federal government. And some say it’s simply a reckless gamble driven by political brinkmanship – or even boredom.
Over 50 nations want to start trade talks with US after tariffs, Trump officials say
Shifting alliances and the rise of regionalism
America’s trade policy has had an unintended side effect: the alienation of long-standing allies and partners. Countries like Canada and members of the European Union (EU) are being forced to reevaluate their trade loyalties.
Within Asia, the threat of a US-led trade war has encouraged the formation of tighter regional blocs—especially among East Asian economies.
As these countries turn inward and toward one another, the long-term implications for the US are grim. Former allies are now building new networks that exclude the US, challenging its longstanding dominance in global trade.
Some, can already spot the silver lining.
Morocco, Egypt, Turkey and Singapore, all of which have trade deficits with the US, could find an opportunity in the distress of those, like Bangladesh and Vietnam, which both run big surpluses and have been hit hard by Trump. India is already exploring new textile avenues.
EU seeks unity in first strike back at Trump tariffs
Currency nationalism and threat of de-dollarisation
A more profound concern is emerging: the potential erosion of the US dollar’s dominance in international trade.
BRICS and ASEAN countries have long championed the use of local currencies in cross-border transactions. Now, amid trade volatility and global instability, this shift appears to be accelerating. China, India, and the European Union have already begun trading in their respective currencies.
The petrodollar – an arrangement that has underpinned the dollar’s global strength for decades – is also under threat.
As China surpasses the US in oil imports and Gulf nations adopt central bank digital currencies (CBDCs), the longstanding agreement between Saudi Arabia and the US to trade oil in dollars could soon unravel. A full-scale rejection of the petrodollar would mark a seismic shift in global finance.
China says willing to work with EU to bring certainty to global trade
The emerging world order
One thing is clear: the US is facing an imminent economic slowdown, one that could derail decades of uninterrupted growth. As it retreats from its leadership role, new powers are poised to step forward. China, the EU, and emerging markets may well capitalise on the US’s inward turn.
If the current turmoil persists, a US recession seems not just likely but inevitable. The consequences would be global: reshaped alliances, new economic coalitions, and a diminished role for the United States in world affairs. From the embers of asymmetric trade warfare, a new world order may very well emerge.
Tariffs throw US, Canadian farm machinery manufacturers into turmoil
Whether Trump’s strategy is a masterstroke of genius or a reckless gambit remains to be seen. What is certain is that the ripple effects are global, and the stakes couldn’t be higher.
Are we witnessing the end of an era – or the beginning of a new one?
The article does not necessarily reflect the opinion of Business Recorder or its owners
The writer is Features Editor at Business Recorder
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