The great decoupling
Trump's tariffs are driving the world away from US leadership
US President, Donald Trump, recently raised tariffs on imported goods from almost all countries in the world. He claims his tariffs will reduce the US trade deficit, revive American manufacturing, and get the US better ‘deals’ with foreign countries.
But so far, Trump’s tariffs have mostly created economic havoc — both at home and abroad. US tariffs are being raised and reduced unpredictably and recklessly. The US stock market has acted like a yo-yo in response to the tariffs; experts are questioning the status of the US dollar as an international safe haven currency; and investors are losing confidence in the US economy. Even the number of tourists travelling to the US has cratered. In short, Trump is taking a wrecking ball to the American economy.
Trump’s tariffs are also creating problems for many other countries. His rash Liberation Day tariffs were calculated based on countries’ trade surplus in goods with the US: Trump essentially applied steep tariffs on countries that haven’t committed any crime against the US other than exporting a lot of goods to them. This is creating problems for developing countries that are highly dependent on the US market, such as Cambodia, Lesotho and Sri Lanka, to name a few.
However, there is a silver lining to Trump’s tariffs. They are having an unintended consequence that global citizens should celebrate: more people are daring to imagine a world economy that isn’t dominated by the US. If we want a world of shared prosperity and shared power, we should welcome this.
Why is a world not ruled by the US desirable?
We should work towards a world with less US dominance for two important reasons. First, the US has created and maintained a system of global governance that disproportionately benefits itself. The US has too much power in large international organisations, such as the International Monetary Fund, the World Bank and the World Trade Organisation. This uneven distribution of power creates global inequality. For example, it has been documented that transnational corporations based in the US have benefited vastly more than anyone else from proposals implemented by the World Trade Organisation since the early 2000s.
Second, the US has clearly emerged as an imperialist superpower with little respect for the sovereignty of countries that are unwilling to succumb to US hegemony. Violent, and seemingly never-ending, US interventions abroad have made this clear. US leaders often claim that their interventions abroad serve to protect ‘freedom’ and ‘democracy’, but this claim is highly dubious. Here is a good case in point: the US intervened in foreign elections at least 128 times between 1946 and 2014, usually to sabotage the democratic process in favour of US interests. As if this wasn’t shocking enough, a recent report found that 73% of the world’s dictatorships receive direct military support from the US.
Towards a more equitable international order
With less US influence, we would likely move towards an international order where power is more equitably shared between nation states. But exactly how is this power rebalancing playing out?
Trump’s tariffs — coupled with his arrogance in international fora — are making many countries de-risk from the US, economically and politically. Traditional European allies, for example, are seeking more autonomy in trade, defence and energy, taking a more cautious approach to US cooperation. The French economist, Thomas Piketty, recently wrote that “the US is no longer a reliable country.” The EU even issued burner phones to its US-bound staff for IMF and World Bank spring meetings in Washington D.C. in fears of US espionage.
In the Global South, many countries have gradually been turning away from the US and towards large emerging economies within their own ranks, primarily China. But this trend is strengthening amidst Trump’s tariffs. For example, China, Japan, South Korea and countries of ASEAN recently issued a joint statement taking a unified stance against Trump's tariffs and seeking to de-risk themselves from the US.
In this global restructuring, the role of China is very important. While Trump may have tried to weaken China with his aggressive trade barriers aimed at the country, China has proven highly resilient to his tariffs. David Daokui Li at Tsinghua University recently said that US tariffs wouldn’t even make the list of the top three challenges for the Chinese economy. Why isn’t China concerned about US tariffs? Well, China has had to deal with US hostility for years now, and has unsurprisingly taken action. Since 2018, when Trump started his trade war against China, the country has gradually reduced its dependence on the US market.
Not only has China reduced its dependence on the US market, China has also worked hard and strategically to build strong economic partnerships with other countries across the entire globe. This, coupled with the self-destructive behaviour we’re witnessing in the White House, could pave the way for a new international economic order with a stronger role for China and a weaker role for the US.
This is not saying that China will replace the US as global economic hegemon. Nor is that desirable. But a restructuring of global economic power is desirable; a restructuring involving less US dominance. As nations increasingly seek alternatives to US-centric trade relationships, we stand at the threshold of potential systemic change. There is now hope for a more equitable international order — one where prosperity is shared rather than concentrated, where sovereignty is respected rather than undermined, and where cooperation replaces domination.