AA Edit | American Power May Decline As Trade War Begins

The decline of the world power America may have just begun on a scale rarely seen in modern history. Asserting his mandate as US President, Donald Trump has started a global trade war that he knows not how or when to end. As he negotiates in the manner of a businessman wanting deals of which he will be the sole beneficiary, the United States is fast losing friends even as its principal opponent, China, which can match it, has taken a defiant stand against an unbelievable 104 per cent tariff barrier.

With friends like the US who needs enemies might well be the conclusion to be drawn by the European Union, a bloc of nations whose exports to the US were a far from insignificant $587 billion in 2024.. The rest of the world may have been trading with America for decades on favourable tariff terms and in the process grown. It is in trying to undo the economic history post-World War II with one extravagant stroke of the pen that Trump has erred as he has disrupted life in the US as well as the rest of the world.

China is the biggest example of a country joining the World Trade Organisation (in 2001) and merrily flouting its rules to build its economy into one of the world’s most powerful. It is now able to stand up economically and technologically to the US, besides being a military power to be reckoned with.

If Trump’s main aim was to take on and tame China, he has then stumbled in dragging the entire world trade into it. Not even the staunchest of allies, like Japan, South Korea and the EU, are prepared to step in and help the US in making China come to the negotiating table.

On the contrary, US tariffs might drive affected nations into embracing the dragon even more.

Global bourses may be plummeting like crazy, with the US markets alone losing $5 trillion in value, as they try to make sense of the destruction of the world trade order and yet they are only an index of the disruption caused by Trump. Wiser economists, including ones who advised Trump, may have foreseen tariffs a quarter of what the maven of protectionism Peter Navarro inflicted by way of reciprocal tariffs. And not even Elon Musk’s scepticism on this manic war seems to have swayed Trump.

The greatest fear is recession in the world’s top economy, signs of which are already evident in oil prices crashing just as production is being cranked up. The slump in prices threatens the producers, including US ally Saudi Arabia. If the tariffs are only a key to negotiations, maybe the world will eventually come out of this trough. But if they are permanent, about which Trump seems to have no idea, they will inevitably send the global economy into a tailspin and the Americans will feel the pain of stagflation or worse in recession.

The pity is all this is self-inflicted volatility just as the global economy was recovering from its Covid lows. And nations, including India which is hoping to sew up a bilateral trade agreement before the tariffs cause too big a dent, have been scrambling to contain the damage caused by the principal disrupter who tried to bring his barnstorming real estate mogul style of functioning to play with the world economy that is being driven off a cliff.