FOR much of the 20th and early 21st centuries, the global economy has been characterized by a Western-centric order, a near hegemony dominated by the United States and Europe.
This “Old Boys’ Club” wielded considerable influence through bloc politics, zero-sum game and arm-twisting of international institutions.
Because old-fashioned economic order has been infested by gazillion contradictions, injustices and disparities widening the gap between rich and poor, many have already expected its doom in phases.
However, instead of bit by bit, decay has raced toward its terminal ending as a result of recently created the US’s “tariff extremism” around the globe.
Since the US’s tariff offensive eclipsed friends and foes, the contours of a new global economic system are in making with leading forces of emerging markets such as China and global south.
Since returning to the presidency, Trump has unleashed a new wave of “tariffs terrorism” unprecedented in scope.
Traditional allies and strategic rivals are now under the same banner, marking a radical shift in Washington’s trade policy that hardens positions taken in Trump’s first term and now, amplifying them with an unbridled display of power.
The US-led economic order, driven by protectionism, decoupling and unilateralism, is facing collapse.
One key reason is the rising consumer prices caused by tariffs and import restrictions.
These higher costs, particularly on Chinese goods, are passed on to consumers, with items like electronics, clothing and household goods becoming more expensive.
This disproportionately impacts low- and middle-income households, leading to inflationary pressures.
As a result, consumer spending declines, which can stifle overall economic growth.
The growing cost of living is one of the immediate factors dismantling the US-led economic order, highlighting the need for a more sustainable, law-based multipolar world economy.
Protectionist policies hinder economic growth by reducing competition and innovation.
Shielded from foreign competition, domestic industries lack the incentive to improve efficiency or invest in new technologies, leading to stagnation and decreased competitiveness.
Additionally, protectionism disrupts global supply chains, increasing costs for businesses relying on international trade.
The rise of “tariff terrorism” has strained international relations, with countries retaliating through tariffs, escalating into trade wars.
The ongoing US-China trade tensions are a prime example, causing market uncertainty and volatility.
Such conflicts can damage diplomatic relations and hinder cooperation on critical global issues like climate change and security.
Protectionism, through tariff extremism, creates inefficiencies in domestic industries by reducing competition.
Shielded from foreign rivals, companies may become complacent, resulting in lower-quality products and services that harm consumers and the economy.
Industries relying on imported inputs face higher costs, worsening inefficiencies.
As protectionist policies deepen, economic fragmentation grows, isolating countries from global markets and decreasing international trade and investment.
This fragmentation hampers economic growth, especially in emerging markets dependent on global supply chains.
The potential breakdown of multilateral trade agreements and diminished international cooperation raises concerns about the future stability of the global economy.
The cumulative effects of rising protectionism, linchpin of US-led economic order is destined to lead to a slowdown in global economic growth.
As trade barriers increase, international investment may decline, further exacerbating economic challenges in many regions.
Rot has set in for US-ridden global economic order.
The dollar, for decades a safe haven, fell about 1.7pc on April 3, its highest daily drop since November 2022, after President Trump imposed tariffs on imports.
Stock markets also tanked as tariffs ignited recession worries.
Left unchecked, a crisis of confidence in the dollar could also undermine its position as the world’s reserve currency, according to market commentaries.
The implementation of US tariffs imposed on April 2 despite a 90 days pause can be seen as “the start of a march towards Europe’s independence”, European Central Bank head Christine Lagarde told France Inter Radio.
The US Administration’s not-so-secret plan is also to rebalance trade by weakening the dollar, analysts say, adding a way to do that would be to enlist foreign central banks in a coordinated effort to revalue their own currencies.
Dwelling on Trump, tariffs and the fate of the dollar, Scottish-American political economist Mark Blyth argues that America’s protectionist policies reflect a global economic reordering that is already underway.
Given the untoward situation that has been laying the foundation of the new world economic order, global economic powers get a good chance to realign their economic and diplomatic terms.
Earlier this week, Chinese President Xi Jinping pledged to deepen “all-round cooperation” with China’s neighbours and urged the European Union to join hands with Beijing in resisting “unilateral bullying” by Washington.
“The recent revival of Beijing’s economic dialogues with Japan — their first in six years — and South Korea suggests regional powers are reassessing relationships in response to American uncertainty.
Although paused for 90 days, the EU faces a new 20% tariff on up to €380 billion ($416 billion) worth of exports to the US.
The EU says it plans to reach out to countries in the Indo-Pacific and Global South in a bid to counter US protectionism.
During a three-day visit to Vietnam, Spain’s Prime Minister Pedro Sanchez insisted that Europe explore new markets and said his government was “firmly committed” to opening up his country and Europe to more trade with Southeast Asia.
The fallout from Donald Trump’s trade war — even with a 90-day reprieve on some tariffs — is only beginning to be felt.
But one immediate knock-on effect could be to nudge the EU closer to China’s orbit.
—The writer is contributing columnist.(yaseerkhan@hotmail.com)
