How Trump has signed death warrant of globalisation – Firstpost

For American President Donald Trump, tariff might be the most beautiful word in the English dictionary. However, the chaos unleashed by the latest “Trump Tariff Tsunami” has not only upended the world but has also sent countries scrambling for a safety valve to protect themselves. The world is reeling from the aftermath of the increased tariffs imposed by Trump on both friends and foes, effective April 9, covering more than 180 countries in the US’ $3 trillion import economy.

Trade War Begins

On April 9, the Trump Tsunami will hit the world. In response, China has already imposed a 34 per cent tariff on all imports from the US. To make matters worse, on Sunday, April 7, Trump threatened to impose an additional 50 percent tax on imports from China unless Beijing withdraws the retaliatory measures it announced last week. This would add to the 34 per cent tariff Trump already imposed on Chinese imports, which is over and above the 20 per cent imposed earlier. If both Washington and Beijing refuse to back down, it will be an all-out trade war unlike anything seen before, with many US companies importing goods from China facing a tax as high as 104 per cent.

Squaring the Circle Easier

The scenario precipitated by Trump’s “Liberation Day” speech on April 2 has already disrupted the global economic order, bringing the world to the brink of an untimely recession. One thing has become abundantly clear: “It is much easier to square the circle than to predict what Trump will do next.”

The Biggest Trade War in History

Nobel Laureate Paul Krugman, a leading trade economist, recently called Trump’s tariff actions the biggest trade war in history. On The New York Times’ Ezra Klein show, Krugman explained: “Most people thought it would be a broad, across-the-board tariff or maybe a few categories. Instead, he announced a complex, different tariff for every country, at levels much higher than expected. With an average tariff of 23 per cent, it’s higher than US tariffs were after the Smoot-Hawley Tariff Act of 1930. Trade is a much bigger part of the economy now than it was in 1930, making this the biggest trade shock in history.”

But Trump and his advisers disagree.

The Bitter Medicine

While America and the world reel from the unprecedented tariffs, Trump remains unrepentant. On Sunday, he said, “I don’t want anything to go down, but sometimes you have to take medicine to fix something. We’ve been treated so badly by other countries because of stupid leadership that allowed this to happen.”

Monday Mayhem

Trump’s “bitter medicine” saw the unprecedented collapse of global stock markets, an event analysts have dubbed “bloodbath, Monday mayhem, and Black Monday”. One of Trump’s staunchest backers, billionaire hedge fund manager Bill Ackman, predicted, “America is heading for a self-induced economic nuclear winter.”

How Bad Was Monday Mayhem?

As bad as it could get. Following Thursday and Friday’s rout in Asian, European, and American stock markets, which former US Treasury Secretary Larry Summers called the fourth-largest two-day sell-off since World War II, Monday saw wild swings across global indices. Here’s a brief overview of the Monday Mayhem:

One: The Asian Bloodbath

On Monday, stocks across the Asia-Pacific region plunged like never before. The Shanghai Composite dropped more than 8 per cent, Hong Kong’s Hang Seng fell over 13 per cent, Japan’s Nikkei 225 closed down 7.8 per cent, and Taiwan’s Weighted Index lost 9.7 per cent, its biggest drop on record. The ASX 200 in Australia lost 4.2 per cent, and the Kospi in South Korea dropped 5.6 per cent. In India, Dalal Street saw its worst opening since March 2020, with Sensex and Nifty ending 3 per cent lower. The Asian market rout was described by one analyst as a “bloodbath”.

Two: Europe Bleeds

Europe’s biggest stock markets all closed more than 4 per cent down. The FTSE 100 index dropped 4.4 per cent, Germany’s DAX fell 4.1 per cent, and France’s CAC 40 lost 4.8 per cent. Only five of the FTSE 100 stocks ended the day in the green, and that too by a slim margin.

Three: America Goes Asunder

Since Trump unveiled his tariff on Wednesday, the S&P 500 stock index fell over 10 per cent in the last two trading sessions, marking its worst performance since World War II. On Monday, the benchmark S&P 500 whipsawed, falling as much as 4.8 per cent before bouncing back by 4 per cent. It closed down 1.33 per cent. The Nasdaq recorded its worst week since 2020, with fears of a global trade war pushing the US toward recession. The so-called Magnificent Seven stocks lost $1.8 trillion in market value, with Apple leading the losses at over $533 billion.

Despite the fear of a repeat of the 1987 Black Monday, America is entering a dangerous terrain of high inflation and recession, which is likely to drag the world with it.

What It Means

What do the violent gyrations of global shares post-Tariff Tsunami mean for the economy? Hopefully, not much, but the probability is high. While stock market movements don’t always correlate directly with the economy, they can indicate underlying instability. If Trump continues his tariff war and other countries retaliate, it could lead to a bloody trade war without traditional arms, and the world may indeed be headed toward recession.

Recession Time

Commodities, especially copper and oil, are often seen as barometers of global economic health, and both have dropped more than 15 per cent since Trump’s tariff announcement. Is a recession likely? While it’s not a certainty, the probability has risen. Economists have upgraded the chances of a global recession, with JPMorgan increasing the likelihood of a worldwide recession by the end of the year to 60 per cent, and Morgan Stanley raising the probability of a US recession to 45 per cent.

What Tomorrow Brings

And the problem is no one knows what tomorrow holds. In less than a week since Trump’s “Liberation Day” speech on April 2, he has upended the global order. While the imposition of tariffs was anticipated, the scale and bizarre nature of his tariff formula were not. With his actions, Trump has taken US trade policy back to the 19th century, surpassing even the Smoot-Hawley Tariff Act of 1930.

As policymakers, business leaders, and commentators scratch their heads over Trump’s next move, there is a consensus that these tariffs are a colossal mistake. Goldman Sachs analysts have likened them to “Pandora’s box”.

Trump Is What He Is

But Trump is who he is—transactional, and his tariffs are as they are. So far, India has been fortunate, with Trump imposing a flat 26 per cent tariff on Indian exports to the US, in addition to a baseline duty of 10 per cent for all countries, sparing pharma imports. However, as Trump has indicated plans to enhance pharma tariffs soon, India must prepare for the consequences. While the Indian government’s reaction has been muted, it is time to get its act together because the “Great Wall of America” is real. Yesterday is gone, and globalisation, as we knew it, is dead. It’s time to learn how to swim in the new global order.

The author is a multi-disciplinary thought leader with Action Bias and an India based impact consultant. He is a keen watcher of changing national and international scenarios. He works as President Advisory Services of Consulting Company BARSYL. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.