IKENNA EMEWU
“Countries differ in their economic success because of their different institutions, the rules influencing how the economy works, and the incentives that motivate people,” Why Nations Fail, book by Daron Acemoglu and James Robinson
I deliberately took part of the headline of this piece from the name of the book quoted above.
When I read that the man in the White House, Washington DC has gone berserk with tariff wars at a global proportion, I turned and looked at the bookshelf behind my desk and reached for the book cited.
It came to my mind how Donald John Trump, the US 45th and 47th president has hit the highways of possible perdition on his country. It is possible, even though he might not know or knows but chooses to live in denial that Trump has engaged his country in reverse gear, headed for a destination he doesn’t know.
Drawing from the words of this book referenced, it was the series of policies of the US by its leaders that brought it to a towering height it has occupied for over the past 130 years when it first emerged world’s largest economy in 1895.
Yes, kingdoms must fall, but when the fall starts, the shapers of history hardly know until the actions precipitate into outcomes least imagined.
President Trump is actually on a journey in history. One country no matter how powerful, engaging the entire world in a hydra-headed trade war is simply biting more than a mouthful.
Globalization on reversal
Globalisation has steadily gained traction over the past 50 years for certain factors and reasons. To a very large extent, the major beneficiaries have been the most powerful economies, the US in the fore.
Even though those known factors sped up the pace of globalization, it actually started in the mid-1940s, immediately after the allied states defeated Nazism. They reasoned that the disparate and isolated stands of the countries of the world worked as an impetus in favour of Adolf Hitler to rout Europe. To stave off a repeat, most parts of the world formed bodies that aggregated forces into collective ideologies, purposes and objectives which fostered unifications.
That birthed the United Nations in 1945, which with its many shortcomings has catalyzed some level of global peace, growth, development and less antagonism.
Before the UN, another large-scale crisis in WW I threw into the lap of the world the need to create the League of Nations, a precursor of the UN.
Since the birth of the UN, there have been over 100 intergovernmental unions globally at regional and sub-regional levels. Some of them also have targeted agendas for particular common needs of the human society including economy, education, healthcare, culture, peace, human rights, military, climate and environment, trade, maritime, aviation, etc.
With the turn of events in the past 50 years when tech-driven communication became more connected and accessible among the different parts of the world, globalization fastened in pace to the era of the famed global village energized by the internet or New Media. The fabric of global connectivity is so intricately woven today that untangling them would create a different set of problems for humanity.
Global trade and benefits
Because no country is an island or would exist as one, the need for inter-dependencies keeps mounting through trade, diplomacy, etc. They have also helped to bridge imbalances and assisted in ameliorating poverty among countries. The richer and more industrialised ones have the whole world as a market while the poorer that can’t manufacture enjoy the benefit of access to goods they ordinarily can’t make.
Pascal Lamy, the Director General of World Trade Oraginsation (WTO) in an interview in 2010 admitted that:
“Just as the WTO has had a significant impact on the development of China’s economy, China’s accession has made the organization stronger. Surely, the accession contributed to China becoming the world’s largest exporter of merchandise goods and the second-largest importer of such goods. This latter point is important because the crisis that hit the global economy in 2008-09 led to a severe contraction of the economies of Western Europe and North America. With those markets consuming less, exporters needed to look to other countries for export growth. This was true of US, Japanese, and European exporters, but it was also true of developing country exporters. China picked up a great deal of slack, and this was an important factor in keeping the global recession from widening and deepening.”
However, one person seems to swim against this tide and trend. That one person is the US president, Donald Trump, an apostle of tariff wars. In his first coming, Trump weaponized trade tariffs and worked assiduously at it with China, India and a few other countries being his major targets.
This time, Trump has taken the entire world in one fell swoop of the largest tariff war in human history. It is Trump versus the world, no exception.
He forages far and wide wielding his stick. But this time, Trump may not have it rosy fighting the whole world.
Teaching the world to seek alternatives
On January 1, 1999, eleven EU countries adopted the Euro, another stage of the EU Monetary Union. The decision gave Europe the benefit of strengthening their continent’s economy through a common currency which makes transactions easy and seamless. It broke the national barriers that held back growth and reduced tensions among the countries.
Even though not admitted openly, it was one of Europe’s moves to regain global control and wrest it from the USA as it was prior to the two world wars that depleted and decimated Europe. With a firm grip on the world’s trade system, the Euro has not yet supplanted the US dollar.
There have also been speculations about the BRICS, the next big thing in the global political system floating a common currency. What Trump does now may spur BRICS to fasten its pace and make the currency come real as a challenger to the dollar and deflate Trump’s and US’s penchant for slamming sanctions indiscriminately on countries because of the wide use of its currency. Should that happen, Trump may as well keep his currency its global demand would take a hit and possibly drop by 60% against three powerhouse manufacturers and exporters – China, Russia and India, all members of the BRICS.
Some other regional blocs may also think of their survival in the hands of Trump and also reduce his constant inclination to levy trade sanctions on them. These alternatives would work like in a multiparty democratic system when a bullish ruling party forces all the opposition parties to agglutinate into a bloc and wrest power from it. Only an unreasonable player underrates the power of a united masses.
US benefits through the dollar
The reason Trump rides roughshod and bullies the countries with trade tariffs and trade and economic sanctions is the widespread use of the US dollar as a prime currency of international transactions.
Trump deploys this more than others before him as a tool of coercive diplomacy. The US dollar is one of the few recognised international safe-haven currencies that facilitate a seamless economic process. Take the US dollar as a commodity in the market whose sales benefit the producer. For every single dollar transacted anywhere in the global market, the profit drops in the pockets of the US treasury. In those countries where the forex fluctuations favour the dollar, every extra dime paid to procure the universal currency is an extra income to the owner of the currency.
Moreover, the status of the dollar as a global reserve currency almost wipes out the possibility of the owner country, USA likely facing a currency crisis.
One of the major reasons the US has the largest economy in the world is primarily the global use of the dollar. When Trump cancels out the advantage, the strength of the US economy flies out of the window.
The USA actually became the global trade clearing house with its dollar as a part of its benefits from globalization at its earliest stages, and it has closely guarded this trump card that Trump himself wants to trump away.
Violation of WTO rules and deviance
Trade sanctions are inimical to free world trade which is promoted by the World Trade Organisation (WTO)
Under Article XXI(c) of the GATT exceptions of national security concerns are a compelling reason sanctions and discriminatory rules are allowed. But Trump‘s global sanctions through the imposition of tariffs cannot be justified on that ground.
Concerning the latest trade sanctions by Trump, China also filed suits against the US at the WTO to press its rights and seek punishment against the USA for violating their trade rights and the WTO treaty.
During Trump’s first tenure, China filed claims against the US over similar trade sanctions and won as the actions violated WTO free trade rules.
For instance, a situation arises where all the countries of the world Trump moved against with sanctions approach the WTO and secure claims, it is only in his imagination that the US would stand the whole world against it.
Falsifications and wrong figures
From economic intelligence reports, the figures Trump’s administration quotes as the tariffs countries of the world impose on US goods are all false and at variance with WTO tariff-weighted averages.
For instance, while Trump quotes that Cambodia imposes 97% tariffs on US goods, WTO data shows the correct figure to be 7.9%. It cites that China imposes a 67% tariff on US goods, whereas WTO data, per cnbc.com, is actually 3%. WTO average and the Cato Institute document have 2.7% as EU tariffs on US goods, while Trump’s administration cites unfounded 39%. There is no single country listed in Trump’s trade sanctions its quoted tariffs on US goods is accurate. The false figures Trump claims as justification are unsustainable and enough grounds for any claims against the US to stand. Whether these countries file for claims at WTO or apply retaliatory sanctions, the US can’t stand the whole world.
How the last time affected the US
When Trump wielded the trade sanctions big stick during his first tenure, US trade and economics experts warned him against the backlash effects on the common people, especially.
All the experts and the entire US media during and after the trade wars drew an assessment that the sanctions option was an abject option and a total failure. The approach negatively impacted trade between China and the USA for instance and widened the gap, further in favour of China than what it was prior. Consumer goods for the average citizen soared in price, worsening inflation in the USA due to the higher costs of goods.
In the Chinese case, for instance, Trump never considered the reality that a good quantity of the goods China as a country of production finishing exports to the US are actually products or brands and patents owned by the US with a production base in China due to certain beneficial reasons in production cost.
A good instance is the assembly of Apple gadgets in China at Foxconn’s 12 factories in nine China Mainland cities. The volume of the goods shipped to Long Island, California is counted in favour of China’s exports to the US while the Apple gadget is actually a US product and brand.
For every Apple gadget produced in China and shipped to the US, the profit calculation in 2015 was $200 to the US and a pittance of $20 to China. At the end of the trading year, the ledgers will have China weighing better than the US in the trade balance. Some of these reasons made the experts stand against Trump’s sanctions against China. As he insisted, the move backfired badly against the US even for grains from the US its number one buyer is China.
China and US in global exports
Eight countries of the world dominate global exports. Of these, China, Japan and South Korea are in Asia, four are in Europe in addition to US occupies the second position.
In 2023, China garnered an export global market share of 14.2% valued at $3.6 trillion. US global export share was 8.5% and $2 trillion, with China’s share almost going to double. Germany’s 7.1% of $1.7 trillion added to that of the US is equivalent to only China’s volume.
China’s high standing at the apex of global exports is not a happenstance because it has maintained this position since 2010 without a break. With dominance and the way China’s retaliation jolted the US, Trump would be living in a fool’s paradise to imagine he would stand the whole world coming for the US with retaliatory sanctions which are very likely to happen in response to his reckless drive.
IMF, World Bank jolts
IMF and the World are major economic tool advantages of the US, and any major global trade disruptions as Trump is set to trigger will shock global financial stability and efforts at development which would also increase the debt burdens of the countries to IMF and World Bank. When their earnings drop, they would not be in a position to live up to their debt and debt servicing obligations. That will trigger a slump of the world economy just recovering from the 2020 pandemic shocks that still struggling and smarting out of the 2008 global meltdown.
The number one beneficiary of the IMF and World Bank is the USA where it controls 16.5% and 17.5% voting shares respectively.
When the two are destabilized, the US pays dearly for it as its own revenues accrual from them will shrink, a direct negative impact on the US general economic outlook.
Isolating from the world
What if the major economic players come for the US in full force and pull out their stakes from the IMF and World Bank? It is a possibility, even though not happening overnight. If Trump stretches his luck by taking the world for granted, such may happen as they go back and regroup.
Already, Trump has withdrawn his country from some very vital intergovernmental agencies, some of them organs of the UN, brainchild of the US which it is still a prime beneficiary of.
In his first tenure as president, Trump withdrew the US from the World Health Organisation (WHO) On February 4, 2025, he issued an Executive Order taking the US from the World Human Rights Commission and the United Nations Relief and Works Agency. He is also mooting similar withdrawals from UNESCO.
The US retains the right or status of world leader because it dominates most UN agencies, organs and intergovernmental agencies. That endows it with prime voting share where it reserves the right to determine what is acceptable and what is not. With its financial and funding commitment, it also has the right to determine who gets what positions and its citizens dominate employment and contract opportunities of these agencies. When Trump pulls out of them or moves the world to abandon most of these agencies, its leadership of the world ends. That position may be taken by a willing country with economic clout, diplomatic reach and goodwill. Who knows who steps in. It may also lead to the rebuilding of global leadership and political architecture.
You aren’t leading the world again when you pull out from the world. A false claim of funding or feeding the rest of the world is untenable.
In conclusion
Quoting Pippa Malmgren in 2021 in a comment related to the address of President Xi Jinping to the World Economic Summit in Davos, it said: “No one can be blamed for wanting to believe that China is leading the world economy into the
future when it seems that no one else can or will. The United States under President Trump is a hard-to-like, isolationist power that neither inspires nor desires international confidence. Europe is not growing and all its energy goes into preventing a break-up of the euro if not the European Union itself. So Xi Jinping can go to Davos and play the role of Guardian of Globalization.”
So, if Trump succeeds in relinquishing the world’s leadership as he labours to, that will be nice for the world to look up to another for leadership going forward. Who knows who steps into those shoes?
Again, I recall that no kingdom lasts forever, nor will the USA break that natural rule of the times and seasons.
We are witnessing history written by Trump.
