Trumpland: What if the world turned US trade war back on America?

Economic Times

30-07-2025

TIMESOFINDIA.COM AI image Tariff' Trump has announced a 25% levy on Indian goods entering US starting tomorrow, coupled with a penalty for India's continued oil and defence purchases from Russia. Prefixing his announcement on Truth Social with 'while India is a friend', the US president has sought to punish India for asserting sovereign choices in trade and foreign policy.
With friends like this, who needs friends? The irony is poetic: the self-declared custodian of free trade is now its most protectionist offender. Economics is built around the principle of movement: of goods, capital, labour and data. This isn't just ideology, it's the physics of prosperity. Yet, the US, once the world's most vocal advocate for free markets, is, in the form of Trumpland, its most disruptive force. From semiconductor export bans and weaponised sanctions to unilateral tariffs and extraterritorial dictates, Trumpland has turned the global economy into a minefield of exceptions, exclusions and coercion. So, here's the question that can now be asked aloud: what if the rest of the world sanctioned the US? What if countries collectively paused the flow of rare earths, APIs, industrial machinery, telecom infrastructure, even data? Could the US survive the very conditions it imposes on others? In 2024, US goods imports hit a record $3.3 tn, while exports reached $2.1 tn, pushing goods trade deficit to $1.2 tn, a 14% increase from the previous year. Even after including services like finance and travel, total trade deficit stood at $918 bn, up 17%, the second highest on record. Trade gap with China grew to $295 bn, a clear sign of ongoing reliance. Beyond China, the US remains critically dependent on imports for over 221 essential goods, including microchips and battery components, with foreign sourcing levels between 90% and 100%. China supplies 70% of rare earths, and dominates the global graphite supply chain. Other key materials like lithium and cobalt are also heavily imported from countries like Chile, Canada and Argentina. In total, just four trading partners — China, the EU, Mexico and Canada — each account for more than 10% of US import value. These are not discretionary purchases, but foundational components of American industry. The US is not merely part of global supply chains, but also structurally dependent on them, never mind all that talk of decoupling and self-sufficiency.Yale University's Budget Lab assessed that the US' 2025 tariff surge has raised its average effective tariff rate to 22.5%, the highest since 1909. This policy shift has led to a 2.3% rise in consumer prices, costing the average household $3,800 annually. Lower-income families are hit hardest, with those in the second income decile losing $1,700 a year.Real GDP growth is expected to drop by 0.9 percentage points in 2025. Long-term output is projected to remain 0.6% smaller, a permanent loss of around $180 bn a year. Exports have declined by 18.1%. Prices for essentials have spiked, with apparel up 17%, food nearly 3% higher, and new cars costing an extra $4,000 on average.Far from protecting the economy, Trump tariffs are eroding household income, slowing growth and adversely affecting America's economic competitiveness.As Walter Scheidel explains in his 2017 book, The Great Leveler, entrenched systems rarely reform themselves through negotiation alone. Meaningful redistribution often follows rupture rather than consensus. So, what might rupture look like today? Imagine the world's major exporters including Europe, China, India, Asean and Latin America agreeing to a coordinated pause in shipments to the US. No semiconductors, no APIs, no telecom equipment. In a matter of weeks, American production lines would slow, inflation would surge, and financial markets would be rattled. It would serve as a powerful reminder that the US economy is not insulated by exceptionalism. It operates on the consent and cooperation of the rest of the world. This isn't about restoring balance. It's a call to deliberately hit the US economy where it hurts, to expose the double standards that define today's global order. In any functioning market, domestic or global, rules matter not only because they enable exchange but also because they constrain abuse. Participation in global trade is characterised by the principle of mutualism and benefits will flow only as long as responsibilities are shared.Disregarding this fundamental point, the US' economic bullying undermines not just the trust but the very ethos of the current global economic system. The world, India included, now faces a pivotal question. Should it continue to accommodate this exception, or begin to act as a collective? A coordinated stand by global exporters, in defence of systemic integrity, would affirm that globalisation is not the privilege of a single actor but the shared project of many. If the international order is to survive, it must demonstrate that no participant is above its rules. Trumpland may yet learn that the system the US helped create can continue to evolve without its dominance. And that the invisible hand, if constrained long enough, may simply withdraw its reach from the United States. (Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.) Elevate your knowledge and leadership skills at a cost cheaper than your daily tea. Regulators promote exchanges; can they stifle one? Watch IEX
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