Between the eagle and the dragon

The Star

2 days ago

NO TACO Theory was on his table, but renowned economist Prof Jeffrey D. Sachs thinks that when it comes to the crunch, US President Donald Trump will backtrack on his tariff policies.
'TACO' stands for 'Trump Always Chickens Out', and like the Wall Street traders trading the acronym for laughs, Prof Sachs believes that the US president cannot keep his trade policy as he had announced it on April 2.
'You know, all of the world is confronting this sudden change of the United States' trade policy. But I personally don't believe that the tariffs are going to stick the way that they were announced. Already a lot has been rolled back,' he explains.
For one, he adds, he is confident that the courts in the US will find some of the trade policy illegal because it was 'based on declarations of emergencies that don't really exist.'
Last Wednesday, the country's Court of International Trade ruled that Trump had overstepped his authority and blocked his tariffs from going into effect. According to the trade court, the emergency law invoked by Trump did not give him unilateral authority to impose tariffs on the world's countries. And although the court then allowed the US administration to keep collecting tariffs while the White House appeals against the ruling, many investors, as AFP reported, feel that Trump 'does not have a very high tolerance for market pressure and will be quick to back off when tariffs cause pain.'
For Prof Sachs, the question lies on whether Trump has the authority to introduce tariffs all by himself; in his view, that is the job of the US Congress.
Good neighbours
Prof Sachs was in Malaysia to speak in a special dialogue titled 'Asean amidst the shifting global order', hosted by Sunway University founder and chancellor Tan Sri Sir Dr Jeffrey Cheah ahead of the 46th Asean Summit last week.
The dialogue was attended by ambassadors, high commissioners, senior bankers, corporate leaders as well as political and government leaders such as Housing and Local Government Minister Nga Kor Ming and Subang Jaya state assembly person Michelle Ng.
The dialogue was attended by ambassadors, high commissioners, senior bankers, corporate leaders as well as political and government leaders such as Housing and Local Government Minister Nga Kor Ming and Subang Jaya state assembly person Michelle Ng.
During his keynote address, Prof Sachs underscored Asean's pivotal role as a regional bloc in navigating geopolitical uncertainties, highlighting the urgency of regional cooperation in areas such as climate action, economic resilience and multilateral diplomacy.
Calling on leaders to harness Asean's collective strength to foster peace, sustainability and long-term prosperity, the Sir Jeffrey Cheah Honorary Distinguished Professor in Sustainable Development at Sunway University and president of the United Nations Sustainable Development Solutions Network (UN-SDSN) says: 'Asean needs to do two basic things: one is to strengthen the relations within the Asean group, and the second is to strengthen Asean's relations as a group with other partners.
'China will be a major partner, and the GCC (the Gulf Cooperation Council), will be a major partner. So, these are two major economic partnerships for Asean.'
He notes that Asean is not alone in the tumult of the changing global trade.
'Every place I travel to, I hear the same question. And most of the world simply wants to go on with a rule-based trading system under the WTO (World Trade Organisation) and get the US to go back to that rule-based trading system.
'Most importantly, whatever actions the US takes, which will be detrimental to the US itself, should not impede trade among the rest of the world's countries. No other region should follow the US into this kind of protectionism,' he says.
Crucially, he stresses, the US should not try to make Asean choose between it and China.
'That would be unfair, but if Asean were forced to choose, you would choose your neighbour, China, obviously.
'Of course, Asean countries should have good relations with all parts of the world. The goal should be openness to all. So the idea should not be an alliance. The idea should be that Asean, which is a very open region in terms of trade, should be able to trade with the US, and with Europe, with China, and so forth.
'But Asean cannot do without good economic relations with China. That's not even imaginable. So the US should not force or try to force Asean into making choices.
'And if the US tries to put on secondary sanctions that impede Asean's economic relations with China, they would have to be resisted, actually.'
As Prof Sachs puts it, 'neighbours need to trade with each other and neighbours need to have common infrastructure.'
'So, at the same time, Asean should work closely with China on physical infrastructure and connectivity.
'The Belt and Road Initiative is a very important, positive initiative. It says, put in fast rail, put in renewable energy, put in digital systems. That's to everybody's mutual benefit.'
Ultimately, we need to keep calm, he stresses.
'Keep calm. Don't get into a conflict. We don't want to be in the middle of any conflict.
'There is no reason for a conflict at all, fundamentally. It's a waste of time.'
Prof Sachs fully believes that despite the disruptions, turmoil and risks, there are reasons to be optimistic.
'The world is disrupted and changing rapidly, and it is changing in frightening ways on the surface. But I want to argue that below the surface, the deeper trends are positive. And not only positive, but powerful as well.
'For one, the notion of sustainable development, which Sunway University champions, is on the right track.
'There is a lot of work to do, but we are on the path that I believe the world is going to achieve the goals. The world needs to achieve it; it can achieve it, and that combination of both need and capacity, to my mind, suggests that we are going to find our way forward.'
'A cultural revolution'
At the core of the shifting global order is an important fact, Prof Sachs stresses: Asia has ended a long period of domination by Europe and the US in the global economy, and the world is now multipolar.
'Asia has restored its place as the centre of gravity of the world economy – the place that Asia has had for most of the last 2,000 years, actually, with the interruption of the period during the Industrial Revolution and Western imperialism.
'Because what has happened is that a world that was profoundly divided by power and technology is now truly a multipolar world; one in which the US and Europe, no doubt, remain very sophisticated and powerful societies, but no longer the dominant societies of the world.
'We've entered the age of multipolarity. That's a big challenge, but it's also a wonderful fact and great opportunity.'
Prof Sachs says the US is going through a 'Cultural Revolution', which he believes could last around 20 years.
As he points out further, the US market for imports is only about 13% of world imports now.
'So you could close off the US market entirely, and the rest of the world would figure out how to get along pretty well.
China, in the meantime, will play a huge, important and positive role for this region, he notes.
Still, it is not the end of US' role in the world, says Prof Sachs.
'We are in what I call America's Cultural Revolution. That's not a good thing. Cultural revolutions do not go well. They set back China for 20 years.
'But the US is not lost lost forever. We just need to get through our cultural revolution.'