Washington’s Economic McVeighism

April 2025 opened in typical Trump fashion, with Washington imposing blanket tariffs on imports to the U.S. Following the announcement, markets from New York through Shanghai witnessed severe shockwaves. Subsequently, the internet was awash with Trump supporters celebrating the effect, particularly on the Shanghai and Hong Kong stock markets, praising Trump’s ingenuity.

However, a week later, Washington announced a 90-day pause on all tariffs above 10 percent for imports from all territories except China. Be this as it may, experts have continued to rank Trump’s trade policy as the least friendly in 100 years. Whereas some commentators argue that the pause was a response to countries’ offer to negotiate, reciprocal tariffs quickly set “Trump’s genius move” and the U.S. economy on a crash course.

Moreover, the escalation against China would mean that either the 145 percent tariff gets transferred onto the American consumer, or a reliance on alternative sources creates gaps in supply elsewhere. More importantly, the emergent supply deficits would likely create new market opportunities for China, while the U.S. would risk losing the Chinese market of 1.4 billion people. However, regardless of how this goes, Trump doesn’t seem to have a winning hand – at least not in the short term.

In my opinion, China-U.S. trade tensions are not about China but rather the U.S.’s strong belief in its legitimacy as the sole global power. However, the foundations of this belief ignore the fundamental fact that growth isn’t always infinite or uninterrupted. Indeed, it is for this simple reason that global dominance has always switched hands throughout history. Therefore, from this we can infer that China’s legitimate right to development has always been seen as a threat to this privileged position. Further, this is exacerbated by the U.S.’s deteriorating economic footing, seen from a $1.2 trillion deficit in goods in 2024 and close to $800 billion of U.S. debt to China. Without the significant progression through time, Trump might have tried the methods of the British from 1833 or 1856, using battleships to enforce “fair trade.” Luckily, these methods are buried 192 years deep.

China’s engine of growth

Trump, during his second State of the Union address in 2019, blamed China for “stealing” American jobs and intellectual property. But in a highly interconnected and interdependent world, how is this to be avoided? Besides, this has always been the way of development. Trailblazers lowered entry barriers for those that follow. History shows that even before Robert Fortune went to China disguised as a native to steal the secret of Chinese tea making, corporate espionage was a crucial vehicle on the path to modernisation. Indeed, Germany would never have replaced Britain as Europe’s industrial power early in the 20th century. Not even the American industrial revolution would have been as successful without both European immigrant capital, skills, and know-how. But more important to China’s rapid growth is its ability to learn, innovate, and master cost-efficient production.

Away from that, not even the 90-day pause on tariffs on certain countries targeted in Trump’s economic aggression changes the general outlook. In fact, Bloomberg Economics projects the general U.S. tariffs to only come down from 27 percent to about 24 percent. Despite the three-percentage-point reduction, this will still be the highest in 100 years. Moreover, this does not consider the 145 percent tariff on China. However, this can have any or a combination of a number of implications. In one scenario, the tariffs are endured and the products arrive at a much higher price, with the American consumer having to bear the burden; or targeted countries seek alternative markets. However, when this happened in 1982 with Japan reducing car exports, the domestic automotive industry produced even fewer cars, making it harder for the ordinary American to own a car as a result of high prices.

The other possible outcome is that a move is made to readjust supply chains, which might require intensive investment in infrastructure, skills development, and new technology in the short to medium term. Some experts are already expressing concerns that it could take decades for the U.S. to produce all it needs domestically. In the meantime, this certainly creates a supply gap. On the other hand, if the U.S. is to source these products from alternative sources, the gap could potentially emerge elsewhere – likely creating a market opportunity for China, given its relations with much of the developing world where this deficit is likely to manifest.

Global ramifications

Until this point, the discussion has been about China and the U.S., but what does Trump’s economic McVeighism mean for the rest of the world? Normally, in such economic conflicts, when a major power faces off with a smaller nation, the outcome is more certain – unlike when two major powers face off. In the former, the smaller nation loses badly; but in the latter, the whole world suffers. Moreover, when all other sorts of nations are tossed into the mix, the situation becomes even more complex and could have far-reaching consequences. For example, as reciprocal tariff walls sprout in different targeted territories, this phenomenon poses a significant threat not just to the U.S. but also to global trade. This situation, however, seems to isolate the U.S, signalling the potential for serious adversity for the domestic economy.

On the contrary, China has, over recent decades, built strong and reliable logistics and infrastructure networks through the Belt and Road Initiative cooperation. In addition, the Chinese have, through innovation, been able to master efficient production. These combined don’t just mean China’s supply chains may not require much readjusting – rather, just some reorientation. The logistics and infrastructure network and efficient production methods also imply that China will be more ready to capitalise on any supply deficits should they occur.

But what does this mean for the U.S.? U.S. data shows that China’s share of total U.S. imports fell from 21.6 percent in 2018 to 13.4 percent in 2024. Moreover, with the imposition of the new tariffs, one can expect this to drop even further. NVIDIA, for example, expects to take a $5.5 billion hit in charges on account of limiting chip exports to China, a key market for one of its most popular chips. Indeed, economists concur that besides affecting American companies, consumers will also have to deal with soaring prices as firms pass on some or all their extra costs – not to mention the loss of jobs, as was the case in 2018 when Trump first made this gamble. According to the WTO, the resulting contraction of bilateral trade between the world’s two biggest economies will certainly be felt in many places as well.

What is happening in the world today serves as a stark reminder of the potential damage that can occur from the unchecked trade powers of the U.S. president. President Trump’s free rein to gamble not only with the U.S. domestic economy but also with the global economy highlights the urgent need for resilient trade systems capable of shielding international commerce when diplomacy is weaponised – as is currently the case against China, Canada, Mexico, and others. While China has made notable progress in building such resilience, more needs to be done in Africa and the Global South. Although no system can fully safeguard against trade-related uncertainties, relative economic stability can be achieved by developing robust, self-sufficient regional supply chains that reduce vulnerability to economic McVeighism and external coercion.

The author is a research fellow at Development Watch Centre in Kampala, Uganda.