The new Trump order

WITH one stroke of his pen, a day after April Fool’s Day, Trump left the entire world bewildered at his tariff policy. He made the entire secretariat of the World Trade Organisation redundant, on the one hand, and all other countries engage in technical exercises with regard to the impact of his new tariffs on their economies, on the other.The proponents of free trade (as if it really existed before Donald Trump’s order) are now trying to find new ammunition to attack Trump’s tariff plan. New phrases had been coined much before Trump assumed his second presidency. A popular phrase is ‘the transactional nature of his approach to dealing with international geopolitical relations’ (as if pre-Trump relations were based on ‘benevolence’!). While, as an economist, I am a proponent of free trade, I must admit that I am having trouble understanding the doomsday nature of predictions about the consequences of Trump’s tariffs in the US and the rest of the world. More on this later.In writing the above, I run the risk of being labelled a proponent of Trump’s economic policies. I don’t want to make disclaimers such as are now common in the writings of many persons of science and knowledge who when agreeing with one point of Trump, start with a paragraph dissociating themselves with Trump’s utterings or actions.For example, scientist Richard Dawkins recently wrote: “In my opinion Donald Trump is a loathsome individual, utterly unfit to be president, but his statement that ‘sex is determined at conception and is based on the size of the gamete that the resulting individual will produce’ is accurate in every particular, perhaps the only true statement he ever made.” When Trump and his vice president gave a dressing down to Volodymyr Zelensky in the Oval Office, the best analysis came from Jawed Naqvi in this paper: “The point we may have missed was Trump’s sound advice to Zelensky showing him the door: ‘You are gambling with World War III.’ It’s hard to remember an American president confessing to an ally he had been arming in a brutal war to be wary of the conflict turning into a nuclear war.”Trump’s order was an invitation to negotiate; that’s probably why he tweeted that China got it wrong by retaliating.Have we missed something in the Trump order? From my reading of the fact sheet released by the White House on April 2, 2025, it looked like an invitation to all affected countries to negotiate bilaterally with the US to move in the direction of pre-Trump free trade to the extent acceptable to him. Commentators have stated that the tariff numbers in the order are based on an allegedly erroneous formula. But what actually matters is that almost all countries have imposed higher tariffs on American goods compared to what the US has imposed on theirs. If tariffs are bad, why are these much higher in all other countries?All countries other than the US suddenly seem to have become champions of free trade. If so, they all can and should reduce their tariffs. If not, then it means that their actions are not consistent with what they propose to champion. It is almost impossible to find fault with the principle ‘treat us like we treat you’. Trump has left the door open for free trade (relative to what it will be if no country negotiates with the US to seek concessions by somewhat lowering their tariffs) in his order. Retaliation is not a good option for any country, at least, for one like ours, that is always at the mercy of other countries. China has retaliated; it is not like us and is already a superpower and well on its way to dominating the world.Trump’s order was an invitation to negotiate; that’s probably why Trump tweeted that China got it wrong by retaliating. Only time will tell who was right or wrong. Whichever way the tariffs have been crafted in Trump’s order, they induce uncertainty regarding future levels of the actual tariff, except baseline tariff which is 10 per cent for all countries. The formula for the level of additional tariff will be debated in negotiation. The correct level imposed by a country should be clearly known by that country’s officials. If that is lower than what Trump’s order imposed, the order has the flexibility to reduce it in future. But this process will take months, if not years, to complete. Until that process is kick-started and ends, uncertainty over America’s tariff policy will continue. This will be bad for the US and the world economy. It seems that an international recession, including in the US, is likely to occur soon. Strangely, when this uncertainty is pointing towards greater certainty about a US trade policy-induced recession, interest rate cuts by the Fed are likely to come soon, notwithstanding the Fed chair Jerome Powell’s recent talk about maintaining interest rates under heightened uncertainty. Trump seems to have visualised a recession much earlier and hence is demanding rate cuts notwithstanding the Fed’s autonomy.The international media’s ‘doomsday’ reaction is entertaining. The Economist blurted out that Trump’s “mindless tariffs will cause economic havoc”. The Wall Street Journal chided: “Blowing up the world trading system has consequences that the president isn’t advertising.” The Financial Times warned: “Trump takes world to brink of full-blown trade war.” But why is Trump risking a recession in his own country with tariffs? It is because he wants to transfer resources from US consumers to producers and his government (through tariff revenues). This is consistent with what he was campaigning before he won the trust of the majority of Americans. One has to admire the tenacity of his actions, consistent with his words, and the speed with which he is moving to deliver his agenda. No matter how loathsome he might be to Dawkins and others in the US and abroad, Trump is convinced that he will restore manufacturing supremacy in America. He does not care if prices of cars rise in his country and admits this with impunity. People like me wonder when did the US actually lose its manufacturing prowess!The writer is former deputy governor of the State Bank of [email protected] in Dawn, April 11th, 2025

WITH one stroke of his pen, a day after April Fool’s Day, Trump left the entire world bewildered at his tariff policy. He made the entire secretariat of the World Trade Organisation redundant, on the one hand, and all other countries engage in technical exercises with regard to the impact of his new tariffs on their economies, on the other.The proponents of free trade (as if it really existed before Donald Trump’s order) are now trying to find new ammunition to attack Trump’s tariff plan.

New phrases had been coined much before Trump assumed his second presidency. A popular phrase is ‘the transactional nature of his approach to dealing with international geopolitical relations’ (as if pre-Trump relations were based on ‘benevolence’!). While, as an economist, I am a proponent of free trade, I must admit that I am having trouble understanding the doomsday nature of predictions about the consequences of Trump’s tariffs in the US and the rest of the world.

More on this later.In writing the above, I run the risk of being labelled a proponent of Trump’s economic policies. I don’t want to make disclaimers such as are now common in the writings of many persons of science and knowledge who when agreeing with one point of Trump, start with a paragraph dissociating themselves with Trump’s utterings or actions.

For example, scientist Richard Dawkins recently wrote: “In my opinion Donald Trump is a loathsome individual, utterly unfit to be president, but his statement that ‘sex is determined at conception and is based on the size of the gamete that the resulting individual will produce’ is accurate in every particular, perhaps the only true statement he ever made.” When Trump and his vice president gave a dressing down to Volodymyr Zelensky in the Oval Office, the best analysis came from Jawed Naqvi in this paper: “The point we may have missed was Trump’s sound advice to Zelensky showing him the door: ‘You are gambling with World War III.’ It’s hard to remember an American president confessing to an ally he had been arming in a brutal war to be wary of the conflict turning into a nuclear war.

”Trump’s order was an invitation to negotiate; that’s probably why he tweeted that China got it wrong by retaliating.Have we missed something in the Trump order? From my reading of the fact sheet released by the White House on April 2, 2025, it looked like an invitation to all affected countries to negotiate bilaterally with the US to move in the direction of pre-Trump free trade to the extent acceptable to him. Commentators have stated that the tariff numbers in the order are based on an allegedly erroneous formula.

But what actually matters is that almost all countries have imposed higher tariffs on American goods compared to what the US has imposed on theirs. If tariffs are bad, why are these much higher in all other countries?All countries other than the US suddenly seem to have become champions of free trade. If so, they all can and should reduce their tariffs.

If not, then it means that their actions are not consistent with what they propose to champion. It is almost impossible to find fault with the principle ‘treat us like we treat you’. Trump has left the door open for free trade (relative to what it will be if no country negotiates with the US to seek concessions by somewhat lowering their tariffs) in his order.

Retaliation is not a good option for any country, at least, for one like ours, that is always at the mercy of other countries. China has retaliated; it is not like us and is already a superpower and well on its way to dominating the world.Trump’s order was an invitation to negotiate; that’s probably why Trump tweeted that China got it wrong by retaliating.

Only time will tell who was right or wrong. Whichever way the tariffs have been crafted in Trump’s order, they induce uncertainty regarding future levels of the actual tariff, except baseline tariff which is 10 per cent for all countries. The formula for the level of additional tariff will be debated in negotiation.

The correct level imposed by a country should be clearly known by that country’s officials. If that is lower than what Trump’s order imposed, the order has the flexibility to reduce it in future. But this process will take months, if not years, to complete.

Until that process is kick-started and ends, uncertainty over America’s tariff policy will continue. This will be bad for the US and the world economy. It seems that an international recession, including in the US, is likely to occur soon.

Strangely, when this uncertainty is pointing towards greater certainty about a US trade policy-induced recession, interest rate cuts by the Fed are likely to come soon, notwithstanding the Fed chair Jerome Powell’s recent talk about maintaining interest rates under heightened uncertainty. Trump seems to have visualised a recession much earlier and hence is demanding rate cuts notwithstanding the Fed’s autonomy.The international media’s ‘doomsday’ reaction is entertaining.

The Economist blurted out that Trump’s “mindless tariffs will cause economic havoc”. The Wall Street Journal chided: “Blowing up the world trading system has consequences that the president isn’t advertising.” The Financial Times warned: “Trump takes world to brink of full-blown trade war.

” But why is Trump risking a recession in his own country with tariffs? It is because he wants to transfer resources from US consumers to producers and his government (through tariff revenues). This is consistent with what he was campaigning before he won the trust of the majority of Americans. One has to admire the tenacity of his actions, consistent with his words, and the speed with which he is moving to deliver his agenda.

No matter how loathsome he might be to Dawkins and others in the US and abroad, Trump is convinced that he will restore manufacturing supremacy in America. He does not care if prices of cars rise in his country and admits this with impunity. People like me wonder when did the US actually lose its manufacturing prowess!The writer is former deputy governor of the State Bank of Pakistan.

[email protected] in Dawn, April 11th, 2025.