[By GuanchaNet Columnist Shaoshan Bao, Translation by Ma Li, Proofreading by Han Guo]
US President Donald Trump has sent a cryptic "invitation" to the world: It urges all countries to distance themselves from the US political and economic system and accelerate the process of decoupling from the US dollar-dominated trade settlement and financial systems.
In fact, this is not just an invitation but an unavoidable instruction. The so-called "reciprocal tariffs" announced by the Trump administration have openly exposed the immaturity and capriciousness of American political decision-making. As policy formulation becomes increasingly unpredictable, the reliability of the US as an economic partner becomes increasingly worrying.
The US is like a pony in the circus that only knows one trick, firmly believing in its indispensability while secretly feeling aggrieved. The actions of the Trump administration carry a certain self-destructive meaning and send a warning to the entire world: Stay away from me. He attempts to force other countries to change their behavior through punitive measures, without any concealment of his "beggar-thy-neighbor" approach. In short, the Trump administration views economic policies through the lens of zero-sum games.
This current round of so-called "reciprocal tariffs" reveals that the policy-making approach of the Trump administration is capricious, extremely hypocritical, and highly arbitrary. These "reciprocal tariffs" are actually not based on a detailed analysis of the tariff and non-tariff barriers of various countries but are calculated using a simple and crude electronic spreadsheet formula: dividing the US's net trade deficit with the country by its exports to the US and then halving the result.
Lesotho is a typical example. This African country has an annual GDP of only $2.4 billion and belongs to the list of the poorest countries globally. As a member of the Southern African Customs Union (SACU), Lesotho implements the unified external tariff rate established by the union. That means Lesotho’s tariff rates are the same as those of South Africa, Namibia, Eswatini, and Botswana.
On April 2 local time, Trump signed the tariff executive order Visual China
If the calculation of the US "reciprocal tariff" were based on the tariff rate of a trading partner, it would mean that all members of the Southern African Customs Union would be affected by the same "reciprocal tariff." However, the reality is not so.
In fact, Lesotho was subjected to a 50% "reciprocal tariff," Namibia 21%, South Africa 30%, Botswana 37%, and Eswatini 10%. For Lesotho, its annual exports to the US amount to about $236 million, mainly consisting of diamonds, textiles, and clothing, while imports amount to approximately $7 million. Such a low import volume is due to the fact that most residents of Lesotho earn less than $1,300 annually, making US goods unaffordable for them.
The US method of calculation is actually: dividing the US's trade deficit with Lesotho ($229 million) by Lesotho's exports to the US ($236 million) to get 97% and then halving it.
Indonesia is another typical example. The US had a trade deficit of about $17.9 billion with Indonesia, and Indonesia exported $28 billion worth of goods to the US. Therefore, the calculation result is $17.9 billion/$28 billion = 64%.
The lack of logic becomes even more apparent in the following fact: Even countries with a trade surplus with the US and zero tariffs were still subject to "reciprocal tariffs"; for instance, despite Australia having a $2.2 billion trade deficit with the US in 2024, it was still levied a 10% tariff.
Evidence of the ineffectiveness of tariff hikes
Tariff hikes are the most frequently mentioned words by President Trump, but doing so may cause more severe harm to the US than any other action. Since 2018, the effects of the tariff hike policy have been clear: it did not "bring jobs back" or "revitalize American manufacturing." Imports did not decrease; instead, the US trade deficit expanded. From an economic perspective, the tariff hikes failed to deliver on their promises. Politically, they only stirred up discontent among some groups, with no other effect.
Based on Trump's performance during his first term and his legacy, increasing evidence suggests that, in terms of his stated goals, the tariff hike policy is ineffective and may even backfire. The evidence clearly tells us that the effect of the tariff hikes is at best neutral, if not worse.
In a paper published in 2024, David Autor and other co-authors explored in great detail the economic and political consequences endured by the US and its trade partners, such as China, during the trade war between 2018 and 2019. One valuable conclusion drawn from the article is that so far, "this trade war has brought no economic benefits to inland states in the US."
The article points out, "Import tariffs imposed on foreign goods neither increased nor decreased employment in protected US industries; retaliatory tariffs had a noticeable negative impact on employment, primarily in agriculture; however, US compensatory agricultural subsidies only partially mitigated the aforementioned negative impact." Therefore, from an economic perspective, the overall effect of Trump's tariff hike measures is negative. Besides the conclusions mentioned above, there is growing evidence suggesting that the net effect of Trump's 1.0-era tariff policies on the welfare of the American people is negative.
In a paper written for the Federal Reserve Board in 2019, Aaron Flaaen and Justin Pierce concluded that any small employment-promoting effect brought about by direct import protection was offset by the larger negative effects caused by rising input costs and retaliatory tariffs. Therefore, this policy has an overall negative impact on US employment.
The authors concluded, "Manufacturing industries in the US that are more susceptible to increases in tariffs will experience relative job reductions because the positive effects of import protection are offset by the larger negative impacts of rising input costs and retaliatory tariffs. Higher tariffs also lead to relatively higher producer prices due to rising input costs." Flaaen and Pierce's research touches on the core issue of the chain reactions caused by tariffs. Tariffs may bring about job growth in industries directly protected, but ultimately result in a net loss of jobs in the US as higher costs permeate downstream sectors of the economy.
Vyakovich and co-authors analyzed the impact of the 2018 tariff increase policy on employment in a paper published in 2022 for the World Bank Group. They found that "import surcharges and retaliatory tariffs led to a relative decline in the number of online job postings in the affected industries' commuting areas." Conversely, they found no evidence of a positive impact of import protection policies on the number of job postings. The authors concluded, "In 2018, these tariffs together reduced hiring by 175,000 positions, accounting for 0.6% of the total in the US, with two-thirds of the reduction attributed to import surcharges and one-third to retaliatory tariffs."
According to data from the St. Louis Federal Reserve, during the period from 2018 to 2023, the number of manufacturing jobs in the US increased by about 200,000, rising from approximately 12.7 million to 12.9 million. However, during the same period, total non-agricultural employment in the US increased from about 149 million in 2018 to about 156 million in 2023, adding approximately 7 million jobs. Although manufacturing jobs grew by about 1.6%, total employment increased by about 4.7% over these five years, indicating that growth in manufacturing jobs lagged behind overall employment growth. The tax increase policies implemented since 2018 do not appear to have directly contributed to a recovery in manufacturing employment.
In addition, output growth in US manufacturing expanded during the period from 2018 to 2023. According to Statista data, real value-added manufacturing output grew from $2.2 trillion in 2018 to $2.8 trillion in 2023, an increase of about 27%. During the same period, US gross domestic product (GDP) grew from approximately $20.5 trillion in 2018 to $25.5 trillion in 2023, representing an overall economic scale growth of about 24%. This indicates that manufacturing output growth slightly outpaced overall economic scale growth. This difference suggests productivity improvements within manufacturing, as output growth far exceeded employment growth. Once again, this tells us that if one of the main goals of imposing tariffs is to revitalize manufacturing employment, the results so far are unsatisfactory.
Finally, we should consider the net trade situation of US manufacturing. It is well known that one of the major concerns for the US is the net trade deficit in manufacturing. During the period from 2018 to 2023, overall exports of manufactured goods from the US increased. In 2021, US manufacturers exported $1.4 trillion worth of goods, which accounted for a significant proportion of total US exports. By 2024, total exports of goods and services reached $3.2 trillion, up from $3.1 trillion in 2023. Despite the increase in exports, the US continued to experience a persistent trade deficit in manufactured products.
According to data from the US Census Bureau and the Bureau of Economic Analysis, the overall trade deficit for US manufactured goods and services in 2024 was $918.4 billion, an increase of $133.5 billion compared to 2023. This continuous widening of the deficit indicates that imports of US manufactured goods exceeded exports, resulting in a net trade deficit in the industry. It is also worth noting that despite the imposition of tariff increase measures, the net trade deficit in US manufacturing continues to expand.
Lacking leverage
The series of policies implemented by the US in 2025 lacks many cards compared to implementing the same policies ten or twenty years ago. The fundamental reason lies in the fundamental changes in the global trade landscape over the past twenty years. Today, the US accounts for less than 15% of global trade, which is half of what it was at the beginning of this century. Meanwhile, China has become the largest trading partner for 150 countries, and the trade volume between regions outside the US has grown faster than the trade volume involving the US. This trend is unlikely to change. The International Monetary Fund (IMF) and other institutions have long predicted that the economic growth rate of the Global South will exceed that of G7 countries. Trade growth among countries in the Global South (South-South cooperation) is also growing at a rate higher than the global average, meaning that the relative influence of the US in global trade will continue to decline.
It is often pointed out that imposing tariffs will have a significant impact on China, and indeed, the first round of tariff wars initiated by Trump and the subsequent ongoing tariff wars—whether inherited by Biden or continued into Trump's second term—are essentially targeting China. For the US, China is its most important political and economic rival.
On April 4, the Ministry of Finance website released an announcement stating that starting from April 10, a 34% tariff will be imposed on all goods originating from the US
This view was recently confirmed by a memorandum from the US Department of Defense. The Washington Post reported that this memorandum refers to China as the "impending threat" to the US. Since the Obama administration launched the "Asia-Pacific Rebalance" strategy, all efforts by the US have targeted China. The frustration experienced by Washington in recent years stems from its diversion of attention from dealing with China to other matters around the world. Here, it is particularly worth mentioning Ukraine as an example. Washington is eager to distance itself from Ukraine and shift the responsibility of containing Russia onto Europe.
Now, let's examine the trade relationship between China and the US from the perspective of scale. In 2024, the US reported a goods trade deficit with China of approximately $295.4 billion, meaning that the US imported much more from China than it exported to China. Specifically, the US exported approximately $143.5 billion worth of goods to China, while importing approximately $438.9 billion worth of goods from China. By the way, regarding the "reciprocal tariff" rate, the calculation result is $295.4 billion/$438.9 billion = 67%. However, China's trade surplus with the US accounts for less than 5% of its total trade in 2024. Simply put, the importance of the US market to China has diminished significantly.
Now, let's convert China's trade surplus with the US into per capita terms. In 2024, China's population was approximately 1.408 billion. This means that China's per capita trade surplus with the US is approximately $209.80. In 2024, adjusted for purchasing power parity (PPP), China's per capita GDP was approximately 19,436 international dollars. China's per capita trade surplus with the US is equivalent to 1.08% of China's per capita GDP. This adjustment is not very significant, which is largely the problem addressed by the fiscal and monetary policy measures announced at the 2025 "Two Sessions" in China. Of course, it goes without saying that the overall adjustment is manageable, but it is worth noting that due to different impacts on various industries and enterprises, the mechanism may have certain imbalances. However, these can be resolved through flexible policy implementation.
Transition is possible
At the global level, Professor Simon Evenett's assessment indicates that countries around the world could fully compensate for the losses caused by losing the US market within four years. The time required for different countries to achieve this goal will vary depending on their respective economic structures and the degree of trade dependence on the US market. Evenett pointed out that this assessment is mainly based on the organic growth compensation effect brought about by trade with other countries rather than just with the US.
I have previously pointed out that, in addition to the compensation effect brought about by organic growth, through fiscal measures and conscious coordination of policy responses, including strengthening bilateral and multilateral trade, most countries could fully compensate for the losses caused by losing the US market in even less time than Evenett estimated.
Since the role of the US in global trade is constantly weakening and countries can achieve orderly adjustments within a reasonably short period of time, the US actually has no cards to play (borrowing a phrase often used by President Trump). However, there is a counterargument to the above view, which holds that only the US capital markets have sufficient size and depth to fund the US global trade deficit, especially the trade deficit with China.
First, it is noteworthy that China's trade surplus in 2023 was approximately $59.39 billion, and the total volume of international trade is estimated to be around $31 trillion. This means that China's trade surplus accounts for about 1.92% of the total global trade volume. For those who issue serious warnings about China's trade surplus, once placed in a global context, these warnings turn out to be unnecessary.
Malaysian Prime Minister Anwar Ibrahim said on the evening of April 6 that Malaysia will take the lead in coordinating ASEAN countries' response to Trump's tariffs Video screenshot
Secondly, this argument holds that China's trade surplus (or the global trade deficit with China) is largely supported by US capital markets. However, this causal inversion is incorrect. For the US, its trade deficit is supported by government spending or commercial bank credit creation of dollars. This mechanism actually creates currency out of thin air. In other words, import payments are not entirely funded by capital markets. On the contrary, capital markets absorb these dollars because they are consumed. In other words, the world's ability to trade with China and make up for the loss of the US market is not constrained by US capital markets.
Using currencies other than the dollar for global trade financing and settlement is feasible. Over the past decade, this has become increasingly common, and the pace of transition toward a multipolar currency system has accelerated during this period, largely due to the weaponization of the dollar and its related institutions.
Since 2014, Russia's entire experience has best demonstrated to the outside world that an economy can expand its trade scale while摆脱ing the dollar as a means of trade settlement and payment. Currently, more than 50% of China's international trade is settled in Renminbi.
Conclusion
The "reciprocal tariff" policy implemented by the Trump administration will have destructive effects. Such a large-scale structural change will inevitably cause systemic shocks to global relative prices. However, this shock should be seen as a blessing in disguise.
Other countries and regions in the world will actively respond to these shocks, especially by strengthening multilateral and bilateral trade relations and mechanisms through joint efforts, and taking fiscal policy measures at the national and transnational levels. This adjustment period will be relatively short (at most a few years), and the benefit will be that it will usher in the post-dollar era after the end of the dollar's global dominance.
The design and implementation of "reciprocal tariffs" also highlight the capricious nature of US policymakers. These tariff increases are not based on any rational assessment of tariff and non-tariff barriers (regardless of how debatable such assessments may be) but are simply calculated by dividing the US trade deficit with the country by its exports to the US. In many cases, this figure is further halved to reflect some form of "goodwill." This obviously reflects a "seat-of-the-pants" policy-making process.
Clearly, the US considers itself a victim, suffering oppression and exploitation from the rest of the world. This is actually a manifestation of US privilege. Given the dollar's superpower status, the US's influence on multilateral institutions over decades, its dominant role in sanctioning dozens of countries worldwide, its long-standing military advantage (although it has declined somewhat), and the fact that the US has launched over 210 military interventions in other countries since 1946 (as cited in the book "Dead by the Sword: The Militarization of US Foreign Policy" by Duffy Toft and Kushi, published in 2023), the US's anger is unlikely to gain recognition from most countries in the world. You cannot claim to be the "most exceptional" ruling country in history while simultaneously declaring yourself a victim with utmost certainty.
Trump's proposed "Liberation Day" actually helps countries liberate themselves from a set of global political and economic systems that have long hindered their effective path of independent development. The world can see the true face of the US through this, and the hypocritical "freedom and benevolence" facade will eventually be uncovered, exposing its capricious narcissistic mindset. A multipolar world is being built, and it is already beginning to take shape. When the US shows sincerity and is ready to integrate into this international family as a normal and equal partner, it will still have a place of its own.
Thank you, Mr. Trump. The world has accepted this "invitation."
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