According to all accounts, a world is finishing and we don’t know what will replace it. For Pakistan, this is particularly worrying because despite what we like to tell ourselves, this country has always depended deeply on this world to stay afloat.
Rarely the general panorama has been imported more than now. Concentrating only on short -term impacts would be an error. The biggest image here is brutal in its simplicity and criticism of its importance. For almost half a century, Pakistan has remained afloat as a country through rescues organized by the institutions of a multilateral world order, including the IMF, followed by the World Bank. The sun is now getting into this world. The day he arrives when Pakistan meets one of his balance of traditional payments and runs out of foreign exchange, as he has done in more than a dozen occasions in the last four or five decades, and there is no one to rescue.
At the time of writing this article, the commercial war between the United States and China is intensifying with a dizzying speed. In a matter of hours, both countries announced massive tariffs against the products of others, and another round of European Union tariffs were expected. Something very unusual was also happening in the financial markets, since the markets of shares and bonds began to collapse simultaneously. In general, these two move in opposite directions, because the money retired from one enters the other. A simultaneous fall in both shows world markets of much deeper chaos.
Here are some things to consider to handle a situation of rapid movement.
The biggest image here is brutal in its simplicity and criticism of its importance.
First, tariffs are not the result of the lobbying of industry, agriculture or any other powerful personal interest in the United States, and the community of economists in the American academy in the American academy denunciates them almost universally. It will be difficult to find any voice outside the Trump administration that thinks that these rates are a good idea.
This is important, because it tells us that this is a crazy gambit. All previous rates, including those presented by the famous Smoot-Hawley law in 1930, arose due to the fierce lobbying of the protection industry. This time is the opposite. The industry, financial markets and academia are united to denounce these rates as reckless. And with their actions, the markets are pointing out their disgust. The liquidations in the markets and bond markets, the improvement of the probability of a global recession, the closure of factories and layoffs of the workers, all are expressions of disapproval and deep apprehension with respect to the impact that these tariffs have probable.
Secondly, if these rates and the resulting commercial war are being pushed against the will of almighty acquired interests in the United States, what exactly is the great idea here? What do you expect to achieve the architects of this policy?
There is a document entitled ‘A user guide to restructure the global trade system’ written by a relatively unknown individual under the name of Stephen Miran. Posted in November 2024, exposes all this. Subsequently, Look was chosen by Trump to be the president of the Council of the President of Economic Advisors and, although he does not agree with the rhythm and intensity with which Trump pursues the tariffs, clearly presents in the document why the policy is necessary.
In a nutshell, they look at that the United States is carrying a great burden to provide a security umbrella to the world, as well as its reserve asset, the US dollar. Although the United States had a dominant position in the world economy (in the 1960s, its part of the world GDP was 40 percent, he says, it has now been reduced to 26pc), the dollar as a reserve currency helped the United States because they could print any amount of money to pay their invoices. But today as the rest of the world has been included and the participation of the United States in global trade, as well as global GDP, the dollar as a reserve active has become a load because other countries can devalue their currencies to reduce their products in global markets, but the United States cannot.
To stop this trend, the United States can take monetary measures (such as attaching user rates to dollars maintained as reservations by other countries) or can take commercial measures through rates. He advocates the latter, argues that this is in opposition to what the industry and the academy want, which will be accompanied by a collapse of short -term assets prices, but could eventually lead to the United States to a position in which part of the land that has lost to other countries can recover.
The most important thing, argues that they intertwine security and trade relations. Since the United States provides the safety and reserve assets that supports the global commercial system, it is able to use both to stop the erosion of its own position within this world. “Countries that want to be within the defense umbrella must also be within the fair trade umbrella,” he argues.
“This tool can be used to press other nations to join our tariffs against China, creating a multilateral approach to tariffs. Forced to choose between facing a tariff on their exports to the US consumer or applying rates to their imports from China, who will choose? … the attempt to create a global tariff wall around China would increase the pressure of China to reform its economic system.”
The key conclusion here is that the tariffs are not about to disappear soon, that the institutions that rescued Pakistan historically could be on their way to disappearing, and that Pakistan could, in the near future, to be forced to choose between the United States and China. This requires an integral renewal of our economic strategy completely. The New World dawns before us will not admit Orthodoxy of import substitution or faith in the liberalization and growth driven by export.
The writer is a business and economy journalist.
Posted in Dawn, April 10, 2025
