Economies, unite to defeat US' tariff war

US President Donald Trump declared April 2 as "Liberation Day" for the United States. For the rest of the world, however, April 2 may be remembered as the day the US administration dropped an economic "nuclear bomb".

The US' tariff strategy is nothing but an aggressive attempt to extract global economic rent by leveraging its central position in the global political architecture and as a still substantial market power. The US tariff rate on Chinese imports now effectively totals 145 percent. It is a coercive approach aimed at addressing long-standing structural issues in the US economy — rising debt and deindustrialization — by shifting the costs onto the global economy.

The repercussions of the US' tariff strategy will unfold over the coming months. In particular, developing economies will have to bear the brunt of the US' belligerent move in the shape of a wave of bankruptcies, job losses and poverty uptick. What is especially troubling is that the US' ability to extract these costs from the rest of the world does not stem from its overwhelming dominance of the markets. Rather, it reflects a deeper problem: other economies are trapped in a classic prisoner's dilemma.