by Yasir Habib Khan

Editor's Note: The author is President of the Institute of International Relations and Media Research (IIRMR). The article reflects the author's opinions and not necessarily the views of China Economic Net.

For much of the 20th and early 21st centuries, the global economy has been characterized by a Western-centric order, a near hegemony dominated by the United States and Europe. This “Old Boys’ Club” wielded considerable influence through bloc politics, zero-sum game and arm-twisting of international institutions.

Because old-fashioned economic order has been infested by gazillion contradictions, injustices and disparities widening gap between rich and poor, many have already expected its doom in phases. However, instead of bit by bit, decay has raced toward its terminal ending as a result of recently created the US’s “tariff extremism” around the globe.

Since US’s tariff offensive eclipsed friends and foes, the contours of new global economic system are in making with leading forces of emerging markets such as China and global south.

Since returning to the presidency, Trump has unleashed a new wave of “tariffs terrorism” unprecedented in scope. Traditional allies and strategic rivals are now under the same banner, marking a radical shift in Washington’s trade policy that hardens positions taken in Trump’s first term and now, amplifying them with an unbridled display of power.

In order to assess as to why US-led world economic order that propagates protectionism, decoupling and unilateralism is doomed to fall. And what are the merits of emerging law-based multipolar world economic order that will steer all toward sustainable prosperity, there are vivid rationales.

One of the most immediate reasons which has started dismantling US-led economic order is that protectionism is increasing in consumer prices. Tariffs and import restrictions lead to higher costs for imported goods, which are often passed on to consumers. For example, the tariffs imposed by the U.S. on Chinese goods have resulted in higher prices for electronics, clothing, and household items, disproportionately affecting low-and middle-income households. This inflationary pressure can reduce consumer spending and overall economic growth.

Protectionist policies stifle economic growth by limiting competition and innovation. When domestic industries are shielded from foreign competition, there is less incentive to improve efficiency and invest in new technologies. This can lead to stagnation in productivity and a decline in the overall competitiveness of the economy Furthermore, protectionism disrupts global supply chains, leading to inefficiencies and increased costs for businesses that rely on international trade.

The rise of protectionism, tool of tariff terrorism, has also strained international relations, as countries engage in retaliatory measures that can escalate into trade wars. The ongoing US-imposed trade tensions on China serve as a prime example, with both countries imposing tariffs on each other’s goods, leading to uncertainty and volatility in global markets. Such tensions can hinder diplomatic relations and cooperation on other critical issues, such as climate change and security.

The cumulative effects of rising protectionism, linchpin of US-led economic order is destined to lead to a slowdown in global economic growth. As trade barriers increase, international investment may decline, further exacerbating economic challenges in many regions.

Rot has set in for US-ridden global economic order. The dollar, for decades a safe haven, fell about 1.7 percent on April 3, its highest daily drop since November 2022, after President Trump imposed tariffs on imports. Stock markets also tanked as tariffs ignited recession worries.

Left unchecked, a crisis of confidence in the dollar could also undermine its position as the world’s reserve currency, according to market commentaries.

The implementation of US tariffs imposed on April 2 despite 90 days pause can be seen as “the start of a march towards Europe’s independence”, European Central Bank head Christine Lagarde told France Inter radio.

The US administration’s not-so-secret plan is also to rebalance trade by weakening the dollar, analysts say, adding a way to do that would be to enlist foreign central banks in a coordinated effort to revalue their own currencies.

Dwelling on Trump, tariffs and the fate of the dollar, Scottish-American political economist Mark Blyth argues that America’s protectionist policies reflect a global economic reordering that is already underway.

Given untoward situation that has been laying down foundation of new world economic order, global economic powers get a good chance to realign their economic and diplomatic terms.