The Looming Shadow of Uncertainty

Economists worldwide are increasingly focused on a single, pervasive term: uncertainty. This abstract concept now casts a long shadow over the global economy, creating an surroundings of instability and unpredictability.

US Tariff Measures: A source of Global Economic Risk

The United States’ trade policy has undergone significant shifts, emphasizing tariffs as a strategic tool [1]. These measures, often dubbed Tariff War 2.0, have become a primary source of risk for global economic instability.

The logic behind these tariffs is rooted in protectionism: to revitalize American manufacturing, reduce trade deficits, and safeguard domestic jobs. However, the global economy is an interconnected network, and disruptions in one area can trigger widespread consequences.

According to the UN, global trade could shrink by 3% due to the US’s new tariff measures [2].

These tariffs also put upward pressure on the value of the U.S. dollar, which makes U.S. exports more expensive and increases the attractiveness of imports to U.S. customers [3].

Expert Perspectives

Kristalina Georgieva, managing director of the IMF, stated earlier this month that the US’ tariff measures pose a significant risk to the global outlook at a time of sluggish growth. She emphasized the importance of avoiding actions that could further harm the world economy.

Rebeca Grynspan, head of the UN trade agency, recently voiced concerns over the uncertainty that has engulfed the global economy following the US’s decision to impose tariffs on various countries. She warned that this uncertainty is hindering global economic growth and could lead to more severe economic crises.

Erosion of Global Trade Norms

The uncertainty stemming from US tariff hikes extends beyond policy unpredictability. It also undermines global trade norms. The multilateral trading system,a cornerstone of global economic growth for decades,is being eroded by unilateral actions and challenges to the world Trade Association.

Washington’s trade policy resembles a “no-rules boxing match,” where every new tariff is a heavy blow aimed to the global economy. Though, when you throw a punch at your opponents, they are unlikely to simply remain passive and endure it. The outcome is more terrifying than a boxing match as no one knows who will be hurt by the next punch.

China’s Role as a Stabilizer

While the US is perceived by some as creating instability,China is positioning itself as a source of stability and predictability in the global economy.

China has actively pursued policies to expand openness and promote cooperation, demonstrating its commitment to globalization through initiatives like the Belt and Road initiative and active participation in international economic and trade negotiations.

In 2024, China’s GDP growth reached its 5% target, exceeding 130 trillion yuan ($17.8 trillion). The GDP growth target for 2025 is set at around 5%.

Last year,china’s contribution to global economic growth was approximately 30%.

By adjusting domestic policies, expanding domestic demand, and strengthening trade cooperation, China has demonstrated resilience against external shocks, providing a model for other countries navigating global uncertainties.

The Importance of Credibility

Economic policy is more than just numbers; it is indeed a reflection of national credibility. China has fostered trust and cooperation through stable policies and an open approach.

In contrast, the US tariff policy, while purportedly aimed at Make America Great again, ultimately burdens American consumers and businesses, undermining US international credibility and leadership.

A Pivotal moment for the Global Economy

The year 2025 is a critical juncture for the global economy. Certainty can only emerge from cooperation, rules, openness, and order.

Washington faces a choice: to persist with tariffs, risking a lose-lose black hole, or to return to multilateralism and seek cooperative solutions.

The current situation presents two possibilities: if one engine (referring to the US economy) continues to misfire, the global economy faces a crisis. Though, if both engines (the US and China) coordinate, they can propel the world economy toward a brighter future.

Former Singaporean prime minister Lee Hsien Loong emphasized that the rules-based order and cooperative approach is not an option but a necessity.