From MAGA to meltdown: the unmaking of America's order
“Right now, we are very close to a recession. And I’m worried about something worse than a recession if this isn’t handled well,” warned Ray Dalio, founder of the world’s largest hedge fund, Bridgewater Associates. His words cast a foreboding shadow over an already unpredictable future.
The American billionaire investor’s caveat is far-reaching. As he spoke last week on NBC’s Meet the Press, Dalio laid bare the bevy of challenges facing the US economy — a fragile economy with rising debt, an ever-deepening political divide, geopolitical tensions, and a shifting global power structure. “These times are very much like the 1930s,” he said, a subtle reference to one of history’s most volatile periods – marked by the Great Depression, rising protectionism, and the rise of extreme political ideologies.
Sketching the contours of financial doom, Dalio added the prospect of the dollar’s decline as the world’s reserve currency, the dismantling of America’s democracy, and rising international tensions — potentially even a military conflict. “That could be like the breakdown of the monetary system in 1971. It could be like 2008. It’s going to be very severe,” he cautioned. “I think it could be more severe than that if these other matters simultaneously occur.”
But why does Dalio paint this grim financial scenario? The answer lies in Trumponomics, the US president’s aggressive isolationist policies, which have already triggered a disruptive trade war. The rollback of Washington’s commitment to free trade and open markets threatens to undo the global economic order that America consciously built after the Second World War.
The great disruption
In plain view, this seismic shift appears to be driven by two key motivations: first, Trump’s belief that both friends and foes have long exploited the US in global trade, and second, his pledge to “Make America Great Again.” As a result, the MAGA leader spared neither allies nor adversaries, imposing a 10 per cent tariff on imports of goods from around the world, alongside 25 per cent levies on steel, aluminium, and cars. However, he singled out China for 145 per cent levies, inviting a scathing retaliation from Beijing, which imposed 125 per cent duty on US products.
This weaponisation of economic policy by Trump — which not only undermines the World Trade Organisation (WTO) but also seems strategically aimed at political leverage — sent the global financial system into a tizzy, simultaneously eroding America’s leftover credibility as a reliable trading partner.
With that, the global trade order, once structured by agreements and institutions designed to ensure the seamless flow of goods and services, now stands threatened. A cornerstone of this system was the WTO, established three decades ago with the aim of liberalising and overseeing global trade. The global trade watchdogs provided a rules-based framework for international commerce and replaced the General Agreement on Tariffs and Trade (GATT), addressing unresolved issues such as the rise of non-tariff barriers.
But Trump, in true Trump style, acted unilaterally, bypassing these multilateral mechanisms. He justified tariffs on steel and aluminium imports on the grounds of national security, citing Section 232 of the Trade Expansion Act of 1962. Similarly, he invoked Section 301 of the Trade Act of 1974 to impose sweeping tariffs on Chinese goods, accusing Beijing of unfair trade practices.
Rhetoric steeped in disdain
The steep tariffs were accompanied by arrogant rhetoric defying all norms of decency, civility and diplomacy. Trump told reporters that world leaders are “kissing my *s” to negotiate trade deals. He mocked Chinese President Xi Jinping’s tour of Southeast Asia as an effort to “figure out ways to screw the United States of America.” The choice of words of his Vice President JD Vance equally reeks of his contempt for China. “We borrow money from Chinese peasants to buy the things those Chinese peasants manufacture,” he said in a recent Fox News interview.
This language, laced with bravado, speaks volumes about Trump’s disdain for multilateral institutions like the WTO, which he views as an obstacle to American interests. “Trump’s perception of the world is so fundamentally different from what proponents of a rules-based world order would support that his first term in office will likely be considered a ‘walk in the park’ compared with what he's doing now,” noted former German envoy to China, Michael Schaefer.
Economic whiplash
All that said, the “reciprocal” tariffs sparked one of the most volatile chapters in financial markets since the Covid-19 pandemic, wiping trillions of dollars from stock markets and leading to an unsettling surge in US government bond yields. Multinational corporations, caught in the storm, were forced to reassess their global supply chains, with some rashly shifting production away from China to safer shores in Vietnam, Mexico, or even back to the US.
But that was just the beginning of this turbulence. The market volatility was exasperated when Beijing struck back with calculated precision, sending global stock markets plummeting and intensifying fears of a looming recession. Though Trump moved swiftly to retract some of his tariffs, the damage had already been done, leaving scars that would take years to heal.
China’s reaction, however, was far from random. It was sharp, delivered with laser-like focus. It targeted the agriculture sector, the lifeblood of the American economy, especially in the heartland where Trump draws much of his political support. By all means, Beijing delivered a near-fatal blow, one that echoed far beyond trade, hitting the very roots of American livelihoods. And this was followed by more painful blows.
The White House, it appears, miscalculated China’s ability to respond. It is the largest single importer of US agricultural goods. Last year, the US exported $176 billion in agricultural products – 75% of which went to only 10 markets and nearly half (47%) to only three countries: China, Mexico, and Canada. Trump responded to the Chinese move with billions in subsidies to offset losses. Bad economics!
Ripple effects
Tariffs aside, Trump’s disregard for multilateralism is more troubling. He and his aides have frequently criticised the WTO, blocked appointments to its appellate body, and threatened to pull out from the body the way they withdrew the US from WHO. This emasculation of the global trade body’s dispute resolution system crippled a key enforcement tool of international trade. The absence of global avenues for redressal of unfair trade practices is likely to trigger unilateral retaliation and economic escalation.
The ripple effects of Trump’s measures extended beyond trade policy and market volatility. Foreign investment also took a hit, as some investors hastily withdrew from emerging markets or delayed capital expenditures due to the uncertainty surrounding tariffs and supply chains.
Currency markets are also bracing for the shocks of the trade war between the world’s two largest economies. Trump, who has warned against any effort to undermine the dollar in international trade, accuses other countries of manipulating their currencies, sparking fears of a potential currency war, which could upend the global financial system.
It’s not only the global trade order that will take the hit, America’s industry, and American consumers will also feel the pain. Former US presidents were aware of it. Ronald Reagan warned in 1987 that import tariffs lead to industry complacency, retaliatory trade wars, shrinking markets, and ultimately, mass job losses. “The memory of all this occurring back in the 1930s made me determined... to spare the American people the protectionist legislation that destroys prosperity,” he is heard saying in a video clip that has resurfaced amid the ongoing tariffs war.
A trade war built on fiction
But if tariffs are so evidently flawed, one can’t help but ask: where did the idea of this economic misadventure come from? The answer is almost too surreal to believe. It is, quite literally, a Frankenstein of economic policy, born of a fabricated expert.
Peter Navarro, Donald Trump’s senior trade advisor and a bitter China hawk, repeatedly cited the views of “Ron Vara” — an anagram of his own name — in books and memos to back his pro-tariff arguments. This fictitious economist, conjured from the recesses of Navarro’s imagination, was used to lend pseudo-intellectual legitimacy to a trade war that destabilised global markets and fractured decades of economic consensus.
As reported by journalist Rachel Maddow and later confirmed by The New York Times and Snopes, Navarro invoked Ron Vara — a fictional economist of his own invention — to bolster his arguments, even quoting him in official memos. Navarro first caught Donald Trump’s attention after the president’s son-in-law, Jared Kushner, stumbled upon his book ‘Death by China’ on Amazon. Critics have since likened Navarro to a Rasputin-like figure within Trump’s economic circle, advocating extreme trade policies — his use of the Ron Vara persona only deepening concerns about the intellectual integrity behind those proposals.
In a twist worthy of satire, the architect of America’s tariff wars found inspiration not in fact, but in fiction. And Trump gladly embraced “Ron Vara” only because the economic remedy he prescribed fitted perfectly well in the MAGA agenda. Trump has given multiple justifications for tariffs, saying that they would spur US manufacturing, create more employment opportunities for Americans, reduce trade deficit with several countries, and help his administration make billions in fortunes.
It’s a risky gamble, to say the least. The policy fails to confront the structural inefficiencies at the heart of the American economy, overlooking a fundamental truth of the global order: production is concentrated in regions like Asia and South America, while consumption remains entrenched in the United States.
Trump’s unilateral approach is apparently driven by ideological rigidity rather than economic fundamentals, which will only alienate US allies, erode its credibility as a reliable economic partner, and undermine the principles that have governed the global economy for over half a century. Its geopolitical implications have already started manifesting in unprecedented calls from America’s strongest European allies for a multipolar global order – something that until now only the Global South was calling for.
As Gordon Brown, former prime minister and Chancellor of the Exchequer, pointed out, the path forward in a multipolar world demands that nations engage in meaningful dialogue and collaboration. “The way forward, if order is to be maintained, is for nations in a multipolar world to engage with one another — to communicate, collaborate, and consult.”