As Typhoon Trump wreaks havoc, is there a way to escape the storm?

As the typhoon that is US President Donald Trump sweeps over trading partners and foes alike, even as stock markets are hitting record highs, there is an eerie feeling of being trapped inside the eye of the hurricane with no guidance on what to do and where to go. There is misinformation everywhere. It seems as though there is no objective, independent verification of the real level of casualties and devastation in the wars in Ukraine and Gaza. Neither is it clear Trump can deliver peace in Ukraine when he meets Russian President Vladimir Putin or rein in Israel-Iran tensions before they become nuclear. Reality today is stranger than even the most speculative science fiction. Who would have predicted a month ago that Trump would impose 50 per cent tariffs on India, or unlisted start-up Perplexity AI – which has an estimated valuation of US$18 billion – would bid US$34.5 billion to buy the Chrome browser from Google, which has a market cap valuation of US$2.4 trillion? Lions are trying to swallow elephants, as also seen in the United States now taking on both China and India. From the perspective of financial markets, the US does appear to be on a roll. Recent estimates indicate that the nearly 5,500 companies listed in the US have a market valuation of more than US$81 trillion – almost 280 per cent of the 2024 US gross domestic product – with rising revenue of nearly US$30 trillion. The Magnificent Seven tech companies alone have a market capitalisation of nearly US$20 trillion, or just under one quarter of the total market cap. At the same time, they have revenue of more than US$2 trillion, or 7 per cent of total US listed corporate revenue. The US economy is proving more resilient than expected. This is despite real interest rates for 10-year US Treasuries standing at 1.17 per cent after being 2 per cent as late as February this year. Small wonder that US Treasury Secretary Scott Bessent has called for upwards of 175 basis points in cuts to interest rates as the US federal debt of US$37 trillion is already paying US$1 trillion a year in interest rate charges. With expectations for as many as three rate cuts by the US Federal Reserve in the rest of this year, it is no wonder that investors in US markets are cheering. Mainstream economists who thought that global tariff shocks would have a serious impact on the global economy are still puzzled as to why inflation has remained muted so far while the anticipated trade and economic slowdown has not surfaced in the economic data. While the International Monetary Fund’s (IMF) latest Global Economic Outlook warns that tariff shocks have added to policy uncertainties, the front-loading of exports to avoid tariffs led to a strong surge in exports to the US in the first quarter of the year, which supported growth in Europe and Asia. Amid the easing of monetary policy as global inflation recedes and aided by depreciation of the US dollar, the IMF raised its projections from its April forecast modestly from 2.8 to 3 per cent for 2025 and from 3 to 3.1 per cent next year. In short, things do not look so bad despite the uncertainties over tariffs. This helps explain the bipolar nature of expectations, with financial markets experiencing the best of times while geopolitically the world faces the worst of times with escalating conflicts from Ukraine to the South China Sea. What are the options for corporations, investors and policymakers in this whirlwind of uncertainty? Several patterns are emerging from the confusion. First, the Trump administration is using tariffs to raise revenue to somewhat restore the US’ fiscal credibility. When Trump’s efforts meet with resistance, he does tend to moderate his stances, such as the relaxation of rules barring semiconductor chip sales from Nvidia and Advanced Micro Devices to China, subject to paying the US government 15 per cent of revenue from sales to China. Second, many policymakers see that with the disruption of artificial intelligence (AI) and robotics, there is little alternative but to double down on using AI tools to improve domestic productivity, upgrade labour force skills and use industrial policy to help domestic businesses transform. Third, the decoupling of global supply chains is tougher than expected. Every company and country within these supply chains is looking to make them more resilient and flexible to adjust to major trade and tariff policy changes. Because the US is moving towards a bilateral negotiation stance, each country and company is trying to lay low and not provoke any further sanctions or tariffs. They are surely but silently working towards trade and payment diversification to minimise future disruptions. In short, while the US is noisily creating shock and awe policy announcements, the rest of the world is quietly preparing alternatives. Former Singaporean prime minister Lee Hsien Loong warned that “the best framework is the world, temporarily minus one”. If the US is going one way while the rest wants to retain the multilateral system, we could end up with a “minus one” order. All storms subside, just like political fevers. Living in the eye of the storm and working together to isolate American exceptionalism might be one road out of chaos. The other, as economist Friedrich Hayek said, is the road to serfdom – but he was referring to socialism.

As Typhoon Trump wreaks havoc, is there a way to escape the storm?

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Countries and corporations are surely but silently working towards trade and payment diversification to minimise future disruptions

Countries and corporations are surely but silently working towards trade and payment diversification to minimise future disruptions