As Typhoon Trump sweeps over trading partners and foes alike, even as US stock markets are breaking record highs, there is an eerie feeling that one is trapped inside the eye of the hurricane, with no guidance on what to do and where to go. There is misinformation and disinformation everywhere, since we have no objective and independent verification on the real casualties and devastation in the Ukraine and Gaza wars, nor whether Trump can deliver a truce with Putin when they meet soon, or rein in the Israel-Iran conflict before it becomes nuclear.

Reality is today stranger than even the most speculative science fiction. Who would have predicted a month ago that Trump would impose 50 percent tariffs on India or that the unlisted start-up Perplexity, with an estimated valuation of $18 billion, would bid $34.5 billion for the app Chrome from Google/Alphabet, which has a market cap valuation of $2.4 trillion or at least 130 times larger than Perplexity? Lions are trying to swallow elephants, such as the United States is taking on China and now India, the next superpower with a population (1.4 billion) 4.2 times that of the United States, but gross domestic product at $3.9 trillion or only 13.3 percent of the US. Nevertheless, India's real GDP is growing at 6.2 percent in 2025, more than double the 2.7 percent growth for the United States. India has the second-largest pool of STEM graduates at 2.55 million in 2020, compared with 3.57 million in China and only 820,000 in the United States.

From the financial markets' point of view, the United States seems to be on a roll. The latest data shows that 5,489 companies listed in the US have a market valuation of $81.25 trillion or 278 percent of 2024 GDP, with rising revenue of $29.96 trillion, about 100 percent of GDP. The Magnificent Seven alone have a market cap of $20 trillion (just under one quarter of total market capitalization), but revenue of $2.1 trillion or 7 percent of total US listed corporate revenue. The US economy is more resilient than expected, despite real US interest rates (Treasury rate less inflation) at 1.17 percent for 10-year Treasuries, even though it was at 2 percent as late as February this year. Small wonder that US Treasury Secretary Scott Bessent has called for a 175 basis points cut in interest rates, since the US gross debt at $37 trillion is already paying $1 trillion a year in interest rate charges.

With an expected three further cuts in Fed interest rates for the rest of the year, small wonder that investors in the 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 so far has remained muted, while the anticipated trade and economic slowdown have not surfaced in the economic data. Amazingly, the latest July 2025 International Monetary Fund Global Economic Outlook report, while warning that the tariff shocks added to policy uncertainties, noted that 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. Due to the easing of monetary policy as global inflation recedes and aided by the depreciation of the dollar, the IMF raised its projections from the April 2025 forecast modestly from 2.8 percent to 3.0 percent for 2025 and from 3.0 percent to 3.1 percent next year.

In short, despite the tariff uncertainties, things don’t look so bad, which is why we seem to be bipolar in expectations — the best of times in financial markets, and the worst of times in terms of potential escalating conflicts from Ukraine to the South China Sea.

What are the options for corporates, investors and policymakers in this whirlwind of uncertainties?

Several patterns are emerging from the confusion. First, the Trump Administration is using tariffs to raise fiscal revenue to somewhat restore fiscal credibility. When there is pushback, like that from China, Canada and India, there can be some moderation, especially if Trump sees benefits to the US, such as relaxation of semiconductor chip sales from Nvidia and AMD to China, subject to the equivalent of a 15 percent export tax.

Second, most policymakers see that with the artificial intelligence and robotics disruption, there is no alternative but to double down on using AI tools to improve domestic productivity, upgrade labor force skills, and, in essence, use industrial policy to help domestic businesses transform through better digital public infrastructure.

Third, decoupling of global supply chains is tougher than expected, as every company and country within these supply chains is looking into how to make them more resilient, agile 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 going below the radar screen not to provoke any sanction or tariff/non-tariff action. They are surely but silently working towards trade and payments diversification to minimize future disruptions and shocks. In short, while the US is noisily creating shock-and-awe policy announcements, the rest of the world is quietly preparing for alternative arrangements that involve more local currency, netting of payments and more South-South (N2N or node-to-node) trade to ensure that trade continues to sustain growth and development.

Former Singapore Prime Minister Lee Hsien Loong warned that the “best framework is the world, temporarily minus one.” If America is going one way, while the rest want to retain the multilateral system, we may end up with a “minus one” order.

All storms subside, just like political fevers. But living in the eye of the storm, working together to isolate American exceptionalism may be one road out of chaos. The other, as Austrian philosopher Hayek said, is the road to serfdom, but he was referring to socialism.

Andrew Sheng

Andrew Sheng is a distinguished fellow at the Asia Global Institute, University of Hong Kong, and chairman of the George Town Institute of Open and Advanced Studies, Wawasan Open University. The views expressed here are the writer’s own. — Ed.

(Asia News Network)


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