MARKET PERSPECTIVE
By J Mulraj
Oct 4- 10, 2025
Trump’s aggression is breaking trust in America
Image created by Freepik
In 476 CE, or Common Era, (a secularised AD), Emperor Niro was depicted as having played the fiddle, more likely the lyre, as Rome burnt.
The modern day analogy may, perhaps, be Donald Trump fiddling around with tariffs, as America burns. The President himself alluded to a burning America, whilst addressing 800 US military officers at Quantico, urging them, apparently, to prepare to control civic unrest, perhaps firing at Americans protesting. The generals showed their disdain for such an illegal order (the army is meant to fire at enemies, not their own citizens; local law enforcement agencies are tasked with that), with a stony silence.
At the post WW II Bretton Woods Conference, the world bestowed upon America the extraordinary privilege of being the sole interanationally accepted global currency. By virtue of this, US citizens continued to spend beyond their means, without worrying about inflation, which was exported to other countries. Trump has misused the extraordinary privilege by levying high tariffs and sanctions, on other countries, and by seizing assets, acts which has pushed the effort of others to de-dollarize international trade.
Trump froze $300 b. of Russian funds, for invading Ukraine. This was after the US Government ignored several pleas of Russia not to grant NATO membership to Ukraine, which Russia considered to be an existential threat.
In response, other countries have reduced the % of their central bank funds held in US $ and increased holdings of other assets like gold. In total, non US Central banks have reduced their $ holdings by around 5% of their reserves since the invasion.
The US economy, with a nominal GDP of $ 29 trillion, is, of course, a large market for countries to export to. Also true is the fact that American consumers, spoilt for choice, overspend, and it is this over consumption, rather than unfair tariffs, that has created the trade deficit. And also the debt taken to finance it.
As this column has pointed out, it’s illogical for Trump to accuse other countries of ‘ripping off’ America, when it has become the world’s largest economy! Doesn’t make sense, does it?
Trump has browbeat other countries like Japan and the EU block, to sign trade deals which are one sided, in favour of America. In the deal with Japan, eg, whilst Japanese products, including cars, will attract a 15% duty when exported to America, American cars will enter duty free. Besides this, Japan needs to invest $550 b. in America, in projects decided by America, and 90% of profits from these investments will go to USA. Donald Corleone, sorry, Trump, was mighty pleased.
As a consequence of high tariffs and of using the clout given o America by the SWIFT platform, to seize assets of other countries, they are coalescing to create de-dollarisation alternatives.
The image above shows leaders of other countries warming their hands at the raging fire of de-dollarisation, which is being fed by Trump’s high tariffs. His tariff policy is harming the trust in America that had been built up earlier; trust in it’s currency, trust in its institutions and trust in its ability and willingness to honour the commitments it has made.
So there are attempts to reduce the use of the USD in international trade. The Russian Government has announced the possibility of integration of financial settlement systems of Russia, China and India. They will unite to conduct settlements of trade using digital currencies. If this happens, these three leading nations of BRICS, alongwith others who would like to join, would be released from the constraints, and costs, of the SWIFT system. This system, under US control, allows imposition of sanctions, allows the seizure of financial assets, such as the $ 300 b. of US $ reserves of Russia’s Central Bank, and gives Trump the heft to impose inordinately high tariffs. The high tariffs are a pathway to negotiate trade deals, unilaterally in US’s favour, with a reduction in tariffs acting as the sweetener.
But whatever Sir Isaac Newton said in 1686 still holds true. ‘Every action has an equal and opposite reaction’. China reacted to absurdly high tariffs imposed on it by ordering its airlines to cancel all orders for Boeing.
China’s COMAC has built and displayed two commercial aircraft’s, the narrow bodied C919 and the wide bodied C929, both of which received orders, from Chinese airlines. Boeing, which sells 80% of its planes abroad, management announced its intention to move some production lines to Mexico, to cut costs. This plan was quickly scuppured by Trump, who threatened a 200% tariff on planes produced by Boeing in Mexico and sold to American airlines! Think about that! Trump is making it impossible for aircraft it produces elsewhere being sold to American Airlines! Does he want these airlines to buy from rivals Airbus, or, good heavens, from China’s COMAC?
Similarly, after China refused American soybean, because of the tariff war, it turned to Brazil. American farmers are severely hurt and cannot replace the big Chinese market.
This, in turn, has affected farm equipment maker John Deere.
Trump had also tried to retain its lead over China in semiconductors by restricting Chinese access to high performance chips by Nvidia, and by pressurising Dutch company ASML to stop sale of advanced lithography machines to China. China has developed its own alternatives for both high performance chips and lithography machines and become a challenger.
So Trump’s aggressive tariff policies are hurting, not helping, American interests and thwarting exports of US products like commercial aircraft, defence equipment and ag products like soybean. The trust America had built up since WW2 is eroding.
The US will have mid term elections on Nov 3, 2026, when all 435 Congress seats and 35 Senate seats will go up for re-election. Perhaps Trump’s hold over both may be reduced, and cause introspection.
Trump needs to be applauded for his push towards a Mid East settlement deal. Hamas has agreed to release of the remaining hostages but wants discussion on a few points. Let’s hope that at least one conflict is resolved.
Last week the BSE Sensex closed the week at 82500 for a weekly gain of 293 points.
The main, but distressing, development in India, last week, was the internecine feud between trustees of the two Tata Charitable Trusts, the Ratan Tata Trust and the Dorabji Tata Trust. They, combined, control around 66% of Tata Sons, the principal holding company of the group. The objective of this structure was to ensure that both charitable trusts receive funds for charitable purposes from the profits of the operating companies. A very laudable objective, albeit one that has now put the most highly regarded group in a piquant situation. One hopes that this feud gets resolved swiftly.
America, as much of the rest of the world, is in self created turmoil. One hopes that the Middle East conflict gets resolved. Sadly, another one over Venezuela appears to brew. And Taiwan remains on the back burner. Caution is advocated; even Warren Buffet thinks so.
Comments may be sent to jmulraj@asiaconverge.com
COMMENTS