I have travelled across a drastically altered North America over the last week, from Arizona to Washington, DC, in the United States, and then to Saskatchewan, Canada, where I have seen firsthand the effects of a historic shift in the global economic system. There is so much ambiguity that no one can really predict its future.
It just takes nine minutes to walk from the White House Rose Garden to the International Monetary Fund (IMF) headquarters. Two very distinct worlds have intersected in the last several days during our little walk.
The former is where President Trump took on the globe with his so-called "reciprocal tariffs" at the beginning of this month, using an unusual graphic and dubious calculation.
Three weeks later, after a backlash, market turmoil, and uncertainty, the world's finance ministers convened at the latter location to attempt to pick up the pieces, while still recovering from the setback.
Something special occurred during the IMF sessions that featured meetings of G7 and G20 members. Nearly the whole rest of the world expressed frustration, confusion, and significant anxiety towards the US delegates for sending the world economy back into a catastrophe just as it had just recovered from four years of epidemic, war, and energy shocks. They did not confront outright hostility.
REX, EPA-EFE, and shutterstock Executive orders are signed by US President Donald Trump in the White House Oval Office. REX, EPA-EFE, and shutterstock
US officials at the IMF were very concerned, frustrated, and perplexed by Donald Trump's behaviour.
East Asian nations, which were labelled "looters and pillagers" of American employment in early April due to the fact that their economies—many of which are important partners of the United States—export more commodities to the United States than the other way around, voiced the greatest worry.
The G7 discussed the silent, resolute rage of the Japanese, who felt reportedly misled by the US's trade stance and whose recent sell-off of US government bonds was caused by their uncertainty about what the US trade negotiators really want. US tariffs are "highly disappointing," according to Finance Minister Katsunobu Kato, who told the roundtable that they are damaging GDP and destabilising markets.
It brought back memories of my time at the IMF in 2022, when finance ministers from underdeveloped nations asked me whether things were going OK in Britain amid Liz Truss's government's short budget crisis. Then, when the UK's typical function was to resolve crises in those markets, it was the cause of instability, trading like an emerging market.
The retreating bugle
This week, the dim sound of the US trade war's retreating trumpet became louder among frenzied bond markets. From appreciation for their economic accomplishments to the promise of an agreement to perform a "beautiful rebalancing" of the global economy, the United States seemed to be offering a forest of olive branches to entice the Chinese to return to the negotiating table. The accusations of "looting and pillaging" were a long cry from this.
However, the highly anticipated meeting between US Treasury Secretary Scott Bessent and his Chinese counterpart did not come to pass.
The presumption that the US is backing away from what it cannot admit was overreach is being reported by the majority of the rest of the world as they leave their talks with Bessent.
Reuters As President Donald Trump signs executive orders, U.S. Commerce Secretary Howard Lutnick and Treasury Secretary Scott Bessent stand.Reuters
On tariffs, US Treasury Secretary Scott Bessent (centre) is now in the lead.
As the CEOs of Walmart and Target privately inform the president that there would be empty shelves starting in early May, there is a general belief that nations do not need to reciprocate.
The one to keep an eye on is the decline in container traffic from China to the port of Los Angeles, which is the primary conduit for the global economy in the first quarter of the twenty-first century. The IMF's analysts argue that as satellites monitor fewer and more empty ships departing China's ports, they may begin to see the effect from space. The United States will, of course, deny this.
West Wing comedy
Indeed, compared to the start of the IMF Meetings, there was a lot more relative quiet by the conclusion. Why? Because Scott Bessent, the US Treasury Secretary, has taken charge of the tariff agenda and has mostly calmed the globe and markets on his own.
Financial diplomats blamed some ridiculous West Wing shenanigans for the Bessent ascendancy and the crucial 90-day halt in the so-called "reciprocal" tariffs.
The narrative goes Only after a different White House economic adviser successfully used the ruse of a fictitious meeting to entice hardline tariff hawk and creator of the notorious reciprocal tariff equation Pete Navarro away from the Oval Office was Bessent able to get Trump's attention regarding the harm his tariffs were causing to the bond market.
Reuters Peter Navarro, senior trade advisor, appears during a CNN interviewReuters
The notorious reciprocal tariff formula was created by Peter Navarro.
It is believed that Wall Street executives believed that the only way to restore any kind of normalcy would be to fire Navarro. According to insiders, Trump would never fire his trade advisor since he was imprisoned for his support of the president during the January 6 riots.
At best, this sounds like a real-life Hilary Mantel book about the Trump court, reenacting the future of the global economy and all of our means of subsistence. At worst, it is making governments and bankers wonder how far the United States or the rest of the globe may go. At the moment, the ambiguity around everything is more worrisome than the immediate effects of the tariffs.
A terrifying situation
And some rather crazy speculations about what may happen next are being sparked by this ambiguity.
"Swap lines" between central banks are in place to maintain financial stability during periods of severe global financial crisis, ensuring a steady supply of US dollars.
However, some central banks across the globe have begun to speculate about what would occur if the US decided to utilise its dollar "swap lines" to the rest of the world as a weapon or even as a diplomatic tool.
Is it unthinkable that the United States may refuse them or reject the Federal Reserve's distribution of them? Since there is often no way to lessen it, one must just accept that it is unthinkable. Even if it is doubtful, the dire situation for the global financial system is no longer completely unfeasible.
The notion that nations having a trade surplus with the US may contribute to US funding by imposing an effective tax on their holdings of US government debt is probably less implausible. A few of these concepts have been proposed by US government advisors in papers and speeches.
Reuters Peter Navarro, senior trade advisor, at the White HouseTrump is unlikely to remove Navarro, according to Reuters insiders, since he was imprisoned during the January 6 Capitol Riots in favour of the president.
Concerning yet false beliefs might begin to erode trust in this environment. For instance, just after the first tariff announcement, there was a "whodunnit" over the substantial sale of US government debt.
Some others thought it may be China. However, at the moment, Tokyo is the United States' largest creditor in total. Was this Japanese selling an apparently intentional diplomatic ploy to persuade Trump to suspend tariffs? Even if it appears unlikely, two officials with a lot of connections told me about this situation, which illustrates the current fever.
Nobody is crawling.
Bessent's assertion that "Investors need to know that the U.S. government bond market is the safest and soundest in the world" was impressive, even if he had taken over control of this process and was dominating the US weekend airwaves. If you must say it...
Regarding his international colleagues, another prominent finance minister informed me that "no one was crawling to the Americans" because of the US's unparalleled ability to bargain with its own bond market.
Nobody appears to know if the 10% "baseline" universal tariff is even negotiable in the midst of the uncertainty. The fact that President Trump said that tariff money would be enough to "completely eliminate" income taxes for "many people" suggests that it will remain in place.
Reuters Speaking at the White House, U.S. Secretary of the Treasury Scott Bessent Reuters
"The U.S. government bond market is the safest and soundest in the world," according to Scott Bessent.
"It depends on who you speak with and what day of the week it is. One senior G7 official said, "I've heard three different positions articulated on the baseline, one by the White House, one by the Commerce Department, and one by a US Trade representative." "Are you aware of the ultimate result? Whatever the president desires at the time, influenced by commercial, political, and industrial factors," I was informed.
Reliable UK diplomacy
The UK is especially interested in this since the baseline has a significant impact on the country. The US hit to the UK seems inexplicable, but by the White House's own imaginative definition of "trade cheating"—running a goods surplus—the US is actually "cheating" the UK a little bit. This is in addition to significant tariffs on cars, our largest export, and probably additional ones on pharmaceuticals, our second-most important export.
During two interviews in Washington, I repeatedly brought up this subject with the Chancellor. She politely turned the idea down.
However, she ultimately said something rather informative about the changing world while we were walking around the well-known reflecting pool between the National Monument and the Lincoln Memorial at the conclusion of our most recent conversation. "I understand why there's so much focus on our trading relationship with the US but actually our trading relationship with Europe is arguably even more important, because they're our nearest neighbours and trading partners," she said to me. Back home, it created some controversy, but it wasn't an accidental blunder.
For internal political considerations, it is not possible to make food standards concessions to the United States. The emphasis is still on a technological prosperity pact, which seems to have won over the Americans after persistent UK diplomacy. The UK's intention to proceed with a "high ambition high alignment" agreement with the European Union seems to be quite obvious at this point. And among the finance ministers, news had spread.
Reuters The Chancellor of the Exchequer of Britain Speaking during a news conference in the Downing Street Briefing Room is Rachel Reeves.Reuters
The UK's commercial relations with the EU could be "more important" than those with the US, according to Rachel Reeves.
A high-ranking foreign official cited the UK-EU reconciliation as an example of how the rest of the world is cooperating and "doing its homework" in reaction to the US's lack of dependability. I was informed in private, "I see you are dating again, but Brexit was a bitter divorce."
The US's continued involvement with the World Bank and IMF also provided some respite. In preparation of a second Trump administration, the think group The Heritage Foundation released its Project 2025 plan in April 2023, which called for the US to withdraw from certain international bodies. The governor of the Bank of England recently voiced his worries to me about this.
Bessent used the discussions to reaffirm US support for the Bank and the Fund, but with a shift away from social and environmental concerns and back towards their basic duties. That was a victory for the Europeans.
A great conflict?
However, there is still a larger canvas. Will the United States attempt to enlist the support of the rest of the world in a major conflict with China by using this trade war? If this was the strategic aim of all this, it seems incredible to have so fundamentally and seriously irritated friends. Spain, an EU member state subject to 20% tariffs, serves as a test case in this regard.
Two weeks ago, Spanish Prime Minister Pedro Sánchez visited with President Xi in Beijing. The IMF has only enhanced Spain's burgeoning economy, which was the fastest expanding advanced country last year and is expected to do so again this year. Its foundations include tourism, renewable energy, foreign worker availability, and substantial Chinese investment and technology transfer. The US viewed the visit negatively and had a "frank" conversation with Carlos Cuerpo, its finance minister.
"There is a huge trade deficit with China, and we need to correct that by opening up to China and attracting Chinese investment, of course, within an overall economic security umbrella," he told me at the Semafor World Economy Summit in Washington, DC, seemingly unaffected by all of this. And the only way to do that is to interact and have a conversation with the Chinese authorities.
REX, EPA-EFE, and shutterstock During a meeting, US President Donald Trump speaksREX, EPA-EFE, and shutterstock
In June, President Trump is scheduled to visit Canada for the G7 Summit. Spain has successfully negotiated a significant investment and technology transfer from a Chinese electric car manufacturing. It is disliked in the US. However, it is hard to see the plan amid the confusion and tariff charges of the last month if the US wants to convince the EU and Spain of its dependable long-term allyship against China.
The winner of Canada's election will firmly reintroduce the G7 economy into this discussion about global transformation. Could the recently elected prime minister of Canada also begin a full-scale discussion with the United Kingdom? Then, when President Trump's ninety-day deadline comes to an end, he will preside over the G7 Summit in Canada in June. It is assumed that Donald Trump will visit Alberta, which he says belongs to his own nation.
Peace, tranquilly, and deeds may be traded.
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