Responding to Trump 2.0: A Committee to Save the Rest of the World

The opening two months of Donald Trump’s second administration have been nothing short of seismic. On Day One, he swiftly announced the United States’ withdrawal from the Paris Agreement and the World Health Organization, and ordered a review of US engagement in all international organizations including the International Monetary Fund (IMF) and World Bank. The US also opted out of attending this year’s Group of 20 (G20) meetings, slashed its commitments to international economic development and the North Atlantic Treaty Organization (NATO), and unilaterally opened talks with Russia’s Vladimir Putin to force Ukraine into a ceasefire.

Economic forecasts from other investment banks similarly were downward revisions, and both the IMF and the World Bank project that a global trade war could shave as much as 7% off the world’s gross domestic product (GDP). Unthinkable just a few months ago, murmurs of a US and global recession have become serious prospects once more.

Chaos or calculation?

The turbulence thus far appears to be only the prelude to Trump’s broader policy blueprint. His “America First Trade Policy,” enshrined in an executive order on Day One, promises to introduce so-called “reciprocal tariffs” which Trump later vowed to impose beginning April 2.

The intellectual basis of Trump’s “America First Trade Policy” and many of his subsequent orders, however, rest on flawed economic logic. Trade deficits are not subsidies to other countries; tariffs don’t shrink trade deficits or revive declining industries — as Trump’s first term demonstrated.

Under Trump’s proposal for reciprocal tariffs, the US will take into account taxes including goods and services taxes and value added taxes within the jurisdiction of its trading partners. However, such taxes are not tariffs; they are largely consumption taxes and apply uniformly to domestic and foreign entities alike within the sovereign tax jurisdiction.

Nevertheless, these misconceptions are unlikely to deter further tariff escalation.

The true agenda may extend far beyond trade. If so, and if successful, Trump’s vision could dismantle the very international order the US helped build after the Second World War — a transformation his team seems not only willing but eager to pursue, as they believe the US will thrive in a less rules-based and more transactional world.

Rumors swirl of a so-called “Mar-a-Lago Accord,” a grand bargain envisioned by the Trump team designed to reshape global finance and trade to America’s overwhelming advantage. Disruption, in this vision, isn’t a side effect; it’s the strategy. Stephen Miran, Chair of the Council of Economic Advisers, laid out this blueprint in November last year. The plan saw trade disruption as a means to weaken the dollar and thus regain trade balance, without giving up the privilege of a reserve currency. Yet, for now, it remains just talk.

For now, the US appears to be the only party entertaining the idea of a leaders’ summit to work on such a global reset. Japan too vividly remembers the fallout from the Plaza and Louvre accords, which contributed to decades of Japan’s economic stagnation, to engage in another such reset. China, though intrigued by the concept of “major power diplomacy” which Xi Jinping had floated to Barack Obama at California’s Sunnylands estate in 2013, remains wary, having studied in detail those accords and their consequences for Japan and Germany.

Strategic responses: What should be done?

“In a crisis, we must focus on what we can control,” Mark Carney, now Canada’s Prime Minister, said during his campaign for office. That lays out a guiding principle for a global response to “America First,” and it begins with strengthening domestic agendas.

China’s long game:

Since 2015, China has pursued its “new development philosophy,” prioritizing higher-quality growth driven by innovation and productivity. China’s Communist Party Plenum last year added substance to this vision. Tech giants like BYD, Huawei, Alibaba, and DeepSeek signal China’s growing tech prowess. However, weak domestic demand remains a vulnerability. Should Trump fulfil his pledge to impose 60% tariffs on China, China could face a 2%–2.5% hit on its GDP, which would require a surge in domestic consumption to offset the damage. Failure to rebalance the economy would further bloat China’s trade surpluses, escalating global tensions.

Southeast Asia’s balancing act:

Southeast Asia, once a beneficiary of Trump’s policies in his first term as a trade intermediary amid the tensions between China and the US, now faces a harsher reality. The “America First” doctrine targets those that profited from these workarounds. What is the Association of Southeast Asian Nations’ (ASEAN) best defense? Accelerating its own economic integration, not only to blunt Trump’s tariffs but to capitalize on rising Chinese investment and renewed EU interest in the region. The ASEAN Economic Community, which envisions ASEAN as a single market and production base, is meant to do just that, and this is the time to bring it to its fruition.

The global agenda: A counterweight to chaos

Countries cannot afford to neglect the international dimension of their response to the Trump tariffs. Without coordinated action, Trump’s agenda risks becoming the de facto global agenda.

There are several actions that countries can pursue:

1. Responding to tariffs: Tit-for-tat retaliation may be unavoidable to deter further aggression. Yet smarter alternatives exist — subsidizing affected industries and lowering tariffs on non-US imports could mitigate the damage while maintaining global trade flows.
2. Strengthening trade pacts: Expanding and deepening agreements like the Regional Comprehensive Economic Partnership (RCEP) or reviving the EU-China Comprehensive Agreement on Investment (CAI) could counterbalance US disruption.
3. Preserving multilateralism: Despite the World Trade Organization’s (WTO) weakened state — largely due to US obstruction — it remains the best venue to challenge Trump’s tariffs. The WTO’s Multi-Party Interim Appeal Arbitration Arrangement offers a temporary safeguard for rules-based trade.
4. Preparing for the unthinkable: Trump’s second-term playbook, the Project 2025 plan published by the American conservative think tank Heritage Foundation, openly flirts with withdrawing from core global institutions like the IMF and World Bank. The world must ready itself for that possibility — major reforms may be needed to adapt those institutions and the international financial system it supports to an absent or isolationist US.

A Committee to Save the Rest of the World

Time’s cover of February 15, 1999, famously presented the “Committee to Save the World.” It showed a picture of then-US Treasury Secretary Robert Rubin, Federal Reserve Chairman Alan Greenspan, and Rubin’s deputy and successor Lawrence Summers. The cover reflected the mood at the time: the three Americans had been fighting crises around the world, from the 1994 Tequila Crisis to the Asian Financial Crisis and the Russian subnational default. Controversial as some of this trio may have become later in their careers, there was no doubt that the US played a decisive role then in pulling together the world’s response to crises in the international financial system.

Now that the US itself has become the disruptor of the international system, new leadership is required. A “Committee to Save the Rest of the World” could coordinate a multilateral response to the unilateral Trump agenda and prevent a repeat of the history of the 1930s.

Who exactly should be on that committee remains to be seen, but a natural candidate that has emerged after the global financial crisis is the G20. The G20 has lost some of its luster in recent years and geopolitical events have not been kind to the group.

But the US’ decision to forego this year’s G20 is an unexpected opportunity for the rest of the world to get organized. The stakes couldn’t be higher. The question is: Who will rise to meet the challenges?

This commentary is the author’s personal opinion and not to be attributed to the organizations he is affiliated with.

© Bert Hofman.

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