BY all accounts a world is ending and we don`t know what is going to replace it. For Pakistan this is particularly troubling because despite what we like to tell ourselves, this country has always been deeply dependent on this world to keep itself afloat.

Rarely has the bigger picture mattered more than it does now. To focus only on the short-term impacts would be a mistake. The bigger picture here is brutal in its simplicity, and critical in its importance. For almost half a century now, Pakistan has been kept afloat as a country via bailouts arranged by the institutions of a multilateral world order, chief among them the IMF, followed by the World Bank. The sun is now setting on this world. The day is coming when Pakistan runs into one of its traditional balance of payments crises and runs out of foreign exchange reserves, like it has on more than a dozen occasions over the past four or five decades, and there is nobody around to come to its rescue.

As of this writing, the trade war between the United States and China is escalating with dizzying speed. Within hours both these countries announced massive tariffs against each other`s products, and another round of tariffs was expected from the European Union. Something highly unusual was happening in the financial markets too, as stock and bond markets both started to collapse simultaneously. Usually these two move in opposite directions, because money pulled out of one goes into the other. A simultaneous plunge in both shows far deeper chaos gripping world markets.

Here are some things to note in order to get a handle on a fast-moving situation.

First, the tariffs are not the result of lobbying by industry, agriculture or any other powerful vested interest in America, and they are almost universally denounced by the community of economists in American academia. You will be hardpressed to find any voice outside of the Trump administration which thinks these tariffs are a good idea.

This is important, because it tells us that this is a madman`s gambit. All earlier tariffs, includingthose brought by the famous Smoot-Hawley Act in 1930, came into being because of fierce industry lobbying for protection. This time it`s the opposite. Industry, financial markets and academia are united in denouncing these tariffs as reckless.

And with their actions, the markets are signaling their displeasure. The sell-offs in the stock and bond markets, the upgrading of the likelihood of a global recession, the closure of factories and layoffs of workers, all are expressions of deep disapproval and apprehension regarding the impact these tariffs are likely to have.

Second, if these tariffs, and the resultant trade war, are being pushed against the will of all-powerful vested interests in America, then what exactly is the big idea here? What do the architects of this policy hope to achieve?There is a paper titled `A User`s Guide to Restructuring the Global Trading System` written by a relatively unknown individual by the name of Stephen Miran. Published in November 2024, it lays all this out. Miran was subsequently picked by Trump to be the chairman of the President`s Council of Economic Advisors and whereas he disagrees with the pace and intensity with which Trump is pursuing the tarif fs, he lays out clearly in the paper why the policy is necessary.

In a nutshell, Miran argues that America is carrying a huge burden in providing a security umbrella to the world as well as its reserve asset, the US dollar. While the US had a dominant position in the world economy (back in the 1960s its share of global GDP was 40 per cent, he says, which has now shrunk to 26pc), the dollar as reserve currency helped America because they could print any amount of money to pay for theirbills. But today as the rest of the world has powered on and America`s share of global trade as well as global GDP has shrunk, the dollar as reserve asset has become a burden because other countries can devalue their currencies to cheapen their products in global markets but the US cannot.

To arrest this trend, the US can either take monetary measures (like attaching user fees to dollars held as reserves by other countries) or it can take trade measures through tariffs. He advocates for the latter, argues this is in opposition to what industry and academia wish, that it will be accompanied by a short-term asset price collapse, but eventually could bring America to a position where it can regain some of the ground it has lost to other countries.

Most importantly, he argues for intertwining security and trade relations. Since America provides the security and the reserve asset which underpins the global trade system, it is in a position to use both to arrest the erosion of its own position within this world. `Countries that want to be inside the defense umbrella must also be inside the fair trade umbrella,` he argues.

`Such a tool can be used to pressure other nations to join our tariffs against China, creating a multilateral approach toward tariffs. Forced to choose between facing a tariff on their exports to the American consumer or applying tariffs to their imports from China, which will they choose? ... The attempt to create a global tariff wall around China would increase the pressure on China to reform its economic system.

The key takeaway here is that the tariffs are not about to go away soon, that the institutions which bailed Pakistan out historically could be on their way to disappearing, and that Pakistan could, in the near future, be forced to choose between the US and China. This calls for a comprehensive revamp of our economic strategy altogether. The new world dawning before us will admit neither import substitution orthodoxies nor faith in liberalisation and export-driven growth.• The wnter is a business and economy joumalist.