The Post-Trump World: Asia’s Quest for Economic Alternatives

Image Credit: Reuters

President Donald Trump's tariffs and policies have sparked predictions in Asia that the post-World War II economic order may be shifting, prompting efforts to reduce reliance on the U.S. However, finding a viable alternative is proving challenging.

Following World War II, global economic systems were established through institutions like the United Nations and the World Bank, with the U.S. as the dominant economic power and the dollar as the global reserve currency. However, the Trump administration’s foreign and economic policies, which include tariffs and challenges to multilateral institutions, are disrupting this established order.

Interviews with senior bankers, investors, and officials in Asia show that many are actively seeking to diversify beyond the U.S. with an "America plus 1" strategy, but no clear alternative to the U.S. market has emerged. "We are in a one-in-100-year transition," said Ben Hung, President of Standard Chartered. He believes the world is becoming multipolar, led by the U.S., China, and India. Despite this, Citi reports a rise in demand for foreign exchange and hedging services, especially in emerging markets such as Asia, the Middle East, and Latin America.

While some companies, like Taiwanese chipmaker TSMC, are responding positively to Trump’s "America First" agenda, these moves underscore how Trump's policies could inadvertently accelerate the shift toward China as a global power. Beijing is increasingly seen as benefiting from Trump’s tariffs, as many U.S. allies are also being hit with trade restrictions. This is pushing Chinese companies to reduce exposure to the U.S. and diversify into regions like Southeast Asia, the Middle East, and Latin America.

Despite this pivot, U.S. assets remain appealing due to the size and strength of the American economy and capital markets. However, the search for alternatives to the U.S. dollar, such as gold, cryptocurrency, or the yuan, presents its own challenges. For instance, while the yuan is an option, businesses would need instruments to hedge against it, such as the Hong Kong Exchange's Swap Connect, which helps manage exposure to the Chinese currency.

The fragmentation of global markets is causing growing uncertainty. This was evident when the Chinese AI startup DeepSeek shocked investors earlier this year, causing U.S. markets to drop. As China’s artificial intelligence sector continues to evolve, it’s likely more such shocks will follow, catching global investors off guard.

The growing divergence in the world’s economic landscape presents both opportunities and risks, but it’s clear that the global order is evolving in ways that are hard to predict.

 

 

 

 

 

 

 

Paraphrasing text from "Reuters" all rights reserved by the original author