Some problems humanity has created together and must tackle together. Some problems are created locally. Climate change is something that the world has to solve as a whole. If half the world lessens its emissions while the other half increases them, climate change will not be solved. The earth’s atmosphere and the oceans bind humanity.
Local problems are created because of an imbalance in power and the desire to stir up trouble. Ukraine is one such example and Gaza is another. It is hard to understand why apartheid, ethnic cleansing and indeed genocide are acceptable in the world of 2025.
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Then there are other problems that might not even be thought of as problems at all, but punitive solutions emanating from them are still inflicted on the world. One such solution that we are dealing with is regarding the problem of the United States’ trade deficit and the desire to level it out through tariffs. These are required, according to the American president, because the system is grossly unfair to the US and other nations have been “ripping us off,” in his words. Have they? If they have this ripping off has been mostly to their detriment.
The average per person GDP of the world is $13,000, according to the World Bank. Most countries are considerably lower than that. These include India ($2500), Indonesia ($4800), Iran ($4400), Iraq ($5500), Thailand ($7100) and Vietnam ($4200). Sub-Saharan Africa, which has a population a little smaller than India’s, is at $1600. Of our fellow BRICS members, Brazil is $10,200, Russia $13,800, South Africa $6000 and China is at $12,600.
A few countries have a per person GDP considerably higher than the global average. The Euro area average is $45,000 with Germany at $54,000, France at $44,000 and Italy at $39,000. The UK is similar to France. The United States of America is at $82,000, meaning it is more than six times the global average and more than 30 times India’s per person GDP. The US is by far the wealthiest large nation. Its position has made the dollar the world’s reserve currency, meaning most trade globally happens in US dollars, and it is the most attractive destination for the world’s talented people. Its population growth is bolstered by this migration and its corporate and academic elites are studded with those who were born abroad. Its future is assured because of this enormous corps of talent. US per person GDP has doubled since 2004, which is incredible given how high the base already was. This has not been the case for Europe and the Euro area’s per person GDP has stagnated since 2004. Of course there is the problem of inequality in the US, as there is elsewhere, but that is an issue for the US to sort out internally, and not inflict it on a world that is much poorer than the average American.
This weekend, Donald Trump said about us that: “India charges us massive tariffs. Massive. You can’t even sell anything in India… They have agreed, by the way; they want to cut their tariffs way down now because somebody is finally exposing them for what they have done.” Whatever position one has on free trade, it is hard to blame India and its government for trying to protect the interests of its people and to advance its economy. In a nation where a billion people cannot buy anything discretionary and must spend all their earnings on survival, what is there to buy from advanced nations?
Economists suggest that the US trade deficit is a reflection of the country’s budget deficit. The US government spends more than it earns and so it has to borrow. In 2024, this deficit was $1.8 trillion. This borrowing means capital inflows into the US, raising the demand for the dollar and keeping it strong. The strong dollar in turn makes it difficult for the US to export its products and easier to import, which explains the deficit in the trade balance. If the US were to balance its budget and borrow less, according to this “twin deficits” theory, it would not have a trade deficit as wide as it does. This is not going to happen, especially when Trump is going to continue and deepen tax cuts that will reduce his government’s income.
Mexico has a per person GDP of $13,790, meaning it is around the global average. Canada is $53,000, meaning about $30,000 per person per year lower than the US. It is not easy to make out the case as Trump is trying to do that these countries are engaging with the US on trade in bad faith. If they were the numbers, they would not be what they are. It is strange that someone is making the case that they are ripping the US off.
Take a look at the markets around the world and we see the turbulence that has been deliberately created by one man in a powerful nation.
Some problems we have to hunker down and face and resolve as a species, and there are enough of these, and these are problems of sufficient difficulty, to require our full attention. And then we have these ones that are being gratuitously thrust on us, ones that we did not have till a few weeks or months ago, but are now keeping a large part of the world occupied.
By Aakar Patel
