India, July 15 -- Till a year ago, the underpinning of the global economy and trading system was the "indebted" American consumer. The global superpower, the US, ran a $1.2 trillion-dollar current account deficit with the rest of the world, with China running the largest bilateral trade surplus of $295.4 billion (exporting $439 billion to the US). On the capital account, the US had achieved the unimaginable. Earning more on its roughly $35 trillion invested in the rest of the world then it paid out on its $62 trillion inflows (about 40% of which was in fixed income and US government debt instruments). Though its net international investment position was very negative, its net investment income was positive till last year. This was made possible, primarily, because the dollar was the reserve currency and the international medium of exchange. US retail consumption was fuelled by debt. Equally, the US government ran a massive fiscal deficit which accentuated to over 6% of GDP (around $2 trillion) post the handouts made during Covid. The largest lenders to the US were Japan and China (holding over a trillion dollars of US treasury). China's economy was export based and since the turn of the century, it became the largest trading partner to all countries other than the Nordics, the UK, France and Germany, replacing the US in that role. China today is around 36% of global manufacturing, 18% of global GDP and only 13% of global consumption. Essentially today, Americans consume too much, and the Chinese produce too much! The US economy has done very well over the last 25 years. In just the last 15 years, the US, which was about the same size as the European Union (EU), has become 60% larger than the EU. The per capita of both Canada and the UK is worse than that of the poorest American state. But while Wall Street, the American multinational companies, and technology startups and Silicon Valley flourished, main street and the old American middle class languished, as their jobs were shipped overseas. The way the model worked was that the large flows of capital into the US allowed the financial sector (banks, venture funds, private equity, alternative investment funds, pension funds, and all) to thrive through intermediation. Plentiful risk capital was available to support innovation and risk taking. This was further supported by the best universities, attracting top global talent and US government incentives for research and innovation. The US equity markets reached stratospheric levels evidenced by the fact that just the top six technology stocks of $17.3 trillion had a total market capitalisation greater than that of Canada, the UK and Germany combined. According to Forbes, the number of American billionaires rose from 240 in 2000 to 902 in 2025. The other big winners were the profitability of American companies that offshored their manufacturing, most of all to China to take advantage of cheap disciplined labour with poor rights, and strong Chinese government incentives to support the shift. The rise in inequality and the stagnation in middle-class wages frustrated much of main street in the US. Their jobs were shipped across, wages stagnated and a belief that the future of their children was going to be worse than theirs, took root. This was what Trump understood and pandered too, with his Make America Great Again slogan. He accentuated their despair by blaming the American elite, accusing the rest of the world of doing unfair trade with the US, and immigrants from taking away American jobs. Trump campaigned to fix this imbalance in the global trading system. Reduce the US's current account deficit by raising tariffs on imports, tighten immigration and let the dollar weaken to encourage exports. He hoped that by cutting taxes, keeping oil prices in check, middle America's consumption would not be much affected, and the tariffs would bring back jobs to the US. He banked on a spurt in economic growth by his tax cuts, tariffs and cuts in expenditure and deregulation. To attract his base, he also attacked American universities as being elitist and woke and cut funding to them. Given the core of the problem is the indebted and heavily consuming American, and the large fiscal deficit, Trump's continued tax cuts, and inability to curb government spending, will likely worsen the fiscal deficit and not reduce consumption. The uncertainty in his tariff announcements is not a recipe for corporate planning. Reduction in immigration puts pressure on labour costs and restricts the entry of top talent. The weakening dollar will challenge its status as a reserve currency (already the net investment income has turned negative for the US). Equally, central banks across the world have sharply increased their holdings of gold, euro and yen at the expense of the dollar. Neither does China show any plans to consume more. Recent Chinese government actions show a rise in manufacturing investments increasing global overcapacity in ships, rail, autos, aircraft and capital industries. China seeks to build a stranglehold on critical minerals, critical machinery and electronics and has major investments in technology, defence and space together with a strong capital stockpile. Trump's presidency has delivered grievous damage to the old economic order. The new economic order is yet to emerge, and the current upheaval will take some time to settle. The required equilibrium of lower US consumption and lower Chinese production is not on the anvil. Countries (and companies) need to assess their interests, using multipolarity where they can, and recognising, as the former Singapore Prime Minister Lee Hsien Loong said that "choosing between US and China will be painful" but will need to be skillfully navigated!...