AVILLAGEOFBIGHEADS

Trump has plunged the world into a financial crisis. Trump has a view that the world is heavily biased against the US when it comes to trade, leaving the US with a trade deficit. What Trump seeks is a trade surplus with every single country. There are brighter minds than me who have explained how trade deficit in itself isn’t all that bad and how it actually helps the US use the deficit to its advantage to keep the USD as the global reserve currency. 

The fascinating takeaway from all this is the differing reactions to Trump’s “Liberation Day” tariffs. It highlights how poorly or well run each country is. You can classify countries based on how efficiently or poorly they have built their economy into three broad categories. 

1. Efficient 
2. Haphazard 
3. Reckless

Efficient:

There are multiple countries that fall into this category. Countries in the EU and Canada are prime examples. They don’t feel threatened. They are more than happy to call Trump’s bluff or even retaliate. Macron has asked for French companies to halt investment in the US. Canada has retaliated with tariffs of its own. But the standout star in this category is China. China is the world’s largest supplier of a wide range of products, from technology—such as EV batteries (BYD), AI (DeepSeek), and quantum computing—to affordable household goods (Temu, Alibaba), Fashion (Shein), and electric vehicles (BYD). China owes much of its rise to former American presidents Richard Nixon and Ronald Reagan. But when it was given the opportunity, China just didn’t grab the opportunity with both hands, it dove in, head on. Nothing signifies China’s rapid growth as much as this figure below.

From having barely any High Speed railway line, it began by importing rail technology from Japan and Germany and now builds and manufactures its own High Speed trains. From building “ Made in China” products that were derided globally, it now boasts quality comparable with the best of the world. BYD cars are a prime example, and the domestically designed and built commercial airliner Comac C919 is another. All this stems from China’s obsession with becoming self-reliant. It uses its own version of YouTube and Twitter. It even has its own Chat App that boasts 1.38 Billion users. When America blocked the smartphone manufacturer Huawei access to Google stores and other software, they developed their own OS, HarmonyOS. When an American led effort blocked China from accessing the International Space Station, China built its own Space station, Tiangong space station. China has worked relentlessly towards its ultimate goal of being self-reliant without depending on western countries.

All this has led to the present when Trump imposed a 34% tariff, China didn’t back down or “bend the knee”. China was happy to retaliate with a 34% tariff of its own. China stood up to USA’s threats to protect its interests and those of its citizens.

Haphazard:

Of the multiples nations that fall under this category, none is more of an apt example than India. One of the most commonly used retorts by keyboard warriors defending India’s lower-than-expected progress is: ‘India used to be the richest nation on the planet until the British plundered, pillaged, and looted all its wealth – and that’s the reason India is the way it is today”. Yes, the British savagely stripped India of most of its wealth, but it’s been 77 years and India has had ample time to get its act together. Tiger economies of Taiwan, Singapore and South Korea have turned their fortunes around in shorter periods of time, especially South Korea, from a war ravaged Nation where people were wallowing in poverty post Korean War, to a developed nation all within a 50-60 year time period.

India’s problem primarily stems from its leadership. The political class plunder the country on a daily basis. Corruption and Bureaucracy are inter woven into the very fabric of India. Instead of investing in education, research, and technological innovation, there is little to no meaningful investment that could invigorate a sizable, educated, and eager youth toward entrepreneurship. Whatever innovation happens in India is despite, rather than the absence of obstacles at every turn. 

India’s approach to progress is Haphazard at best. It is a travesty that India cannot develop its own version of YouTube or a ChatApp that can rival WhatsApp. The few chat Apps that do exist have little to no marketing. India has a billion people at its disposal from which it can benefit enormously, but India is giving away all that potential to foreign entities at no cost. Global Indian software giants like Infosys and Tata Consultancy Services power SaaS platforms for some of the world’s biggest companies — yet struggle, or perhaps hesitate, to build equally impactful systems for India’s own billion-plus users. Instead, all that data, and data is power, is given away.

In the hardware sector, India’s manufacturing infrastructure & output lags far behind China’s. China is using more factory robots than the rest of the world combined and most of these robots are made in China by Chinese companies with a revenue of 8.75 billion USD in 2023. In comparison, India’s robotic revenue for the same period was 1.39 billion USD. All this is to say that India lags far behind its neighbor economically — but not because of a lack of an educated population. But it is mainly due to bureaucracy and corruption at every turn. 

Let me offer a personal example, last year after quitting my job in South Korea, I went to the local government office to submit my application to retrieve my Pension Fund ( akin to 401k ). After verification, I was asked to fill up a form, sign it and submit it, all done within 15 minutes or so. I had the money in my bank account a few days later without having to follow up or nag anyone. When I applied to collect my Pension fund in India back in 2009, even before I could collect the application form, I was asked to bring a letter from my previous company manager (Lucky for me, the company was miles away) stating that I was eligible to apply for a Pension fund, which I did. After I filled out the form, I was asked to take the form back to my previous employer and have the manager sign it. I felt I was being given the run around in the hopes that I would give up. I persisted. Eventually after running around for a full day, I submitted the application. I was told, I would have the money in my account after 90 days. The money never came. I called. I was asked to wait a little longer. I waited for 6 months. Called back. I was asked to wait a little more. I waited for 2 years. The money never came. There are a multitude of other examples of how others have struggled too with bureaucracy and rampant corruption in India. 

As a result, when Trump applied tariffs on India, India could not afford to retaliate. It just couldn’t. It is too dependent on American companies who outsource their BPO and SaaS services to India. Indian Pharmaceutical exporters also are heavily dependent on American consumers. Without having built a self-sustaining industry, it has to leverage its position to its advantage and operate like a Wheeler-dealer who can smell a deal. Noticing that other Asian countries have higher tariffs imposed on them, India is hoping to steal some of their manufacturing business, rather than having built these manufacturing businesses from the get-go. India did something similar a few years ago when Europe stopped buying Russian oil after Russia invaded Ukraine. India bought Russian crude oil at a discount and then sold the refined oil to Europe for a sizable profit. The ultimate hustler. But don’t be fooled, these new tariffs will help Politicians and the Rich in India get richer while suffocating the burgeoning middle class.

Reckless: 

Zimbabwe is the prime example of a country that falls under this category. Zimbabwe has been mismanaged for decades, leading the country through unprecedented levels of inflation and eventually adopting the US dollar as its currency.

Although Zimbabwe has now introduced a new currency, the dollar is still commonly used. When your country’s very existence is pegged to USA, if Trump asks you to dance, the only possible reply one can muster is “ Are my shoes bright enough or would you prefer I wear something more glittery ? “