Thanks to President Trump’s new round of international tariffs, the global economy is now at the risk of unraveling. This is not just the result of plunging world trade and investment, but of soaring U.S. military expenditures.

US President Donald Trump’s “Liberation Day” announcement of sweeping new tariffs on imports from more than 180 countries will be remembered as a man-made economic tsunami. Many are already comparing it to President Herbert Hoover’s 1930 Smoot-Hawley Tariff Act, which slashed global trade by 66% in five years and deepened the Great Depression. Trump’s tariffs – most of which have been abruptly paused for 90 days – have rattled financial markets, prompting analysts to warn that the United States could enter a recession in 2025.

A broad vision is necessary if the United States wants to bring industry back home. The time has come for the it to reconcile its ambitions with on-the-ground realities. Washington should develop a sustainable strategy for managing relationships with other major powers, especially China.

Donald Trump might briefly bend the rules of economics, but their core endures. Tariffs could spark a U.S. manufacturing revival, but it will be fleeting. And the fallout — higher costs of living, strained global ties and a fractured world economy — seems all but certain.

The world’s major growth engines are about to run in reverse. The policies and uncertainties of US President Donald Trump’s second administration have hit a sluggish global economy with a transformational exogenous shock. Risks are especially worrisome in both the United States and China, which have collectively accounted for a little more than 40% of cumulative global GDP growth since 2010.

Global GDP is likely to shrink again in Q2. Inflation will rise, and real pain will start to set in. Key industries will be disrupted, dragging down production and consumption. The United States may miss its growth target for 2025, and as a new cross-Atlantic trade war looms, growth may slow in the eurozone as well.

A great many negative consequences would follow a successful effort by the United States to pull the MFN rug out from under the world’s second-largest economy. If this key pillar of global trade is taken away, the collapse of the WTO itself could follow.

By trying to weaponize the U.S. tariffs on America's big trade partners against China, President Trump is basing bad economics on worse geopolitics. It could prove a costly prelude to a global downturn.

China and the U.S. should not entangle themselves in trade imbalances and tariffs but find a new, innovative perspective. The future will be shaped by AI, big data, quantum computing and telecom. Both countries have tremendous common interests.

The two major powers should go beyond their differences and work together to advance global industry and offer even greater joint contributions — finding new ways to secure a peaceful, mutually beneficial relationship.