When madness creates magic
It is possibly better to toss conventional wisdom out the window if a bull decides to wreck a China shop. If the uncontrolled animal happens to be a human, someone like the US President Donald Trump, who has a habit of regularly snorting triumphantly, such wisdom looks more fickle and more fragile. On January 7, 2026, Trump posted a positive and bombastic statement on his social media platform, which raised eyebrows among several economic analysts across the world, and put his critics on the back foot.
The post categorically states, “Breaking News. Numbers released today show that the United States of America has the lowest trade deficit since 2009, and is going even lower. In addition, our nation’s gross domestic product is predicted to come in at over 5 per cent, and that is after losing at least 1.5 per cent to the ‘Democrat shutdown.’ These incredible numbers, and the unprecedented success of our country are a direct result of tariffs, which have rescued our economy and national security.” In three words, ‘Trump tariffs work.’
Several cynics may argue that Trump habitually resorts to chest thumping for no rhyme and reason, routinely lies, and plays fast and loose with the numbers. But this time, he is possibly right. Data released by the US department of commerce reveals that the country’s monthly trade deficit in October 2025 is a shade less than $30 billion, or the lowest since the second quarter of 2009 (nearly 17 years ago). Remember, in 2009 the US economy was coming out of the great financial meltdown of 2008, when the global economies were on the verge of collapse, and trade was widely disrupted.
It is not the case this time. In contrast to 2009, the US economy is booming, and registered strong GDP growth rates of 3.8 per cent, and 4.2 per cent, respectively, in the previous two quarters. It implies that the annual growth will be around four per cent. This is unprecedented for an economy whose GDP is about $30 trillion. The growth and trade deficit figures (higher exports, lower imports) lay to rest the fears that the president’s tariff madness, and investments enthusiasm will lead to grievous consequences in the future.
First, let us look at the latest trade numbers. Imports came down by more than three per cent in October, and goods imports fell by a higher 4.5 per cent. Exports rose by 2.6 per cent, and goods exports by nearly four per cent. Of course, in Trump’s language, the trends imply that his policies work. Tariffs have forced slower imports, and pressured nations to open their markets, which fueled exports. As the trade deficit comes down, and if the trend persists, the US may enjoy trade surpluses with the major trading partners.
Critics disagree. Some media reports indicate that the decline in goods imports, the lowest since 2023, may be due to a combination of tariffs, and softer domestic demand. The latter may imply slower GDP growth over the next few quarters. The boost to exports came from “non-monetary gold, and other precious metals,” even as “exports of consumer goods, mostly pharmaceutical preparations, fell as did those of other goods.” However, the imports of capital goods were up by nearly $7 billion, which were linked to the ongoing, higher investments in Artificial Intelligence.
Yet, for the moment it seems that Trump’s policies are unlikely to lead to a global slowdown, and do not indicate a backward movement to 100 years ago, when global trade was in a terminal decline. One way to gauge the reality is to consider the GDP growths of the major economies. One can say that Japan and Germany show predictable behaviour. Both have virtually stagnated. But look at the other three of the top five economies. Despite the punitive tariffs and threats, tantrums, headwinds, and high dependence on the US, India grew at a blistering pace of eight per cent in the first half of this fiscal year.
Earlier during the fiscal, the consensus forecast was 6.3-6.5 per cent annual growth, but the figure was upgraded by economists and institutions to 7.4-7.5 per cent. Given its size, the Chinese economy is growing at a rapid pace, and may record a five per cent growth in the current fiscal. If you add the GDP of these five economies, they constitute more than half of the global GDP. If you add a few other G7 countries, and some BRICS nations, it seems that despite the laggards a slowdown and economic crisis is possibly not happening.
Rest assured that the GDP and trade deficit numbers will boost Trump’s confidence, which needs little or nothing to be at an elevated level. The next milestone will be the US’ Supreme Court judgment on whether the tariffs are constitutional. If the order is positive for him, he will dive headlong in the sea of tariffs. If not, he will find other ways to jump into the same waters. If the future figures are positive, the US may keep imposing tariffs, disrupt trade, but still not affect the global economies. The threat of 500 per cent duties on goods and services from nations that import Russian crude oil is an indicator.
However, India will be more concerned about the bilateral trade deal with the US. It may ease the ongoing pressures on the macro indicators, as growth is expected to slow down over the next six quarters. At present, China, India, and the US seem to be doing well, thank you. Clearly, the major economies are at least modestly successful in finding alternative markets for exports. In such a situation, it is difficult to say what exactly conventional economics is, was, and how it will shape up in the future.
China is still not worried about the American posture. The former has proved that it is winning the trade wars, and its economy is getting along fine. Russia, at present, has withstood the implications of the extreme western sanctions. One needs to see what happens if Trump does impose a 500 per cent tariff on the buyers of Russian crude oil. Going by the standard economics, one expects a contraction in the global GDP, but this may not happen soon. By current estimates, it may grow at 2.5-3 per cent annually. In retrospect, analysts, experts, and economists may thank Trump, his policies, and his madness, which somehow is turning into magic for the major economies.
The author has worked for leading media houses, authored two books, and is now Executive Director, C Voter Foundation; views are personal
