Can someone explain how can one country make such a big impact on the stock markets of rest of the world? How did they become so powerful?Do we have any such examples of super economies impacting the trades of the rest of the world by implenting similiar trade rules?
Why is every other country connected to and dependant on USA market? Can any other country like China make such a big impact on the world in near future using similiar tactics?
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We are the largest consuming market on the planet. If you have to sell your goods at such a high price in the US and you lose your customer base because of it, then you lose a lot of money.
> How did they become so powerful?
After WW2, the US was one of the only industrial economies not heavily-damaged/outright destroyed. That stability gave them a great deal of both hard (economic might) and soft (influence) over other countries.
>Why is every other country connected to and dependant on USA market?
For reasons related to the above, the US Dollar was made into the worlds reserve currency, meaning when countries exchange funds and products, they usually do so using US Dollars.
So, now that Trump and his regime are (deliberately) fucking up the US economy via…..uh, everything they are doing, that lauded stability is taking a hit, and everyone that relied on the stability of the US economy is being impacted.
> Can any other country like China make such a big impact on the world in near future using similiar tactics?
Yes.
As TrickOut said. US is one of the largest markets to sell into in the world. Suddenly having MUCH bigger barrier to entry into this market will destabilize every company that exports to US or sells to companies that export to US. Which is a huge slice of every reasonably-size country’s economy.
It’s really hundreds of little reasons but you can boil it down to around two
Because they truly buy that much stuff from other countries. Smaller countries sometimes even devote a significant % of their production to selling things to the United States. The US is an extremely wealthy country. There are countries with more people and smaller countries with higher per-person wealth, but not another one with high numbers in both
For decades, they also built relationships with other countries on banking, finance, national defense, and technology and other countries agreed to these relationships (at varying levels of coercion) and now, those relationships were changed in the course of a few months
There is way too much to explain in an ELI5 but the short version is the USA has spent most of its history capitalizing global crises by offering solutions that uniquely benefit them, creating those crises if there wasn’t a convenient existing one, propping up foreign leaders who will capitulate to the USA, and deposing those who won’t.
Even countries that dont directly trade with each other can affect each others trade.
Country A sells wood to country B
Country C starts to sell wood to country B for half the price country A sells it.
Country B doesnt need two sets of wood and so starts buying all their wood from country C.
Country A now has a choice either lower their price, find someone else to trade with or stop selling wood.
The US consumes A LOT of resources from around the world, and so when they say that it costs more money to buy from another country it has a big impact.
Generally speaking countries dont like to cause such disruption, its bad for almost everyone involved. Lets say a car manufacturer wants to build a new factory. This may take 10 years worth of planning. They want to build it somewhere that they know is stable, somewhere that wont suddenly make their operating costs very expensive. The US elects their presidents every 4 years. Do they want to take the risk that next government might be as erratic as the current one?
The final thing is that some resources are very hard to find or make. For example certain types of chips are only made in 3 factories in the world. When one of the factories caught fire it had a severe impact on the cost of chips because 1/3 of worlds chips suddenly werent being made.
I think china would probably have similar impact for the opposite reason. They sell so much and the reciprocal would be painful. But China, when they did similar snotty things, did them in very calculated manners, so the world used to negotiate them back rather than demand
We are all connected. By our relationships, by our treaties, by our trade, by our ships and boats and planes and trains, by the common thread of human experience. Tug one thread of this big blanket and others will strain, or tear, or fray. Tug over and over again, or too hard, or in the wrong place, and all you have is a pile of thread.
(if any of y’all crochet, make a long scarf or a big blanket some time and let the kiddo pull the final thread. Watch as it all unfurls)
Because the US economy is about 1/4 of the global economy.
China and the EU are each about 1/5th.
The thing is, the US is a major importer of goods, while China is a major exporter. So China tariffing imports wouldn’t have remotely as big an impact. If they restricted exports, different story.
The EU combined could cause similar levels of disruption.
Because every economy on earth all use the same resources.
You own a lemonade stand, everyone fucking loves lemonade but you only sell to your nearby neighbors down your street. Other neighborhoods have smaller lemonade stands and get in a big fight. Like they start breaking down other stands and decide the way they run their stands is the only way to do it and they’ll only hire white blondes and all this bologna. You don’t really care though. But then one of them vandalizes your stand so now you decide to join the fight. At the end of the flight you’re the only lemonade stand in town that is left undamaged. Like not only did everyone’s stand get ruined but their houses get burned to the ground and they’re basically left on the street but shit do they miss lemonade. For years everyone even in other neighborhoods has to buy your lemonade since you’re the only dealer in town. This makes you so rich you make ice cream stands, stands that sell scooters, and all sorts of shit and sell that to the other neighborhoods too. Life is good. You have a major empire. Your hand becomes a huge factor in everything since no one else can focus on anything besides getting their houses rebuilt and lemonade stands remade. You reach hundreds of neighborhoods with yourself as you take advantage of this amazing opportunity.
Meanwhile other countries start making cups and jars and lemons and sugar and scooter wheels and all this stuff you need mainly for their own survival and they do it for hella cheap. The people that make them almost do it for free for the benefit of their own neighborhood in efforts to just rebuild. Yeah you could go to the grocery store or the local mall and buy it but holy hell do the other neighborhoods sell it to you for dirt cheap. So you make all these agreements to buy milk for your ice cream and cups for your lemonade and all this shit in exchange to sell your ice cream and everything to them. They rely on you – like a lot. Major percentages of their business relies on you buying their cheap stuff to support your lemonade and everything else.
All of a sudden though you decide your family is getting fucked over because you really should just be making lemonade for them and then only. You’ve lost sight of the advantages you had by buying your sugar and lemons for dirt cheap. So you decide if anyone wants your lemonade they better pay you big time for it. You’re going to get your lemons from your own backyard despite not having trees grown yet. This goes for everything else you’ve built off their cheap sales, the milk, the scooter wheels etc. you do this all at once, but remember the entire system was set up over the span of years with your agreements assumed. This is a major shock. Why are you being an overweight overfed dick all of a sudden? Everyone doesn’t know what to make of your new behavior. Like how can anyone trust you going forward when you blow up all these agreements at the drop of a hat?
So all your stuff is now devalued. All of their stuff is devalued. They now consider selling to all the other neighborhoods but yours. You are left coping by saying this was necessary because the system was screwing you over. You should have just planted your own trees years ago. That’s your new logic anyway.
China could cause impacts, but not nearly as drastically. China spends a lot of time manipulating its own currency up and down to suit its whims when it comes to trading. Chinese currency is also not being used by everyone to trade.
There’s a rich kid in 3rd grade that gets a $50/week allowance and he has a sweet tooth. Every day he buys candy from his friends at lunch. Soon, kids learn to bring candy that they can sell to the rich kid. A lot of kids end up with a few extra bucks, and some of them use that money to buy other stuff from other kids, like Pokemon cards. Soon, there are quite a few things that kids are bringing to try to sell to each other. Then one day, rich kid goes to the dentist and finds out he has tons of cavities. His rich dad gets mad, and while he doesn’t stop the allowance, he tells his kid that for every piece of candy he buys for a dollar, he has to give his dad back an extra dollar. On top of that, this applies not just to candy, but to everything his kid buys from other kids at school. Now, the kid would rather to go the store and buy candy for $1.50 (or eat the candy he has at home), and he and stops buying from his friends. The kid ends up spending more on candy, and the supply of money at school dries up and no one can sell candy or buy Pokemon cards anymore
Since others have already done a great job of explaining this with regards to the US, I’ll address a different part of your question;
Do we have any other examples of other economies impacting the world in a similar fashion?
Yes. Historically there have been some other examples;
The British Empire, or rather, it’s banks in London, were the primary providers of loans for many countries, including British Colonies. So whenever they made a move, it had a huge impact. If you know about the Tunguska meteorite, you might’ve heard that had it struck Earth a bit sooner, but on the same trajectory, it would’ve hit London. There are entire countries who would’ve had practially ALL of their national debt erased if that had happened.
The Roman Empire was another example. When the Western Roman Empire collapsed, it set back trade and economic development by several centuries across Western Europe and North Africa.
Do we have similar examples of super economies impacting global trade?
Yes. It was called mercantilism, and it was one of the biggest reasons the US seclared independence from Britain.
During the colonial/mercantile era, trade agreements were very zero-sum, and it was generally only legally permissible for colonies to trade with their colonizing empire or other colonies of said colonizing empire (which also plays into a big reason for the Golden Age of Piracy coming about: illicit goods from other colonial powers, duty free, financed many a pirate – hence their association and near synonymous status with smugglers).
In the case of the US colonies and Britain, the British imposed policies that either incentivized or outright mandated colonies only export goods to them. One of the goals of colonial mercantilism was strictly wealth extraction. The tension caused by these policies were only exasperated when Britain began imposing additional taxes on imported goods to the US colonies as a means to alleviate war debt from the (domestically) French-Indian War, which was a single theater in the larger (some say World War 0) Seven Years War between the British and French. Speaking of the French, their war debt as well as the extravagance of the aristocracy and royalty pissed off their impoverished common folk in France enough to have a demostic revolution, which subsequently pushed all of Europe into decades of conflict with the Napoleonic Wars.
All of this is a result of a global trade dick measuring contest between the French and British empires. These trade practices bled over into the early 20th century, as WWI was largely instigated by Germany (which was a very young nation at the time), capitalizing on international crisis in an attempt to gain their own colonial possessions to compete with France and Britain. The conflict was so destructive and expensive, that the center of global trade transitioned from London to New York, thus boosting the US’s status as a global power (as well as seizing colonial possessions of Spain as a result of the Spanish-American war).
The woes of colonial mercantilism persist to the modern day. I mean, we have photographs of Ghandi leading salt marches to harvest salt from the sea in defiance of British salt taxes. There’s a reason the global south is generally impoverished and has a lot of issues: Western economic and military dominance.
USA is big, if you remove a big brick from a wall the whole thing starts to become instable and falls down.
Also US has many (almost) monopolys.
There isn’t a EU or Asian alternative to Google, Apple, Nvida, Intel, AMD, Meta, Twitter, Netflix, Disney, ….
The US is an important market for exports and selling stuff.
For example, the new upcoming Nintendo Switch 2, even though sold worldwide, USA is an important marketplace, while also providing the technology for the switch Hardware.
And ofcourse imvestments are hold back if the market is too unpredictable or worse in a freefall.
Whats also important is the US$. Third world countries are exchanging their unstable money into more stable US$ to save them for later. Their own money is too harsh affected by inflation, its not worth saving.
Now the US$ is also affected by high inflation making millions in savings worthless in many countries.
This again affects their economy and so on.
The system was not designed to defend itself against attack from the inside.
Because the U.S. is the largest economy in the world, and unlike other large economies, like the EU, China for example, the U.S. buys a LOT of other countries stuff. Those other large economies do not buy other countries stuff at nearly the same level. Add to this the U.S. is the richest country in the world too, which means we buy even more of other countries stuff beyond just the size of the country. If the U.S. stopped buying other countries stuff almost every country in the world will have their economies affected, some like China, Canada, the EU would be affected a lot, some smaller countries less. But it goes further, if the U.S. doesn’t buy others stuff that in itself negatively affects their economies, but that then ripples outward independently of the U.S. So when those other countries economies slow as a result, they stop buying as much stuff too, which makes the world’s economy even worse. You would be surprised how important exporting to the U.S. is to other countries in the world. China in particular.
After WWII the US was the largest industrial power. Therefore every major market in the world that was friendly with the US wanted to form trade deals with it. The USD also became the reserve currency of the world due to how strong the US economy was.
Additionally the US is the world’s major consumer. So if US imports are down due to say major tariffs then that affects all worldwide exports.
America isn’t one country it’s basically 50 in a trenchcoat as one country. A better comparison would be do you think the E.U. as a group could shake up the world economy because that’s basically what’s happening.
Good luck getting an unbiased answer on this website.
We spent 40 years telling them that the path to success was the free movement of Labor and capital so that we could get our hooks into their natural resources and exploit their people for our labor.
You have a pool of water. There’s an elephant in it. The elephant gets out which will severely reduce the water level because the elephant displaces so much of it.
American economy is the elephant.
It’s called supply chains for a reason – supply chains tend to be long, and any of the links in the chain failing means your supply chain fails. Uncertainty makes planning hard, chaos reduces efficiency, this drives up prices. Prices for one thing getting driven up drives up prices of other things that depend on it. Prices for everything going up means people can’t afford to buy as much, tanking the whole economy.
This will ruffle some feathers but for the most part you can think of the world as a book/movie and the US, for better or worse is basically the main character
The scary thing is how can 1 man mess up the ….
Simple answer is we are a big importer/consumer of goods/stuff.
Tariffs will increase the cost of goods/stuff…
Americans will naturally buy/consume less goods/stuff.
Exporters will slow production of goods/stuff.
Vast majority of global economies are interconnected and globally reliant… Slower production leads to decreased revenues, decreased taxes, job loss, ect…
Global recession and now everyone is angry🤷🏻♂️
World runs on Capitalism, the #1 country fueling Capitalism is fucking up the system = whole system is fuckd.
Imagine you have lemonade stand and you get to place your stand right outside the hi-school (USA) everyday the kids come out and buy lots of lemonade but one day the Principal tells the kids they are not allowed to buy your lemonade now you only sell to the people that walk by occasionally or may come to the baseball games in weekends (other countries) now instead of selling 100 glasses of lemonade each week you sell 10.
Think of it like a heart. All of the body’s blood is pushed through the rest of the body by the heart. When the heart stops pumping blood, the rest of the body dies because there’s not enough circulation.
It’s a little like that, in that post-WW2 the USA got set up as a primary financial center of the world economy. This whole situation is a bit like Trump pressing a big red button labeled “GLOBAL ECONOMIC HEART ATTACK”, and here we are. The tariffs in this case are basically blocking the vessels that let the USA’s economic heart keep pumping money around the world.
Others explain better how the USA got into this position, but it’s a combination of right-place-right-time and absolutely ruthless economic imperialism that even predates WW2.
How can one person throwing diarrhea balloons ruin a party for everyone else?
It takes a really big party to ignore some things.
Beyond the size of it. US ends acting as an intermediary in many global transactions. Also the dollar is the defacto currency of international trade. US also buys a whole lot of stuff, like a ridiculous amount from all countries. Trade with US is a major chunk of many nation’s economies. It is not one way in terms of advantage. US gets access to goods and services they can’t or don’t want to produce. You want some obscure medicine that uses nasty chemicals in production? You have someone else do it, instead of worrying about the safety and environmental headaches. You want coffee? You buy it from South America. So when US starts putting in tarrifs on everything and the penguins in the south seas, you get what what is happening as markets start recalibrating the trade forecasts and how much value they think each company will be able to provide to shareholders.
I’d like to touch on the fact that the USD is the primary reserve currency of the world. Part of the destabilization comes from this fact. From what I can tell, America wants to play a smaller role on this front (purposely weakening the USD) so that the US as a whole can be more competitive.
A quick explanation for a reserve currency. For two countries doing trade with each other, if they use their own currencies / exchange directly with each other, there’s a potential conflict of interest. If say, Japan gives India a bunch of Yen for some Indian products, and then immediately prints billions upon billions of Yen, artificially inflating their own currency, India would end up in a situation where they gave Japan tangible goods in exchange for now worthless paper currency. So instead of India accepting a currency Japan has direct control over, they request payment in a currency that’s independent of either, as an intermediary. The USD is the primary intermediary used in these transactions for global trade. So India and Japan only need to rely on the stability of the USD for their transactions to make sense. This gives intrinsic value to the USD, making the currency have value in it of itself. It has value beyond simply being the thing Americans use to trade amongst themselves.
The theory behind the tariffs, from what I can tell, is that essentially America needs to add more USD into circulation in their own market, but simultaneously can’t print money, because that would piss other nations of even more. So by devaluing their own currency, by making exporting to them less valuable, it incentivizes other nations to use the USD they have in reserve currency, recirculating it into the market.
All this to say. A lot of the destabilization happening, is the world reducing the amount of USD they’re holding in reserves, and then figuring out what to do with it, because day by day, it’s becoming less valuable.
Becuase most of the counties around the globe, and particularly Europe, have their entire social welfare propped up by leveraged trade surpluses with the U.S., and our massive trade deficits. Basically here in the U.S., over the last several decades, our politicians and their lobbyists have inked unfair and exploitative trade deals with many countries that benefit foreign companies/countries greatly, with trade surplus, at the expense of American jobs and wealth and trade deficits here. Not good and the decaying middle class reflects this. Trump is resetting that, into a more favorable position for America and Americans and the markets, and their global media cheerleaders are melting down.
{{{They}}} don’t want you to know this but, the US is really, really, really, really, really rich. It is, in fact, the richest country in the world.
That’s easy. German companies build 1000 cars a day. They sell 200 of those to the US.
With the tariffs, German cars will cost 20% more overnight. This will convince a lot of US customers not to buy them. So now, German companies will only send 100 cars a day to the US.
So now. They need to cut production down to 900 cars a day. They have less income, fire some workers… The subcontractors will see their orders shrink. It’ll ripple down the entire economy. Those are all consequences of the fevered dreams of the orange clown, borne by German workers.
This doesn’t just happen in Germany. It happens in every country that sells some stuff to the USA.
If the USA was more like North Korea or Algeria, them commiting economic suicide would not affect the world much. But their economy is roped in with that of hundreds of countries. If they sink, they pull them all along with them. And they have tremendous inertia.
In fact. The few countries that aren’t roped into the US economy much will be the ones to benefit the most. Iran, Russia, North Korea.
If irony was a commodity, Trump would put tariffs on it.
In this list of countries by GDP we see the following
USA is a major contributor to the wold economics. More by import (consumption) than by export. WHEN USA reduces imports with tariffs, the world notices.
China is a major exporter (production) so their most effect use of economic power in statecraft is to block exports.
Imagine you are a country and you bake cookies. A lot of the other countries make baked good too.
You sell some of your cookies to other countries, but the USA is the fattest country and they buy a whole bunch of your cookies. Same with the other countries baked goods.
One day the USA gets very sick and can no longer eat all the baked goods. Suddenly you have way too many cookies, and all the workers that helped you bake the cookies are no longer needed.
Not only that, but all the people that gave you ingredients for your cookies have nowhere for their ingredients to go. Now they have a bunch of people that helped make the ingredients that aren’t needed.
Now all the people that aren’t needed used to buy things like houses and vehicles and TVs. Without a job, they stop buying those things and the people who made the things that the people bought aren’t needed and they don’t buy things.
It is very interesting that Trump and his cronies claim we have “all the cards” against China’s “losing hand” — — a suspect statement on the surface before you consider that he bankrupted multiple casinos.
It would be an intriguing exercise to read something into his constant gambling references, given that history.
So it’s Trump, with that record, playing his hand against Xi, who has steered China’s rise from a late-stage developing economy into arguably the most powerful economic force on the planet.
Imagine you have a friend you rely on, he has been with you your whole life and you trust him with everything, he has always backed you up and you have always backed him up.
Suddenly he develops severe schitzofrenia with full on halusinations and use your key to get into your home and burn all your belongings, log on to all your online accounts and burn all your connections, cancels your insurance, the works.
Trump is that schitzofrenia.