HINDU BUSINESS LINE
22.04.2025
Aradhna Aggarwal *
The Illusory Truth Effect—a psychological phenomenon where repeated exposure to falsehoods makes them seem true—has become a cornerstone of modern political propaganda. A 2023 study in Public Opinion Quarterly found that by the end of his first term, President Trump had made an estimated 30,573 false claims. The study showed how the repetition of these claims powerfully shaped public misperceptions—regardless of their factual basis. His ongoing rhetoric about the U.S. being “taken advantage of” by the global trading system is (mis)informed by this effect. Emboldened by its political traction, he has leaned even more heavily on this misinformed narrative in his second term.
In reality, the global trading system—far from exploiting the U.S.—has been largely shaped by it to serve its own strategic and economic interests. For decades, the U.S. has been a primary beneficiary of globalization, enjoying access to cheaper goods, global expansion of its multinationals, dominance in high-value services, and outsized profits in finance and tech. U.S. GDP per capita has consistently outpaced global averages; since 1991, the gap has widened by 70%, from $31,866 to $54,296. While critics like J.D. Vance argue that globalization has made U.S. firms complacent by enabling them to outsource instead of innovate, evidence suggests otherwise. In 2024, U.S. firms again led the world in patent grants in the US—157,955—far ahead of China, Japan, Germany, and South Korea. The tech sector alone generates nearly $2 trillion in GDP and employs 9.3 million Americans. In frontier fields like AI and quantum computing, the U.S. remains at the cutting edge.
Trade deficits, often painted as a sign of decline, actually reflect the U.S.’s singular macroeconomic position. America funds these deficits through capital inflows, enabled by the global demand for the dollar. As the world’s most preferred reserve currency, the dollar draws investment from corporations, banks, sovereign wealth funds, and central banks across the world into U.S. assets—bonds, stocks, real estate, and startups. This “exorbitant privilege” allows the U.S. to borrow in its own currency, while others must earn dollars to pay for imports. Goods flow in due to domestic demand, but so does capital—offsetting the trade deficit. When channeled productively, these inflows have long supported strong economic growth, as noted by the Center for Global Development. These deficits are not inherently harmful; their impact depends on how the capital is used. Moreover, the outcome of current U.S. trade policies may not reduce fiscal or trade imbalances. Much will depend on how they influence investor confidence and growth expectations.
The real driver of economic discontent in the U.S. isn’t globalization—it’s domestic policy failure. The global trading order has worked well for the U.S. as a whole, but its gains have been unevenly shared. This failure of redistribution, not trade, fostered the victim narrative and created fertile ground for disinformation.
Beneath the economic rhetoric lies a deeper geopolitical anxiety: the erosion of American hegemony, especially by a rising China. China is rapidly closing the gap with the U.S. across sectors, triggering tensions typical of power transitions. Vance’s remarks at the American Dynamism Summit laid bare this concern: “The idea of globalization was that rich countries would move up the value chain… But as [poor countries] got better at the low end, they also started catching up on the high end.” The U.S., assuming permanent dominance, is now grappling with the unsettling reality of competition in manufacturing, innovation, and design.
This hegemonic unease isn’t limited to China. Trump’s tariffs in his first term did reduce the bilateral deficit with China but merely diverted trade to other competitors, drawing his attention to new rising economies. Meanwhile, the broader Global South—led by BRICS+—is voicing dissatisfaction with the dollar-dominated system. It is exploring trade in local currencies, developing alternative payment systems, and even proposing a common BRICS currency. Though still early, these moves signal a shift toward a more multipolar global financial order.
The U.S.’s strategic objective is now clear: to slow or block the rise of rivals before they undermine American dominance and the privileges that come with it. As the rules-based order is increasingly reshaped by unilateralism and strategic competition, emerging economies must respond with collective purpose. They must move beyond symbolic alliances and transform BRICS+ into a coherent economic bloc, promote regional trade integration, invest in shared technological capabilities, and build independent financial infrastructure. Diversifying value chains and strengthening domestic resilience is essential—not just for growth, but for asserting agency in an evolving global order.
Senior advisor Trade, Technology and Skills Unit, NCAER; Views are personal.
