Ever since “Liberation Day” was announced by President Donald J. Trump on 2 April 2025, the world has not been the same — and will not likely change much — not at least until 2029 when the current administration ends.

But what exactly is the meaning and significance of Trump’s “Liberation Day” declaration? Allow me to share my armchair, non-economist observations on the current turmoil in the world.

On this day, Trump believes the US will be finally freed of the evil clutches of foreign goods that have been gradually preying on America’s manufacturing competitiveness for decades. This is the day when various reciprocal tariffs will be applied by America on all goods imported from countries which had set up all forms of trade barriers such as import taxes, government induced foreign currency rate fixing, and trade quotas on goods coming from the US. These trade barriers have effectively prevented US manufacturers from entering foreign markets.

More anomalous, in the view of the current administration, is that cheaper, competing foreign goods have entered the US market over several decades of US administrations eager to promote open trade as a tool to foster democratic, freedom loving ideals among all nations, friends and foes alike, unfortunately to the detriment of US manufacturers.

And how did this come about? The end of World War II gave birth to an era of open trade policies with the establishment of the General Agreement on Tariffs and Trade (GATT) in 1948 among 23 countries, largely the victorious WWII Western nations ostensibly for the purpose of rationalizing trade among countries through the reduction and equalization of protectionist tariffs, quotas and other trade barriers; and for conflict resolution protocols of trade disputes.

The GATT in 1948 provided the rules for the World Trade Organization that was formally founded in 1995 pursuant to the Marrakesh Agreement by 123 countries that primarily covered agreements in additional trade in services, trade related aspects of intellectual property, sanitary and phytosanitary measures, and technical barriers to trade.

Enterprising developing countries struggling to get back on their feet after the devastation of WWII put to good use the multitudes of their barely surviving populace and Western educated nationals who returned to their homeland to help rebuild their devastated countries to produce cheaper products that could be exported to the West using the natural resources of their respective countries.

For most underdeveloped countries like the Philippines and other Asian nations, these “resources” meant primarily the people who were, and for some countries still are unfortunately to this day, prepared to make do with practically starvation wages when compared to labor costs in the US. Cheap labor was our main competitive advantage and to some extent our plentiful natural resources.

On this day, Trump believes the US will be finally freed of the evil clutches of foreign goods that have been gradually preying on America’s manufacturing competitiveness for decades.

Over time, as the quality of the products in the developing countries improved through technology that ironically was supposedly illegally acquired from the West, the imbalance between what was being sold to the US became bigger and bigger, resulting in significant trade surpluses for the exporting countries but massive trade deficits for the US.

With significant trade deficits, the US had no choice but to continue issuing more debt securities to the world increasing the risk of the government’s inability to rein in the ever growing debt. As of end 2024, the debt-to-GDP ratio of the US was at a whopping 98 percent. This means that for every dollar America earns, only two cents is available for its own use.

In simple terms, as advocated by Trump, the US was “robbed” of its wealth, as well as its intellectual resources, through the massive trade surpluses with other countries and America needs to recover this lost wealth by assessing reciprocal tariffs on the rest of the world. His mantra: we will do to you what you do to us.

On the surface, Trump’s logic seems fair, but what are the consequences? Barely a week after “Liberation Day,” the capital markets are in turmoil. Several countries, notably China, have declared similar tariff assessments on US goods. Analysts have forecast a 60-percent probability of a US recession occurring.

Global trade will surely slow down, increasing even more the prospect of a recession.

Unfortunately, in a recession, it will not be the Trumps and Musks of this world who will be affected and who will bear the consequences. It will be ordinary folks like you and me who will suffer.

Until next week… OBF!

For comments, email bing_matoto@yahoo.com.