New world order should be driven by South-South trade, cooperation

US President Donald Trump's "reciprocal tariff" is not truly reciprocal; rather, it functions as a "trade deficit tariff." In its true sense, a reciprocal tariff means that Country X would impose the same tariff rate on imports from Country Y that Country Y imposes on imports from Country X. 

However, when we examine the calculation of Trump's reciprocal tariff, it becomes clear that it is based on dividing the US trade deficit with a partner country by the imports from that country, and then dividing that result by two. As a result, even if a partner country reduces its tariffs, it will not necessarily lead to a reduction in the reciprocal tariff. 

According to this formula, the only way to lower the reciprocal tariff is for the partner country to export less to the US and import more from the US. 

An important point to consider is that these varying degrees of "reciprocal tariffs" for US partner countries will lead to uneven bilateral negotiations between countries and the US, with countries that can strike better deals being in a more advantageous position. 

Do countries like Bangladesh possess the negotiation skills, capacity, and bargaining power to secure favorable terms? Those countries that are unable to negotiate effectively and continue to face discriminatory tariffs in the US market, especially with the apparent collapse of the multilateral trading system, will have no recourse for justice or remedies. 

Developing countries must recognise that this represents an extraordinary situation and a structural shift in the global trading regime. They need to collaborate more effectively to strengthen South-South cooperation. The New World Order should be driven by South-South trade and cooperation.

Selim Raihan is a Professor at the Department of Economics, University of Dhaka, and Executive Director, at the South Asian Network on Economic Modeling (SANEM).