Sunday Times 2
Make America trustworthy again
View(s):By Ricardo Hausmann, PROJECT SYNDICATE, EXCLUSIVE TO THE SUNDAY TIMES IN SRI LANKA
CAMBRIDGE – In his historic speech at the World Economic Forum’s annual gathering in Davos in January, Canadian Prime Minister Mark Carney argued that the international order is not undergoing a “transition” but a “rupture”.
As the Sino-American rivalry escalates, he warned, the underlying architecture of the global economy—open markets governed by reasonably predictable rules, with the United States underwriting key “public goods”—is being replaced by a patchwork of transactional and coercive arrangements. Interdependence, once seen as a driver of shared prosperity, is increasingly recast as a vulnerability to be exploited.
Carney’s diagnosis resonated widely because governments and firms have already begun to price in a more volatile and politicised global economy. At a time when a hostile US administration can shut off access to the world’s largest consumer market for overtly political reasons, and when critical supply chains are increasingly used as chokepoints, planning for a rules-based order is simply naive. Echoing former Czech President Václav Havel, Carney noted that governments and firms continue to behave as if the international order will snap back, even as the evidence mounts that it will not, since acting otherwise would be costly and disruptive.
But the term “rupture” implies that the global economy will move toward a new equilibrium. In game-theory terms, the dominant player has shifted to a strategy that better serves its interests, and everyone else must adapt to a new set of incentives. If that is the case, the logical response is for middle powers to reduce their vulnerability by forming coalitions, diversifying trade partnerships, and building autonomous supply chains, just as Carney proposed.
But there is another possibility. What looks like a new equilibrium may instead be a temporary departure from the old one. Economic history, after all, offers plenty of examples of strategies that delivered short-term gains but were eventually reversed because they undermined the structures that made those gains possible in the first place. Exercising leverage is not the same as dismantling the institutions necessary for leverage to be credible. If the US continues to use tariffs, financial exclusion, and export restrictions to extract concessions from its trading partners, the world will not simply adjust; it will hedge. Governments and firms will redirect investment and reduce reliance on US markets.
The danger goes beyond any single trade dispute. When tools designed to manage the global economy through international coordination are repurposed as instruments of coercion and deployed unpredictably, ordinary commercial exposure becomes a tail risk. In response, firms and governments stop optimising for efficiency and focus on bolstering resilience.
This is not a moral critique; it’s the economics of complex cooperation. Many high-value cross-border arrangements—investment, supply-chain integration, and infrastructure finance—are long-term and relationship-intensive and thus depend on credible commitments. If one side cannot trust the other to honour agreements, it protects itself by shortening time horizons, raising risk premiums, establishing expensive contingencies, or disengaging altogether. When this logic becomes widespread, the result is not merely a redistribution of gains but a smaller overall pie.
Credibility is what makes large-scale cooperation possible. Like infrastructure or human capital, it is essential for specialisation and cross-border coordination. “Weaponised interdependence” erodes that foundation. As credibility weakens, specialisation gives way to redundancy; trust is replaced by self-insurance; and network economies begin to unravel. As Carney observed, a world in which everyone must pay a diversification premium is inevitably a poorer one.
The US, far from being exempt, also pays that premium—often more than it realises—because its economic power depends on governments and firms choosing to route trade, finance, and technology through American systems. When those connections come to be seen as liabilities rather than assets, they begin investing in alternative suppliers, payment systems, standards, and technology platforms.
The strategic implications are profound. Amid an escalating geopolitical rivalry with China, the Trump administration is effectively encouraging allies and trading partners to hedge against US policy volatility by diversifying away from American markets and supply chains. Once supply chains are rerouted, contracts rewritten, and standards duplicated, a return to the status quo ante is difficult to achieve.
An economic strategy that incentivises trading partners to seek alternatives, thereby strengthening America’s principal geopolitical rival, does not seem optimal from a US perspective and hence not part of a new equilibrium. It is more akin to a binge that leads to short-term gratification, only to be followed by long-term regret. If so, then Carney’s “rupture” is not inevitable. The world will still diversify, but the US may eventually recognise that making itself untrustworthy is self-defeating.
Trust, however, does not behave like a thermostat. It builds slowly and collapses quickly. Credibility hinges on pre-commitment: the mechanism that makes cooperation possible even when the temptation to act opportunistically is strong.
The underlying problem is one of time inconsistency. What looks attractive in the moment – exploiting leverage – undermines what matters over time: being trusted enough that others want to engage. The only lasting solution is to establish institutions and norms that constrain executive discretion.
If tariff policy can swing with the news cycle, it quickly becomes a political risk, discouraging long-term investment in manufacturing, energy, and technology. Restoring America’s credibility therefore requires institutional change. Broad tariff authority must return to Congress, presidential emergency powers must be narrowed, and legal guardrails must be strengthened to ensure that “economic statecraft” does not become a permanent substitute for coherent policy.
Making America trustworthy does not mean renouncing leverage. Instead, it means preserving the reputation for stable policymaking that gives US leverage its value.
In 1961, US President John F. Kennedy pledged to “pay any price, bear any burden, meet any hardship, support any friend, oppose any foe to assure the survival and the success of liberty.” Today, the world is asking America for something far less dramatic, yet in some ways more consequential: self-restraint. Without it, Carney’s warning will become self-fulfilling, not because the international order was bound to collapse, but because the global hegemon made itself impossible to trust.
(Ricardo Hausmann, a former minister of planning of Venezuela and former chief economist at the Inter-American Development Bank, is a professor at Harvard Kennedy School and Director of the Harvard Growth Lab.)
Copyright: Project Syndicate, 2026. www.project-syndicate.org