We’re all having to master a vocabulary that was once the preserve of specialists. Now everyone needs to know their tariffs from their treasuries, their levies from their yields. But there’s one more term from the realm of economics that urgently needs to enter our lexicon. Given what Donald Trump is doing to the world economy – and the world – we need to talk about opportunity cost.
Put simply, opportunity cost is the value of opportunity lost. It’s the benefit you could have had if you had chosen a different path. For an economist, the opportunity cost of the Mars bar you bought is the Twix you didn’t.
But the principle extends beyond money. It applies to time, too. The hour you spent scrolling on your phone cost you the hour you could have had walking in the park. It can apply to anything, including our energy and attention.
Enter Trump. For weeks, the resources of governments and businesses around the world have been focused squarely on the White House and its whipsawing, on-again-off-again series of tariffs imposed on enemies and friends alike.
Last week, it was Trump as gameshow host in the White House Rose Garden, proudly unveiling his Price is Right table of import duties, listing each country alongside the percentage by which it was about to get whacked. He called it “liberation day”. This week, it was the 90-day “pause” – climbdown would be another word – for everywhere except China, which got hit with extra levies. Throughout, people in every ministry and trading floor on the planet held their breath, along with the boardroom of every company that buys or sells overseas, as they watched to see what Trump would do next to the global economy currently held hostage in the Oval Office. With a gun to the temple of the world trading system, Trump’s every twitch has commanded humanity’s attention.
And, my, how he loves it. You could see his pleasure as he told a Republican dinner on Tuesday that the world’s nations were “kissing my ass” to negotiate a deal that would spare them tariff pain. For him, the uncertainty is all part of the fun. As the Economist rightly observed, he relishes “being the focus of a planetary guessing game”. Trump used to get his dopamine hit from a mention in the gossip columns of the New York tabloids; now he’s tasted the thrill of commanding an audience in the billions and he’s hooked.
But consider the price we are all paying. I don’t (only) mean those trillions of dollars wiped out at a stroke through tumbling stocks, or even the investments put on hold as businesses decide that, amid all this uncertainty, now is not the right time to open that new factory or launch that new product, thereby delaying, perhaps for ever, the jobs or wages that would have found their way to people who need them.
I mean instead the opportunity cost: the action the world could be taking if it were not forced to monitor, adjust to and accommodate the whims of one man, whose ideas on economics were formed five decades ago and were wrong even then.
Right now, all the capacity governments have is devoted either to saving or replacing a global trading system that was, however imperfectly, functioning. Huge intellectual and political energy is, and will be, dedicated to ensuring that national economies can survive now that that system has been upended and a previously indispensable trading partner has gone off the rails.
There are already some strong ideas. Gordon Brown has called for an “economic coalition of the willing” that would mobilise the World Bank and the International Monetary Fund to protect the poorest nations and coordinate action on both interest rates and credit for companies in trouble. That approach fits with the suggestion that the likes of Japan, Canada, South Korea and Australia join forces with Britain and the EU to form a free trade alliance minus the US.
I would embrace both those developments. But just think where all that collective energy could be going if it were not having to confront a crisis started so needlessly by Trump. Those same powers would be free to act together to tackle the climate emergency, to name the most obvious example. Europe has just experienced its warmest ever March, 1.6C hotter than pre-industrial levels, while figures released this week show that Arctic sea ice reached its lowest extent for March since satellite records began.
Naturally, no one expects Donald “Drill, baby, drill” Trump to care about that, not when he actively wants to see the world burning more, not fewer, fossil fuels. But much of the rest of the world does care about the climate crisis. Of course, it would be naive to imagine that, absent Trump, they would be devoting every waking hour to reducing carbon emissions. But what little capacity the international system has for collective action has been gobbled up by a crisis that was not born of natural disaster or pandemic, but the caprice and vanity of one man.
Witness the plight of Sudan. Figures are hard to come by, but a monitoring lab at Yale puts the number of dead in the civil war that has raged there since 2023 as high as 150,000, with the UN accusing both sides of “harrowing” crimes, including mass rape and torture. International action is essential. Instead, say campaigners, there’s been a “loss of leadership, coordination and money”, traceable to the day Trump took office.
Part of that is down to Elon Musk’s dismantling of the lead US aid agency, but part of it is other governments having their hands full managing the Trump hurricane. As Kate Ferguson of Protection Approaches told me, the gutting of USAid and “the anxiety triggered by tariffs” mean US funding to on-the-ground emergency response rooms – health clinics and the like – has collapsed, “and other states are hesitant to fill the gap”. Next week there’s a chance to put that right, as foreign ministers gather in London on Tuesday to discuss Sudan. But it’s hard to be hopeful. David Lammy won early plaudits for highlighting the bloodshed in Sudan, but in recent weeks, the foreign secretary’s focus has necessarily been elsewhere. You can say the same of Gaza or Ukraine, forced down the list of international priorities by a trade war that did not have to happen.
This is how it is. Political bandwidth is limited. I’ve been told often that governments can handle only one crisis at a time, two at most. Now a huge chunk of that capacity has had to be diverted to dealing with something that decision-makers could previously take for granted: relations with the US and the functioning of the global trade system. Currently, both are in a state of permanent crisis. Britons have seen this movie before, when Brexit consumed several years of political and policymaking energy, and the entire apparatus of the UK state was forced to deal with an issue that never needed to arise, energy that could have gone on real problems that desperately needed solving.
To repeat, Trump will lose no sleep over any of this. He likes the thought that his foes – and even his allies are foes – will be snarled up, trying to untangle knots he’s created: it’s a tactic he’s used since the 1970s, when he liked to tie up opponents in lawsuits. He loves tariffs especially, because they give him the power to exempt countries or even individual companies he favours – those who “kiss his ass” – in a system that all but invites bribery and corruption. He loves these games. But they cost everyone else dear – until, that is, the rest of the world decides to stop playing.
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