Trump’s Tariff War Is Accelerating A Much Larger Economic Shift, Says Economist El-Erian

Allianz Chief Economic Advisor Mohamed El-Erian reportedly said that the latest U.S. retaliatory tariffs by the Trump administration are more than just another trade fight – they’re part of a much larger transformation that will define the future of the global economy.

In a column for the Financial Times, El-Erian warned that the world is undergoing a “three-S” shift – structural, secular, and systemic – a fundamental change that extends far beyond tariffs and trade policy.

The sweeping trade measures impose a 25% tariff on auto imports and a minimum 10% tariff on all U.S. trading partners. The largest increase affects Chinese goods, with total levies now reaching 54% following a new 34% tariff on top of the existing 20% rate. 

Canada and Mexico were exempt from the changes.

The S&P 500 was down 4% in morning trade on Thursday, while the Nasdaq-100 had fallen 4.7%, reflecting broad market weakness.

El-Erian argued that structural change is already underway, with the U.S. losing its role as the undisputed anchor of the global economy. 

That shift is forcing geopolitical and financial realignments, particularly in Europe, where Germany is leading an effort to boost defense and infrastructure spending. 

He said that as power becomes more distributed, businesses and governments must prepare for an economic landscape where past strategies may no longer work.

El-Erian also flagged growing concerns about stagflation in the U.S., where business and consumer confidence are falling, stock market performance is weakening, and gold prices are climbing. 

With debt levels historically high, he said the Federal Reserve has little room to maneuver on interest rates, further complicating an already fragile outlook. The uncertainty is forcing companies to shift focus from innovation and growth toward managing short-term risks.

At the highest level, systemic changes in global governance and financial markets are reshaping the rules of trade, policy coordination, and economic power, according to El-Erian.

He outlined two potential outcomes. One is a “creative destruction” scenario, where economies adapt and ultimately emerge more efficient and balanced. The other is a more troubling breakdown scenario, in which economic relations fracture, leading to prolonged stagnation and policies driven by conflict rather than cooperation.

While experts remain divided on how the global economy will evolve, most agree that the transition will be volatile and uncertain. 

El-Erian warned that businesses and governments must abandon any hopes of a quick return to stability and instead build resilience, embrace volatility, and adapt in real time.

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