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한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском Trump escalates his trade war rhetoric and has just begun his second term. In response to the Colombian government's protest over the conditions of its citizens' deportation, the 47th U.S. president retaliated with a furious announcement of a 25% tariff hike, forcing Petro to withdraw his demands. Against Canada and Mexico, his neighbors and trade partners, he has just signed another 25% tariff increase. The reasons? According to Trump, their borders are a sieve for drugs and illegal immigrants. As for China, he has so far imposed a 10% tariff, though his campaign promise was 60%. In the 21st century, trade wars are one of the most controversial strategic tools in international relations. The Economy: A Geostrategic Factor Tariffs have historically been used to protect local industries and balance trade deficits. However, their current use goes beyond their original purpose. These policies have transformed global economic dynamics, reshaping supply chains and markets, and profoundly impacting geopolitical, social, and financial structures. Competitiveness and Technological Strength The contemporary use of trade wars follows a more complex and multifaceted logic. In the case of the United States, for example, the tariffs imposed by recent administrations have aimed both to limit China’s competitiveness and to preserve U.S. technological and economic supremacy. This strategy, however, is not limited to a bilateral confrontation. The United States has also imposed trade barriers on traditional partners such as the European Union and Canada. As a result, traditional alliances have become secondary to the unilateral goal of maximizing profits. This policy has been justified under national security arguments, a legal tool that has generated tensions within the World Trade Organization (WTO) and challenges the principles of non-discrimination and multilateralism that have underpinned the global trade system since the mid-20th century. The impact of these policies affects both intergovernmental relations and, directly, consumers and producers. Tariffs and the Domestic Economy The implementation of tariffs on products from China, such as technological goods and manufactured equipment, has driven up their prices in markets like the United States. As always happens when goods become more expensive, this has especially harmed the most vulnerable sectors of the population by exacerbating economic inequalities and reducing their purchasing power. To maintain competitiveness, many companies have opted to relocate their operations to countries like Vietnam, Malaysia, or Mexico, which entails transition and adaptation costs. Regionalization against Protectionism At a global level, trade wars have triggered a phenomenon of regionalization, leading to the creation of agreements such as the Regional Comprehensive Economic Partnership (RCEP), led by China and signed by countries in Asia and Oceania, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which includes nations from the Pacific coasts of Asia and Latin America. Through these agreements, the signatory countries seek to counteract the effects of U.S. protectionist policies. Since 2019, the United States has blocked the appointment of new members to the WTO Appellate Body, weakening its ability to resolve disputes and increasing uncertainty, as well as the likelihood of escalating trade tensions. While regionalization forces a reassessment of the sustainability of the multilateral trade system, in this climate of instability and uncertainty, countries are searching for alternatives that ensure economic stability — though these solutions ultimately reinforce the fragmentation of global trade. Trade War and Geopolitics The impact of trade wars is also evident in the geopolitical sphere. The rivalry between the United States and China, driven in part by tariffs and technological restrictions, is redefining international alliances. On one hand, countries like Japan and South Korea have strengthened ties with the United States to counter China’s influence. On the other hand, emerging economies in Latin America, such as Mexico and Brazil, face pressure to align with one of these blocs, limiting their maneuverability and autonomy on the global stage. In Europe, tensions with the United States have led the European Union to prepare new tariffs and strengthen regulations to protect its strategic industries, such as the automotive and technology sectors. Uncertainty and Volatility While the imposition of tariffs can provide immediate benefits to the countries that implement them — whether in terms of tax revenue or political influence — their social and economic costs can be significant. Trade wars impact the flow of goods and services but also financial stability. Trade tensions increase stock market volatility, influence investment decisions, and weaken global economic growth prospects. The uncertainty generated by protectionism forces companies to adapt to an ever-changing and unpredictable environment. Trade wars have exposed the fragility of global supply chains, underscored the importance of diversifying production sources, and highlighted the need to strengthen multilateral institutions that promote fair and equitable trade. What to Do? The solution goes beyond simply removing tariffs or reversing protectionist policies; a more strategic and resilient approach is needed. This involves fostering international cooperation to address trade tensions, reforming the WTO’s dispute resolution mechanisms, and promoting the relocation of supply chains to more stable regions. Countries that impose tariffs must also consider the impact of these measures on households. Rising prices should prompt policies to mitigate growing social inequalities and protect the most vulnerable sectors. The trade wars of the 21st century reflect a complex balance between protecting national interests and preserving global stability. The key to progress lies in adopting a cooperative and sustainable approach that, beyond immediate economic benefits, also considers collective well-being and international cohesion in the medium and long term.

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском In response to its recent retaliatory tariffs on US energy imports, a delegation of major Chinese energy firms visited Kazakhstan in February 2025 to explore new trade opportunities. It was led by the China Council for the Promotion of International Trade (CCPIT), which focused on diversifying supply chains and reducing dependence on western markets. The visit highlights Beijing’s commitment to deepening economic ties in Central Asia through trade, infrastructure investment, and energy cooperation amidst the escalating tensions between China and the West. Traditionally, Russia exerted a dominant influence in Central Asian countries due to its Soviet-era legacy and security ties. However, China’s Belt and Road Initiative (BRI) and expanding economic partnerships with Central Asian nations have established Beijing as a key player in the region. As US presence has diminished, and Russia remains preoccupied with its conflict in Ukraine, China has leveraged economic partnerships, infrastructure projects, and strategic diplomacy. China has emerged as Central Asia’s primary trade partner, even surpassing Russia in economic influence. In 2023, trade between China and Central Asia reached $89.4 billion, reflecting a 27% increase from the previous year. This surge highlights China’s efforts to solidify its economic presence through investments, trade agreements, and infrastructure projects. Kazakhstan remains Beijing’s most significant economic ally in the region, with trade reaching $43.8 billion by the end of 2024, a 9% rise from 2023. Likewise, Uzbekistan has upgraded its ties with China to an “all-weather” comprehensive strategic partnership, aiming to boost trade from $14 billion to $20 billion. Chinese investments in Uzbekistan’s renewable energy sector have grown fivefold, underscoring Beijing’s focus on sustainable development. Infrastructure development is a cornerstone of China’s engagement in Central Asia. The China-Kyrgyzstan-Uzbekistan (CKU) railway is a flagship project designed to provide China with a direct access route into the region, reducing dependence on Russian transit networks. China, Kyrgyzstan, and Uzbekistan signed a trilateral agreement that will carry out the project in June 2024. This aligns with Beijing’s broader goal of diversifying trade routes, particularly amid global disruptions such as Houthi attacks in the Red Sea. China has expanded its influence and investments in the energy industry, extending its reach beyond transportation infrastructure. The China-Central Asia Gas Pipeline, spanning Turkmenistan, Uzbekistan, Kazakhstan, and China, is crucial to Beijing’s energy security strategy. This infrastructure ensures a steady supply of natural gas while providing Central Asian states with an alternative to Russian-controlled routes. In October 2023, KazMunayGas (KMG) and China National Chemical Engineering Group Corporation (CNCEC) agreed to construct a gas turbine power plant at the Atyrau oil refinery. This facility aims to enhance power supply reliability and support the energy needs of the Atyrau region.Similarly QazaqGaz and Geo-Jade Petroleum Corporation are set to develop the Pridorozhnoye gas field in Turkistan Region. China National Petroleum Corporation (CNPC) is implementing four oil and gas projects in collaboration with Kazakhstan’s Samruk-Kazyna. On a regional scale, PetroChina plans to resume construction of Line D of the Central Asia–China Gas Pipeline in 2025, pending the finalization of a gas supply contract with Turkmenistan, further strengthening China’s energy ties with the region. In Kyrgyzstan and Tajikistan, Beijing plays a dominant role in the extraction of essential minerals, while its economic ties with Kazakhstan continue to strengthen. China’s molybdenum imports from Kazakhstan increased to around $19.6 million in 2022, demonstrating the country’s reliance on Kazakh resources. Meanwhile, 1.5% of Tajikistan’s total exports to China were zinc, and 17.5% were copper, demonstrating China’s rising influence over Central Asia’s minerals and the potential for raw material exploitation in Central Asian countries. Despite China’s growing economic footprint, Central Asian states remain cautious about excessive dependence and actively seek to diversify their partnerships, including engagement with the United States. Beijing has heavily invested in Kyrgyzstan and Tajikistan, financing essential infrastructure projects such as roads, bridges, hospitals, and government buildings. These investments reflect China’s broader strategy of fostering economic development as a means to ensure regional stability. By funding key projects, Beijing not only stimulates economic growth but also deepens its political influence by cultivating relationships with local elites. Chinese direct investments in Kyrgyzstan reached $220.8 million in 2023. Specifically, China has been involved in the construction of roads and infrastructure, and Bishkek, China provides grants for the construction of interchanges to solve traffic jams. China and Kyrgyzstan have extended their Belt and Road Initiative (BRI) cooperation until 2026, aligning the infrastructure project with Kyrgyzstan’s national development strategy. China has been the largest national contributor to Tajikistan’s expanding transport infrastructure, accounting for 26 percent of the total value, or $570.2 million. Of this, $37 million has been provided in grants, while the remaining $533.2 million were loans. China has committed $230 million in funding to Tajikistan for the construction of a new parliament  building. The 2023 China-Central Asia summit in Xi’an marked a turning point in Beijing’s regional strategy. Historically, China engaged with Central Asian states through the Shanghai Cooperation Organization (SCO), where Russia played a significant role. However, the establishment of an independent China-Central Asia summit signals Beijing’s growing assertiveness in the region and a strategic shift toward reducing Russia’s traditional influence. In May 2023, President Xi Jinping hosted leaders from Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan for the inaugural  China Central Asia summit, which took place in Xi’an, Shaanxi Province. China announced during the summit that it would upgrade bilateral investment agreements, introduce more trade facilitation initiatives, speed up the construction of the D-line of the China-Central Asia gas pipeline, and give Central Asian countries 26 billion in financing support and non-reimbursable assistance. Kazakhstan will host the next summit in 2025–2026. At the summit, China pledged substantial development aid, expanded energy partnerships, and strengthened security cooperation, reflecting its broader commitment to regional stability and economic integration. Although China’s engagement in Central Asia remains primarily economic, it is increasingly asserting itself on political matters as well. Beijing has taken diplomatic stances that occasionally diverge from Moscow’s interests. For instance, China has openly supported Kazakhstan’s territorial integrity in response to Russian nationalist rhetoric, Chinese President Xi Jinping declared during his September 14, 2022 visit to Kazakhstan that his country backs Kazakhstan’s independence and territorial integrity and is against any meddling in its domestic affairs. However, despite these political maneuvers, China remains cautious about direct security involvement in the region. While Beijing maintains a military presence in Tajikistan and deploys private security firms to protect its investments, it continues to operate within Russia’s established security framework rather than attempting to supplant it. This cautious approach was particularly evident in China’s limited response to border clashes between Kyrgyzstan and Tajikistan, signalling its reluctance to assume a direct security guarantor role in the region. Meanwhile, Russia’s traditional dominance in Central Asia has weakened due to its ongoing war in Ukraine. Central Asian governments are distancing themselves from Moscow, with Kazakhstan’s President Tokayev openly rejecting Russia’s territorial claims in Ukraine. Moreover , the Eurasian Economic Union (EAEU), Moscow’s regional economic bloc, has struggled to compete with China’s Belt and Road Initiative (BRI), which provides more substantial investments and infrastructure development. As a result, China’s influence in Central Asia continues to expand, filling the gaps left by Russia’s declining geopolitical leverage. While China’s engagement in Central Asia has traditionally focused on economic investments, its security presence is steadily expanding. Beijing has increased arms sales, military cooperation, and counterterrorism efforts. Chinese military exports accounted for only 1.5% of Central Asia’s total arms imports, between 2010 and 2014,  but by 2019, this figure had surged to 18%. In a significant development, in 2021, Tajikistan approved the construction of a new base after an agreement between the country’s Interior Ministry and China’s Public Security Ministry or police force. The fact that the Public Security Ministry, not the Chinese military, signed the agreement indicates that counterterrorism is a priority in the face of growing concerns about instability in neighbouring Afghanistan. This facility enhances Beijing’s security footprint near Afghanistan, a region of strategic concern due to potential instability affecting Xinjiang. Unlike Russia, which maintains a direct military presence, China takes a different approach to security cooperation. Rather than deploying conventional troops, Beijing relies on Private Military and Security Contractors (PMSCs) to safeguard its economic interests and infrastructure projects. These contractors, often led by former Chinese military personnel, protect Chinese investments across Central Asia. While negotiating its non-interference policy’s limitations, these PMSCs handle security concerns ranging from terrorism to local unrest impacting Chinese workers and projects by offering a variety of services such as armed protection, intelligence collection, and military training. In line with its security diplomacy and larger Global Security Initiative, China uses PMSCs to strengthen security cooperation and increase its influence in the region. Companies such as Zhongjun Junhong Group and China Security and Protection Group have established branches in nations like Kyrgyzstan and Tajikistan. China launched the Global Security Initiative (GSI) in 2022, reinforcing its commitment to regional security. The GSI prioritizes sovereignty, noninterference, and counterterrorism collaboration, aligning with the security priorities of Uzbekistan and Tajikistan, which face domestic stability challenges. Beyond military engagement, China has intensified law enforcement cooperation with Central Asian states. Beijing has established intelligence-sharing agreements, police training programs, and cybersecurity initiatives aimed at combating organized crime and terrorism. These efforts serve China’s broader goal of maintaining regional stability while protecting its economic interests. Despite China’s growing economic and security ties with Central Asia, local resistance poses a significant challenge. Public opposition to Chinese investments has been fuelled by concerns over debt dependency, land acquisitions, job displacement, and environmental impact. In 2016, proposed land reforms in Kazakhstan sparked widespread protests across the country, as many citizens feared that the changes would allow Chinese investors to buy large tracts of Kazakh land. The government had introduced amendments to the Land Code, which included provisions for leasing agricultural land to foreign investors for up to 25 years. This led to public concerns about the potential for Chinese ownership of Kazakh land, given China’s increasing economic influence in the region. Demonstrations took place in major cities like Almaty, Atyrau, and Aktobe, drawing thousands of people. The scale of the protests forced the Kazakh government to suspend the reforms and impose a moratorium on land sales to foreigners, highlighting the deep-seated anxieties over national sovereignty and economic dependency on China. Protests occurred in several cities in 2019 including Astana, Almaty, and Zhanaozen in Kazakhstan. Demonstrators opposed Chinese industrial projects, fearing environmental harm and long-term economic dependence on China. There was also widespread suspicion that Chinese investments would lead to land leases or permanent settlements by Chinese workers, further fueling public discontent. In Naryn, Kyrgyzstan, violent protests erupted against a planned $280 million Chinese logistics and industrial project. Protesters were concerned about potential environmental damage, the loss of land to foreign companies, and a perceived lack of economic benefits for local communities. The unrest led to the cancellation of some Chinese-backed projects. China’s treatment of ethnic minorities of Uyghurs, Kazakhs, and Kyrgyz in Xinjiang has further complicated its relations with Central Asian populations. Protests against the mass detentions have mainly occurred in Kazakhstan and Kyrgyzstan. From 2018 to 2019, the activist group Atajurt Eriktileri organized frequent demonstrations in Almaty and Nur-Sultan (Astana), demanding the release of detained ethnic Kazakhs. Since January 2021, relatives of detainees have held weekly protests outside the Chinese Consulate in Almaty. In Kyrgyzstan, smaller protests took place in Bishkek in February and December 2019, where activists urged the government to act against China’s repression. China’s growing trade, security, and political influence in Central Asia is a key testing ground for its broader geopolitical ambitions. The future of this engagement will depend on China’s ability to balance its economic interests with local concerns, ensuring that its expanding role contributes to stability rather than fostering tensions. Beijing’s influence in Central Asia is steadily increasing, making it a dominant economic and security partner. Through initiatives like the Global Security Initiative (GSI), the Belt and Road Initiative (BRI), and the China-Central Asia (C+C5) mechanism, China has deepened its presence by offering financial investments, security cooperation, and diplomatic engagement. This approach has been well-received by Central Asian governments, which seek economic growth and stability. Although Russia remains a major geopolitical actor in the region, its influence is diminishing as China’s economic power continues to rise. Beijing’s emphasis on respecting sovereignty and promoting development has helped solidify its relationships with Central Asian states. However, challenges such as local resistance to Chinese investments and potential geopolitical tensions with Russia persist. The long-term success of China’s regional strategy will depend on its ability to manage these complexities while maintaining its strategic foothold. The text of this work is licensed under a Creative Commons CC BY-NC 4.0 license.

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском The commitment to free trade is based on the competitive advantage that nations gain from possessing certain material and human resources that are scarce in other countries. The exchange of goods under the umbrella of free trade results in a global benefit, as it fosters economic growth, improves the quality of goods, and diversifies supply. The free trade doctrine, which has governed international trade in recent decades, is opposed by protectionism, which seeks to favor domestic producers over foreign competition. Above All, Protectionism Trump's campaign to win votes from the U.S. automotive and agricultural sectors was based on extreme protectionism – which we could call the ‘Trump Doctrine’ – centered on the promise of raising tariffs on products from competing countries. The increase in tariffs to boost domestic production in non-competitive sectors clashes with the rules of the World Trade Organization and the already established trade relations with exporting countries. On the other hand, those who silently suffer from Trump's protectionist measures are American consumers, who will have to pay higher prices for imported products that are currently cheaper. The need to reorganize international trade flows had already been raised due to the existence of ecological, social, or economic dumping. In response to violations of competition rules and the presence of discriminatory situations, agricultural groups have demanded mirror clauses to ensure that imported products comply with the same regulations as domestic ones. However, all these proposals have been made within a negotiating framework and not in a disruptive and unilateral manner, as the Trump Doctrine does. Tariff Increases Specifically, the U.S. has formalized a 25% tariff on steel and aluminum from other countries, set to take effect on March 4. This impacts the Spanish industrial sector, which exports aluminum worth 500 million to the U.S. market. There are still no details on which Spanish agri-food products (such as wine, olive oil, meat, and dairy) may be affected and to what extent by the Trump Doctrine. Latin American countries are also at risk: in 2021, 86% of their agri-food exports were destined for three regions — the U.S. (23%), the EU (18%), and China (13%). The EU and Latin American countries belonging to Mercosur have the advantage of having signed an agreement in December 2024, which will allow them to strengthen their trade relations and potentially offset losses in the U.S. market. In response to these tariff attacks, countries have reacted by attempting to reach agreements among the affected nations. The European Union and Canada have met to design a joint strategy against the Trump Doctrine, and China is also considering reorganizing its trade flows, which could provide some relief for its exports. However, the damage caused by tariffs is global and does not only affect exporting countries. In the United States, there will be negative impacts on consumers and businesses in the form of higher prices and even shortages or the disappearance of some imported products. United States-Europe Trade Relations There is no free trade agreement between Europe and the United States, although an attempt was made, without success, to establish the Transatlantic Trade and Investment Partnership (TTIP). However, progress has been made in harmonizing food safety regulations, quality standards, and data privacy rules. Nevertheless, Trump accuses Europe of "treating the United States very badly" and has warned that they must balance the "$350 billion" trade deficit. In Europe, the most exposed sectors to the threat of U.S. protectionism are aerospace, automotive, and agri-food. The countries at the highest risk include Germany (automotive), France (aerospace), the Netherlands (petrochemical), Italy (pharmaceutical), Ireland (technology), and Spain (agri-food), as they have the most open economies to foreign trade. On the other hand, the United States exports high-tech products, machinery, chemicals, and agricultural goods (corn, soy, meat) to Europe. In the digital sector, major U.S. companies (Amazon, Google, Apple, Meta) are well-positioned in the Old Continent, often engaging in market dominance abuses that the EU has attempted to curb through fines and legislative changes. Spanish exports to the United States focus on automobiles, machinery, and pharmaceutical and agri-food products (wine, olive oil, meat, dairy, and horticultural products). U.S. imports into the Spanish market primarily consist of machinery, electronic products, pharmaceuticals, financial services, and agricultural goods. The U.S. has invested in Spain in the automotive, technology, energy, distribution, and finance sectors. In turn, Spain has a presence in the North American market in the distribution sector (Inditex, Mango), renewable energy (Iberdrola, Acciona, Naturgy), communications, and infrastructure (Ferrovial, ACS, Sacyr). The Technological Battle A fierce competition is emerging in the development of space travel, military technology, and integrated artificial intelligence. In the geopolitical landscape, development cooperation, armed conflicts, climate change, and environmental sustainability are key issues to consider. We have just witnessed how restrictions on the supply of microprocessors stimulated China's creativity in the tech sector. China welcomed the new year with DeepSeek, its own AI model — with similar capabilities to ChatGPT but significantly lower costs — which has shaken the U.S. tech industry and triggered a stock market upheaval. Meanwhile, the EU is now trying to shake off its role as a mere spectator in the development of these new technologies and has just announced a €200 billion investment in the development of European AI. It is important to remember that Europe has been a pioneer in AI legislation, with the Artificial Intelligence Act approved by its Parliament at the end of 2023.  Outlook and Solutions The impact of trade wars depends, on one hand, on the measures imposed (tariff, fiscal, or regulatory) and the volume of existing trade flows. However, the characteristics of the regions, economic sectors, and affected social groups also play a crucial role. In the final countdown, before the implementation of the new tariffs, the United States reached a preliminary agreement with Mexico and Canada, granting a one-month pause before enforcing the announced tariffs. In the case of China, its response to the U.S. threat was to announce similar tariff increases on American products. Among European countries, there are different strategic approaches to the Trump Doctrine. The positions of the Paris-Berlin axis — ready to respond to U.S. tariff threats — and the Rome-Budapest axis are opposed. It remains to be seen whether Italian Prime Minister Giorgia Meloni, who attended Trump's inauguration on January 20, will act as a mediator between the EU and the U.S. or if she will focus solely on securing a favorable position for Italy. Volatility, Uncertainty, Fluctuations A trade war affects foreign investments and creates volatility in financial markets due to the uncertainty it generates. Additionally, it reduces trade exchanges (imports-exports) and causes fluctuations in currency markets. The dilemma of “restructuring or rejection” posed by the Trump Doctrine involves the option of readjusting the existing order or entering into direct competition. For now, tensions remain high, and The Wall Street Journal, one of the major U.S. media outlets, describes the trade war as “absurd,” “unnecessary,” and “stupid.” The reality is that an atmosphere of international insecurity has been created regarding future investments, and stock markets have suffered losses. Meanwhile, the threatened countries insist they will enforce countermeasures, to which Trump responds by threatening to raise tariffs even further.

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском Donald Trump seems to be turning tariffs, which can serve as a legitimate tool to achieve the goals of fair trade and the protection of key national security interests, into an illegitimate tool of coercive statecraft. It is likely to undermine the global economic order and US soft-power influence across the world Since re-entering the Oval Office Donald Trump has already threatened dozens of nations with economic tariffs in relation to a vast array of issues, many of which are non-economic in nature. What, if any, is the legal basis for these tariffs in domestic and international law, and how are they different from or similar to the type of economic measures China applies to influence other sovereign nations’ choices in ways that benefit Beijing? In this article we address these questions. Trumps weaponisation of trade tariffs Trump 2.0 seems set on following China’s leadership in the practice of using trade relations for economic coercion against other states, in breach of international and bilateral trade agreements. This practice decouples tariffs from their legitimate World Trade Organization (WTO) purpose of offering protection against unfair trade practices. WTO rules allow protective tariffs in cases of anti-dumping—for instance where foreign firms sell exports below their cost of production—or as countervailing measures against subsidised imports that would otherwise unfairly undercut and thus harm domestic producers. Such tariffs are a lawful tool for economic defence. Furthermore, in a geo-economic world there may be other limited situations where a reasonable argument can be made for using tariffs in a national security context not covered by WTO rules, or against economies that do not play by WTO rules. Moving beyond this delimited use of tariffs inevitably results in the tool becoming an economic cudgel for achieving non-economic political objectives. Where these are based on highly questionable claims regarding the relationship to US national security, and without basis in WTO or bilateral free trade agreement rules, the likelihood that tariffs are naked coercion rather than a legitimate defensive measure grows. Making a wide array of economic and non-economic demands of countries—including Canada, Colombia, Mexico, Denmark, Panama, Taiwan, and the EU—President Trump clearly views tariffs as the medicine for every international ailment, real or imagined, impacting the United States. This is a radical break from the US-led post-war order of rules-based trade, and sends a message that the US is no longer a trusted partner. This shift was most vividly highlighted on 1 February 2025, when Trump’s administration threatened 25 percent tariffs on Canada and Mexico, and imposed a 10 percent tariff on China, citing a national emergency due to illegal migration and drugs, and claiming the target states had failed to assist the US in countering this emergency. While the Canada and Mexico tariffs were suspended after both countries made concessions to Trump, their situation is most indicative of Trump’s radical approach to international relations. Both countries renegotiated the North American free trade agreement directly with Trump during his first term—an agreement Trump lavished with praise, while Canada is also one of America’s closest military allies, and has supported many US military operations since WWII. If Canada can be coerced, it is reasonable to believe any country can be coerced by Trump, including Australia. From a foreign policy perspective, Trump’s radical tariff coercion is likely to be one of the greatest acts of diplomatic self-harm, particularly as friends are forced to start looking at ways to mitigate American dependence. Who pays the price of tariffs?    If the foreign policy results of tariffs are to undermine US soft power, it is also true that tariffs will undermine the US economy. For example, Trump incorrectly believes that exporters will absorb the additional cost of tariffs—for instance, taxes on imports—by dropping their prices. Factors such as price elasticity (are goods necessary or discretionary), pricing power (i.e. brand power), and the size of profit margins influence who pays additional tariff costs. The latter is important when considering globally competitive traded goods. In competitive industries where profit margins are low, at or near the minimum rate of profit at which businesses will invest and operate, then, by definition, all additional costs must be passed on to the consumer to protect the business’s margin. Beyond that, protecting margins is the first choice of all businesses. Hence only where goods are highly discretionary and existing profit margins are high might one expect the exporter to incur the costs of tariffs. All things being equal, the American consumer will pay if Trump levies general tariff taxes on a vast array of goods coming from Mexico, Canada, and China, just as studies show that consumers paid for Trump’s 2018 tariffs. Job losses can also arise as a consequence of tariffs impacting supply chains by increasing the costs of inputs. Economists argue that, while the first Trump administration’s 25 percent steel import tariff created around 1,000 new jobs in steel production, the higher cost of steel hit downstream steel users, resulting in a loss of 75,000 manufacturing jobs. A tariff policy that is targeted and in response to breaches of WTO trade rules has their rightful place in the repertoire of a state’s national economic policies. But there are likely to be few long-term benefits to attacking allies and longstanding rule-abiding trade partners with universal tariffs per Trump’s Make America Great Again agenda. On the contrary Trump’s policies will lead to a Make America Expensive Again outcome, as ABC’s Matt Bevan put it. A Corrosion of US soft power? The weaponisation of everything has in recent times been attributed to China’s unrestricted warfare paradigm. Trump 2.0 seems to follow Beijing’s playbook without further consideration for alliances and partnerships—pivotal to US foreign policy. Working with allies and partners has been a key element of how the Biden administration countered the challenges posed by Russia, China, and Iran in the wider context of great power competition. Donald Trump’s threats of a trade war against Denmark, a NATO ally, over the status of Greenland; threats against Taiwan’s steel, pharmaceutical, and semiconductor industries; tariff threats against more NATO allies in the European Union; and tariff threats against the BRICS bloc resemble the unrestricted weaponising of trade by Beijing and mark a departure from Trump 1.0’s more targeted tariffs. The US is facing the clear and present danger of losing its soft-power acumen, and losing trust from its partners, with tragic consequences for the global rules-based order. In that respect, Trump might be playing directly into the Moscow–Beijing ambition to undermine the US and its allies across the military, economic, and diplomatic domains. The ambiguity of Trump’s “negotiation” strategy, which contains both national security and economic objections as raison d’être, adds to the challenge of maintaining trust and confidence among partners and allies, which would be both tragic and fatal for the US and its alliances.This article was published under a Creative Commons Licence. For proper attribution, please refer to the original source

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском China has been gaining ground in the technological and trade war against the United States through strategic planning, massive investment in innovation, and control over supply chains. It has developed significant infrastructure and policies that have allowed it to advance in key sectors such as artificial intelligence, telecommunications, and semiconductor manufacturing. The bans imposed by the United States on China, far from slowing its technological progress, have acted as a catalyst for self-sufficiency and the accelerated growth of China's tech sector. Although the sanctions aimed to limit China's access to key technologies, in practice, they have driven investment in domestic development and strengthened the Asian country's determination to reduce its dependence on the West. The launch of DeepSeek represents a crucial step in China’s technological independence, particularly in the fields of artificial intelligence and advanced computing. Its design competes with processors from Nvidia and AMD, enhancing China’s capabilities in AI, big data, and supercomputing. Its development demonstrates that U.S. sanctions have not halted Chinese innovation; rather, they have accelerated self-sufficiency. DeepSeek could reduce China’s reliance on foreign technologies for advanced applications, strengthening its tech industry. Additionally, it boosts the ecosystem of startups and AI companies in the country, providing local alternatives to high-performance computing models. Its global impact could lead to a reconfiguration of the semiconductor market, challenging the dominance of Western companies. It also strengthens China’s position in the AI race, giving it advantages in strategic sectors. DeepSeek marks a turning point in the tech war and could change the dynamics of the global industry. Perhaps the clearest sign of DeepSeek’s impact on the West, beyond the stock market turmoil of American tech companies, is the news from El País, which biasedly headlines: “DeepSeek is no game: the threat to privacy from China's new AI. The massive downloads of the Asian country’s application expand the potential to control, disinform, and erode democratic principles.” This strategy is nothing new, just what the West has accustomed us to: “let’s cover up the defeat by smearing and defaming China to divert the debate”. The United States' Technological War Against China The United States' measures against China in the technological war have included sanctions and trade restrictions to halt its progress in strategic sectors. One of the main actions was the ban on exporting advanced chips and semiconductor manufacturing equipment to Chinese companies such as Huawei and SMIC. Additionally, the U.S. has pressured countries like the Netherlands and Japan to limit the sale of advanced lithography machines, essential for producing cutting-edge chips. The U.S. has also blacklisted several Chinese companies, restricting their access to American technology. In telecommunications, it prohibited Huawei's involvement in the U.S. 5G infrastructure and encouraged its allies to do the same. In artificial intelligence, it imposed restrictions on the export of chips from Nvidia and AMD, which are essential for training advanced AI models. Washington has also restricted American investments in high-tech Chinese companies. Furthermore, it has pushed for the relocation of chip factories from Taiwan and South Korea to the U.S. to reduce dependence on China. Despite these measures, China has accelerated its self-sufficiency in key sectors, showcasing its ability to overcome these restrictions. The Background of China's Technological Breakthroughs Prior to DeepSeek Before the launch of DeepSeek, China's major technological breakthrough in the mobile device semiconductor industry was Huawei's Kirin 9000S chip. This processor surprised the world in 2023 when it was included in the Huawei Mate 60 Pro, marking a milestone in China's technological self-sufficiency. The Kirin 9000S, manufactured by SMIC (Semiconductor Manufacturing International Corporation), became a symbol of resistance against the sanctions imposed by the United States. Huawei had been severely affected by restrictions on access to advanced chips from manufacturers like TSMC and Qualcomm, which seemed to limit its ability to compete in the high-end smartphone sector. However, the launch of the Mate 60 Pro demonstrated that China could produce advanced chips without relying on Western technology. This processor was manufactured using a 5-nanometer process, an impressive feat given that the United States had prohibited the export of advanced lithography equipment, such as those from the Dutch company ASML, which are essential to produce next-generation chips. The success of the Kirin 9000S alarmed the United States, as it showed that sanctions had not stopped China’s technological development. Washington began to tighten its restrictions even further, pressuring allied countries like the Netherlands and Japan to limit the export of semiconductor manufacturing technology to China. However, it has not succeeded in halting the progress of Huawei and SMIC, who continue to develop new versions of their chips. DeepSeek is just the tip of the iceberg DeepSeek is just the tip of the iceberg in the technological war between China and the United States, marking the beginning of a new era of self-sufficiency and innovation in semiconductors and artificial intelligence. Although it represents a significant advancement in advanced computing and AI models, it is just one piece of a much broader picture. China has been investing billions in the development of its own semiconductor industry, driving projects in advanced chips, supercomputers, and AI software that compete with giants like Nvidia, AMD, and Intel. The progress in semiconductors, reflected in the manufacturing of the Kirin 9000S and other high-performance chips, proves that China is becoming independent from Western technology. Additionally, the country is betting on quantum computing, advanced robotics, and the expansion of 6G networks, which could redefine global connectivity in the next decade. U.S. sanctions have accelerated this transformation, forcing China to develop domestic alternatives in key sectors such as software, operating systems, and AI infrastructure. Meanwhile, the Chinese government continues to drive the growth of local companies, strengthening its innovation ecosystem and reducing its reliance on foreign technology. On this path, China has developed a solid and rapidly expanding artificial intelligence ecosystem, with multiple companies competing globally. In addition to DeepSeek, several Chinese companies are leading the development of AI models, specialized chips, and advanced applications. Here are some of the most important ones: BaiduBaidu is one of China's tech giants with a strong focus on artificial intelligence. Its ERNIE Bot 4.0 model is China's response to ChatGPT and has been integrated into multiple applications, from search engines to virtual assistants. Baidu also leads in autonomous vehicles and in the development of AI chips like the Kunlun AI chip. Alibaba Cloud (DAMO Academy)Alibaba, through its DAMO Academy division, has developed the Qwen 2.5-Max model, its own generative AI that competes with OpenAI. Alibaba has also created AI hardware and provides cloud services that support the development of Chinese AI startups. Tencent AI LabTencent, the giant in video games and social networks, is investing in AI for gaming, chatbots, and language models. Its AI is used in platforms like WeChat and in data analysis for entertainment and advertising. ByteDanceThe Doubao 1.5 Pro model from TikTok's parent company competes with ChatGPT-4 in knowledge retention, programming, reasoning, and processing. IFLYTEK, SenseTime, Megvii, 4Paradigm, Cambricon, Horizon Robotics, Zhipu AI, and others are leading companies competing in the Chinese AI market. In summary, U.S. sanctions against China in the tech war have failed to stop the country's progress. Instead of weakening its companies, the restrictions have accelerated China's self-sufficiency in semiconductors, artificial intelligence, and telecommunications. Huawei shocked the world with the launch of the Kirin 9000S, while companies like DeepSeek, Baidu, Alibaba, and SenseTime have created competitive AI models. Manufacturers like Cambricon and Horizon Robotics have grown rapidly, all driving China's global influence in 5G, AI, and electric vehicles. China's Key: It Seeks Only the Progress of Humanity, Not Political Dominance China's success in technology and the global economy has been built on a strategy of sustainable development, innovation, and self-sufficiency, focusing on the progress of humanity rather than the pursuit of absolute dominance. Unlike the sanctions and restrictions policy that has characterized the U.S. strategy, China has chosen to invest in infrastructure, education, and technology to drive the growth of its country and contribute to global advancement. DeepSeek's open-source code is an example of China's commitment to collaborative development in artificial intelligence, allowing global researchers and companies to access its technology. By making its architecture public, China fosters innovation and reduces reliance on closed models like those of OpenAI and Google. This strategy strengthens the AI ecosystem and promotes more equitable development worldwide. While some powers seek to maintain their leadership through sanctions and restrictions, China has demonstrated that development based on investment, innovation, and international cooperation is more effective. Its success is not the result of a race for dominance, but a strategy focused on work, research, and development, which in the long-term benefits both its own population and the global community.

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском Donald Trump has made clear his intent to supercharge his “America First” approach to foreign policy in his second term – and Mexico looks set to be at the tip of the spear. While many of Trump’s predecessors have also followed a “realist” strategy – that is, one where relative power is at the forefront of international relations, while diplomatic success is viewed through how it benefits one’s own nation – the incoming president has displayed an apparent unwillingness to consider the pain that his plans would inflict on targeted countries or the responses this will engender. Trump’s proposed policies threaten Mexico in three key ways: First, his goal of deporting millions of migrants would put tremendous pressure on Mexico’s economy and society as the country tried to absorb the influx. This would be exacerbated by his second threat, a sharp increase in tariffs, which could devastate the critical export sector of Mexico’s economy. And third, Trump has floated the idea of using U.S. military power to confront narcotraffickers within Mexico, which would directly impinge on Mexico’s sovereignty and could generate more violence on both sides of the border. But as a scholar of Latin American politics and U.S.-Latin American relations, I see several options that Mexico could use to push back on Trump by imposing high costs on U.S. interests. Indeed, Mexican President Claudia Sheinbaum has already signaled how she may counter Trump’s policies. The most obvious tools are ending cooperation on drugs and immigration and imposing tariffs of her own. She could also revoke some of the decades-old tax and labor privileges that have benefited U.S. businesses operating within Mexico. And finally, she could play the “China card” – that is, in the face of worsening U.S.-Mexico ties, Mexico could turn to Washington’s biggest economic rival at a time when Beijing is seeking to assert more influence across Latin America. From conciliation to confrontration Of course, a worsening relationship is not inevitable. During Trump’s first term, Mexico’s then-president, Andrés Manuel López Obrador, maintained a constructive relationship with the U.S. administration. In fact, Lopez Obrador was surprisingly cooperative given Trump’s at times hostile rhetoric toward Mexico. For example, he helped facilitate the Trump administration’s “Remain in Mexico” program for those seeking asylum in the U.S. and also accepted Trump’s demands to renegotiate NAFTA and give it a title reflecting U.S. leadership: the United States-Mexico-Canada Agreement, or USMCA. Sheinbaum, who took office on Oct. 1, 2024, started with a cautious approach to her relationship with Trump. She congratulated Trump on his victory and urged dialogue with the incoming U.S. president. “There will be good relations with the United States. I’m convinced of that,” she told reporters on Nov. 7, 2024. But Trump hasn’t been conciliatory. In addition to talk about dumping millions of immigrants across the border, he announced on social media on Nov. 24 that he would impose a 25% tariff on Mexican and Canadian goods – a move that would effectively abrogate the USMCA. That post seemingly ended Sheinbaum’s cautious approach. In a strongly worded response, the Mexican president cautioned that she would respond in kind. A trade war, she noted, would harm the economies of both countries; progress on immigration and drug trafficking required cooperation, not threats, she added. The impact of tariffs Sheinbaum has said she wants to avoid a trade war, but Trump’s threats have led her nonetheless to talk about how a trade war would begin. This trade war, plus other costs Sheinbaum could impose on U.S. investors, would also likely foment a coalition of opposition within the U.S. business community – a group that has been a key ally of Trump. Trump’s stated goal of putting high tariffs on goods coming from Mexico is to encourage businesses that currently exploit lower employment costs in Mexico to relocate to the northern side of the border. But that approach ignores the impact that retaliatory tariffs and investment controls would have on U.S.-based companies that rely on the Mexican market. It would have several negative effects. First, a tit-for-tat tariff war would generate inflation for U.S. and Mexican consumers. Second, it would disrupt the integration of markets across North America. As a result of the elimination of tariffs – a key component of both NAFTA and the Trump-era USMCA – markets and the production of goods across North America have become highly interconnected. The trade treaties severely reduced barriers to investment in Mexico, allowing significant American investment in sectors such as agriculture and energy – where U.S. companies were formerly prohibited. Further, manufacturers now rely on processes in which, for example, the average car crosses the border multiple times during production. Similarly, agribusiness has developed symbiotic practices, such that grains, apples and pears are predominantly grown in the United States, while tomatoes, strawberries and avocados are grown in Mexico. Given these processes, the U.S. now exports over US$300 billion of goods and services per year to Mexico, and the stock of U.S. investments in Mexico reached $144 billion in 2023. If Trump abrogates the trade deals and imposes tariffs, he might convince investors to spend their next dollars in the U.S. But if Mexico imposes tariffs, business taxes or investment restrictions, what would happen to investors’ farms and factories already in Mexico? Past experience suggests that any disruption to supply chains or U.S. export markets would awaken strong business opposition, as analysts and business groups have already recognized. Trump is not immune to pressure from U.S. businesses. During his first administration, companies successfully opposed Trump’s attempt to close the border, arguing that slowing the flow of immigrants also meant slowing trucks full of goods. Security and immigration On the issue of the border and immigration, while Trump has issued threats, Sheinbaum has stressed the importance of cooperation. Currently, the Mexican government expends significant resources to patrol its own southern border, not to mention dealing with the many potential migrants who gather in its northern cities. Mexico could demand more support from the U.S. in exchange for this work, plus the costs associated with welcoming back the estimated 4 million Mexicans who are currently in the U.S. without proper documentation. The deportation of undocumented immigrants that Trump has repeatedly promised will require other types of cooperation, such as processing border crossings, and Mexico could slow-walk this process. Mexico has already signaled that it will withhold processing of non-Mexicans. The two countries have a history of collaboration in addressing the illegal drugs trade – but here too there have also been tensions. Toward the end of Trump’s first term, for example, a Mexican general was arrested in the U.S. on drug charges. After a diplomatic uproar, he was returned to Mexico and released. In late November, Sheinbaum noted that she and Trump had discussed security cooperation “within the framework of our sovereignty.” But Trump’s campaign rheotric seemed less concerned with Mexico’s sovereignty, floating the idea of sending troops to the border or even deploying them within Mexico to counter narcotraffickers. That would clearly enrage Mexico, with consequences that would extend far beyond a willingness to cooperate on the issues of drug trafficking. A chance for China? One country that stands to benefit should U.S.-Mexican relations deteriorate is China – an issue that Mexico could exploit. China is now the first or second trading partner with nearly every country in Latin America, including Mexico. The value of U.S.-Mexico trade is over $100 billion a year, but the growth of Chinese imports into Mexico has been limited somewhat by rules-of-origin provisions in NAFTA and the USMCA. A U.S.-Mexican trade war could weaken or end any incentive to keep Chinese goods out. Further, if the doors to the United States are narrowed through tariffs and hostile rhetoric, China’s car parts and financial services would clearly become even more attractive to Mexican businesses. A U.S.-Mexican trade war, in short, would augment Beijing’s access to a market on the U.S. border. A coalition of the concerned? In sum, if Trump goes through with his threats, the result will be costs to consumers and businesses, plus a new opportunity for China. This is likely to foment a coalition of industries, investors, consumers and foreign policy experts concerned with China – many parts of which supported Trump’s campaign.

Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском Western missteps in Africa are creating an opening for Russia to deepen its influence. Recent protests against International Monetary Fund (IMF)-imposed austerity measures have rocked several African states. Kenya, a long-time partner of the United States and a key contributor to UN peacekeeping operations in Haiti, experienced violent clashes between government security forces and anti-austerity protestors over tax hikes in a controversial finance bill. Simultaneously, many protesters saw Kenyan engagement in Haiti as footing the bill for American security interests while ordinary Kenyans struggled to make ends meet. Soon after, similar protests against IMF measures spread to Nigeria. Analysts and locals are concerned that spreading protests may threaten stability across Africa. Citizens of other countries continue to voice their displeasure with the political and economic status quo through protest (in Mozambique) and at the ballot box (in Botswana). IMF loans come with significant stipulations, including reforms to financial systems and governance. Critics of these conditions frequently malign the IMF as a violator of sovereignty. Changes to economic and governing models, combined with high debts and economic stress, increase the costs of everyday products and diminish purchasing power across the continent. To many ordinary citizens, the West is benefiting from the fruit of African resources while hindering Africans’ access to the global economy. Publics in these countries demand alternatives to IMF funding, protesting governments to oppose IMF-imposed austerity. Youth, an increasingly important demographic, are especially active. Many of these young people are college-educated but fail to secure adequately paid employment in skilled industries. The informal economy is growing but increasingly separated from formal and international economies. IMF austerity measures are driving the continent to economic crisis and protest that may have lasting effects anathema to US foreign policy and the liberal international order. Some already see China as a viable alternative, although public opinion of Chinese influence is mixed. Elsewhere, faded Cold War memories make Russia a relatively unknown economic and political alternative. So, while recent Western actions in Africa have put long term relationships at risk, Russia is slowly increasing its influence on the continent. In fact, the Kremlin has already taken action and is engaged in the politics surrounding the various debt crises in African nations. African countries owe debts to multiple international actors, including Russia. However, Moscow has forgiven debts owed by many of these countries, coupling debt relief with additional economic benefits, including an influx of grains and energy resources. It has also deepened defense cooperation with several African countries. This cooperation often includes contracts for weapons sales and the deployment of irregular military units, including the Wagner Group. Diplomatic actions such as the above have led some protestors to see Russia as a viable alternative to IMF funding and partnerships with the US and Europe. In a visual representation of this phenomenon, protestors have been seen waving Russian flags at mass gatherings across Africa. Russia appears to receive the greatest support in the Sahel, where governments have failed to curb political instability and deliver on economic development promises. Publics in the region were already angry with the continued postcolonial military presence of France, and Russia took advantage. Mass publics are not the only actors seeking alternatives, ruling elites also see Russia as an attractive partner. Russian defense cooperation and the presence of irregular forces bolster these regimes in the face of increasing civilian protests over poor governance or human rights. Still, Russia has not yet made the gains it could. The war in Ukraine is hurting Africans and contributing to economic stress as global grain prices have skyrocketed. Some perceive Russia as exacerbating the problems of failed governance through its use of Wagner Group formations to back corrupt officials, protect corporate interests, and bolster unpopular governments. Russian interest in the region is also less significant than in the Middle East, Eastern Europe, or the Arctic, where Russia has more proximate strategic, economic, and political goals. Rather than rushing in, Russia’s economic presence in Africa is slowly advancing Moscow’s goals on the international stage. When Russia sought to undermine financial, technological, and energy sanctions from the West as a result of its invasion of Ukraine, it turned to Africa to find new consumers for food products, energy, and arms. Already, in the wake of the invasion, only half of the continent voted to condemn Russia. Such voting patterns at the UN indicate greater support for Russia in Africa than in other regions around the world, even if distrust of Russia remains high in some parts of the continent. Forecasted crises could increase Russian influence on the continent as well. Shocks generated by the African debt crisis could become a proximate cause for geopolitical and geoeconomic shifts. Rapid demographic changes and disastrous climate events (e.g., droughts and floods) exacerbate existing economic and migratory challenges. Since the tentacles of Russian economic and security influence, as well as misinformation, are already present in Africa, such future crises could pull multiple African states further into Russian orbit, and away from Western countries and institutions. Further alignment of African states with Russia would have several drawbacks. Russia would discourage democratization and use security assistance to bolster dictators across the continent. Environmentally sustainable development is also likely to be hampered. Russia may increase the extraction of natural resources in environmentally damaging ways. Additionally, Russian energy exports will be oil and gas, eroding the already significant investment and progress in green energy development many African political economies have made. As Western missteps create openings for Russia to gain a foothold in Africa, they also set the stage for other global powers to capitalize on the vacuum. Chinese-built infrastructure in Africa also contributed to debt burdens, but unlike Western approaches tied to IMF austerity measures, China is recalibrating its strategy. By shifting to smaller projects with lower debt exposure and promoting green energy development overseas, China positions itself as a more appealing partner. This strategy not only bolsters China’s domestic solar and EV industries but also enhances its soft power by responding to local economic needs. Moreover, as Western policy blunders alienate African publics and governments, both Russia’s and China’s influence may grow. Russia’s gains in the region could indirectly strengthen China’s position by fostering broader skepticism of Western-led systems, aligning African leaders more closely with Beijing’s geopolitical goals, including its stance on Taiwan. Africa is a burgeoning continent. One in four humans will be African by 2050. If the US and Europe pass on opportunities to engage with a continent of emerging green development powers and an increasingly educated demographic bulge, Western policies will undermine their own power and influence in the international order. Russia’s quiet increase in trade and security assistance offers an established alternative. Meaning ultimately, both Russia and China, may play the long game, gaining incremental support from a region of one billion people at a time. This work is licensed under the Creative Commons Attribution 4.0 International License (CC BY 4.0) [add link: https://creativecommons.org/licenses/by/4.0/]

Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском Last week Donald Trump made a bizarre threat on his Truth Social site that he would impose 100 percent taxes on the imports (tariffs) from any country that doesn’t take a pledge to not move away from the dollar as its reserve currency.  Donald Trump’s Big Fear Exists Only in His Imagination  The threat was bizarre for several reasons. First, he seemed to imagine that the BRICS countries (Brazil, Russia, India, China, and South Africa) and their allies are in the process of setting up an alternative currency to the dollar.  This would be very hard to imagine since this group of countries has little in common other than feeling marginalized by the United States, West Europe, and the international institutions they have established. Agreeing on rules for a common currency involves considerable haggling and is difficult even among countries that are similar in their economies, history, and culture. Ask the countries in the euro zone. Bringing this group together in a common currency seems a long shot even one or two decades out. So, Trump was making some grand threat against a development that will almost certainly not happen. Oh well, always good to be cautious. Who Cares If They Establish Their Own Currency? Trump’s ignorance of trade and finance issues really shines through on this one. Paul Krugman has been working hard trying to educate the public on the meaning of a reserve currency.  First of all, there is not a single reserve currency. There is no law that requires all international payments be made in dollars, and many in fact are not. If businesses find it more convenient to sell in euros or yen, there is nothing that prevents them from doing so. It’s not clear if Donald Trump is unaware of this fact or thinks that he somehow will police all the transactions in the world and require them to be done in dollars. Central banks also hold currencies in reserve to cover international payments and to support their own currency in the event of a crisis. The dollar is the predominant reserve currency, but not the only one. Central banks also hold euros, British pounds, Japanese yen, and even Swiss francs. Perhaps Trump wants to monitor the currency holdings of central banks and start raising the tax on imports from any country where dollar holdings fall below a certain level. That seems a pretty whacky way to set trade policy (it would violate most of our trade agreements), but about par for Donald Trump economic policy. The Dollar as a Reserve Currency Undermines Donald Trump’s Dream of Balanced Trade  Insofar as having the dollar as the world’s leading reserve currency matters, its main benefit would be increasing demand for the currency and thereby driving up its value relative to other currencies. This would be good in the sense that it makes it cheaper for people in the United States to buy items imported from other countries.  The effect is not likely to be very large. The overwhelming reason for wanting to hold dollars is to invest in US financial assets, like stock and bonds, both public and private. As long as investors think the United States has a strong and stable economy, they will want to have dollars to be able to invest here.  If the United States were just another reserve currency, like the euro, then fewer dollars would be held as reserves and for carrying through transactions. This would likely mean the dollar was valued somewhat less against other currencies, but it is unlikely that the drop would be more than 5-10 percent. This is the sort of movement in the dollar we see all the time over the course of a year or two. It usually does not get much attention. For example, the dollar rose by more than 5.0 percent against the euro between May of 2021 and the end of the year, and it seems no one noticed. More importantly for this issue, insofar as being the leading reserve currency raises the value of the dollar, it goes the wrong way in terms of Donald Trump’s goals on trade policy. Donald Trump seems to want the United States to have balanced trade or even a trade surplus.  A higher valued dollar directly undermines the effort to achieve this goal. If the dollar is higher valued against other currencies, it makes imports cheaper for people in the United States. That means we will buy more imports.  If the dollar is higher valued against other currencies it means that foreigners will have to use more of their own currency to buy a dollar. That makes our exports more expensive for them. If our exports are more expensive, people living in foreign countries will buy less of exports. If we buy more imports, and sell fewer exports, then our trade deficit will be larger. This means that Donald Trump’s quest to preserve the dollar’s status as the premier reserve currency goes completely against his goal of reducing the trade deficit. Donald Trump’s 100 Percent Tariff Will Hurt Us Much More Than It Will Hurt China The United States provides a valuable export market for China, but it would require some very strange arithmetic to imagine that China somehow needs the US market for its prosperity. First, it is worth getting an idea of the volume of exports at stake. The US had imported $322 billion in goods from China through September of this year, which puts it on a course to import roughly $430 billion for the year. By comparison, China’s GDP on a purchasing power parity basis is projected to be $37.1 trillion this year using a purchasing power parity (PPP) measure of GDP, while it would be $18.3 trillion using an exchange rate measure. This means that its exports to the US would be equal to 1.2 percent of its GDP using the PPP measure, and 2.3 percent using the exchange rate measure. The difference between these two measures is that the PPP measure uses a common set of prices across countries for all goods and services. It means that it prices a haircut and a heart operation at the same price in the United State and China, as well as every other country. By contrast, the exchange rate measure takes the country’s GDP calculated in its own currency and then converts it to dollars at the current exchange rate. The large difference between the two measures is explained by the fact that many services cost much less in China than in the United States and other wealthy countries. For example, renting a comparable apartment or getting a doctor’s exam would cost far less in China than it would in the United States. While for many purposes, such as comparing living standards, the PPP measure is appropriate, in this case the exchange rate measure is probably the right one. We are asking how much demand China would lose in its economy if it is cut off from the US market. Since the goods sold internationally are likely priced in China close to their prices internationally, the demand loss would be larger than would be indicated by their share of its GDP measured in PPP terms.  This means that in the extreme case where China loses its entire US export market, demand in its economy would fall by 2.3 percent, before taking account of any multiplier effects. This is far from trivial, but it is not likely to lead China’s economy to collapse. By comparison, when the housing bubble collapsed in the United States in 2006-2008, the share of residential construction in GDP dropped by 4.0 percentage points.  That drop gave the US a severe recession, but it is important to keep in mind the economic problem we are describing. This would be a story of inadequate demand in the economy. This can be counteracted by the government spending more money, which we did to some extent with the stimulus package enacted under President Obama in 2008-09 and with an even larger package under President Biden in 2021-22.  There may be political considerations that act as obstacles to large-scale stimulus in China, as there are here, but there is no economic reason that China could not boost its economy in a way that replaces the demand lost from the U.S. export market. If China’s government chose, it could even borrow a trick from the US playbook and send $2,000 checks to everyone in the country and put Donald Trump’s name on the check. That would hardly be a crisis from China’s standpoint. The picture looks much worse from the US standpoint. We will be paying substantially more for the $430 billion in goods that we had been buying from China. It would be necessary to look at possible substitutes for these imports on a sector-by-sector basis, but let’s say on average that the additional cost for the replacement its is 40 percent of the price of the goods from China. In that case, we would be paying an extra $170 billion a year, roughly $1,400 per family, to cover the additional cost.  The reason this looks worse from the US standpoint than the Chinese standpoint is that China just needs to create a new source of demand, which its government can do directly by giving people money. On the other hand, the United States is seeing the cost of a number of items rise, in effect seeing a shortage of supply comparable to what happened with the supply chain crisis during the pandemic.  Most governments would not deliberately inflict this sort of pain on its population without a good cause, but Donald Trump prides himself on being unorthodox. This threat over the dollar’s status as a reserve currency certainly is unorthodox.

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском The world economy is underperforming as a result of tight monetary policies, weaker global trade, a slowing Chinese economy and uncertainty around the US election. An escalation of conflict in the Middle East could increase uncertainties, harming inflation reduction efforts and hurting growth. It has been over a year since the Hamas-led attack on Israel. Israel’s response in Gaza has resulted in widespread destruction and significant loss of life. The conflict has since expanded beyond Gaza, involving the Houthis in Yemen, Hezbollah in Lebanon and Iranian strikes targeting Israel. In addition to the awful humanitarian cost of the conflicts, the war and the possibility of its further expansion pose significant repercussions for the global economy. This article discusses three potential ways in which the current conflict and a wider conflict in the Middle East could affect the global economy. Increased geopolitical uncertainties First and foremost, an escalation of the Middle East conflict could lead to greater geopolitical uncertainties. Figure 1 shows the evolution of the geopolitical risk (GPR) and geopolitical acts (GPRA) indices (Caldara and Iacoviello, 2022) – these are text-based measures of heightened uncertainties due to adverse geopolitical events such as wars, terrorism and international tensions. (See this article for more discussion about these measures.) Following the Hamas-led attack on 7 October 2023, both the overall GPR index and its ‘war and terror acts’ component spiked strongly, to a level higher than that seen during the ISIS attack in Paris in November 2015. Both indices eased significantly in the months following October 2023 despite the continuation of the conflict. But they jumped again following Israel’s attack on southern Lebanon in September 2024. As of mid-October 2024, the GPR and GPRA remain, respectively, 21% and 35% higher than their historical averages.   What might be the consequences of such elevated levels of risk? Research tells us that higher geopolitical risk raises oil prices (Mignon and Saadaoui, 2024). It also reduces global investment and increases inflation (Caldara et al, 2022). Greater geopolitical risk has a significantly negative impact on business and consumer confidence in several advanced economies (de Wet, 2023). This is because consumers typically cut non-essential spending and businesses postpone investment decisions during turbulent times. This reduces firm-level investment, particularly for businesses with higher initial investment costs and greater market power (Wang et al, 2023). Higher geopolitical risks also reduce global trade and financial flows, causing greater volatility in capital flows in emerging markets (Kaya and Erden, 2023). Oil production cuts and higher energy prices The second way in which the Middle East conflict could affect the global economy is its impact on energy prices, both directly through production cuts and indirectly through greater uncertainties. In response to Israel’s actions against its neighbours, the Organization of the Petroleum Exporting Countries (OPEC) could reduce oil production to penalise countries supporting Israel. A similar action in the 1970s led to a significant jump in oil prices, which contributed to years of stagflation, with higher global inflation and recessions in major economies. Before Israel's attack on Lebanon at the end of September, oil prices had been declining due to falling demand, particularly from China. On the supply side, oil production had increased in Canada and the United States, countering the production cuts by OPEC, and Saudi Arabia was expected to increase oil production from December. But the situation quickly reversed following Israel’s attack on Lebanon. Oil prices jumped by nearly $10 per barrel within a week, before easing by around $5 per barrel. While the immediate oil price impact of Israel’s attack has mostly faded, the potential for higher oil (and other energy) prices still poses a risk to global inflation and economic activity (Liadze et al, 2022). To provide further context for the potential scale of this impact, we can show what would happen if oil and gas prices were to remain $10 higher for two years than the baseline levels projected in the Summer Global Economic Outlook from the National Institute of Economic and Social Research (NIESR), using NIESR’s Global Macroeconometric Model (NiGEM). The results demonstrate that the $10 rise in oil and gas prices increases inflation by around 0.7 percentage points in major economies in the first year (see Figure 2). The impact is higher in China, where the economy relies relatively more on oil imports for its strong manufacturing industries. The inflationary pressures persist for two years despite central banks’ efforts to curb inflation by increasing interest rates.   The effect of higher oil and gas prices on real GDP is shown in Figure 3. In the scenario described above, GDP would fall by 0.1-0.2% in major economies immediately. Partly due to higher interest rates, real GDP would continue to weaken for three years following the shock. After this, economic activity would start to return to base levels as oil and gas prices revert to their levels in the baseline forecast.   Increased shipping costs and supply chain disruptions A wider conflict in the Middle East could also affect the economy through higher shipping costs and supply chain disruptions. Houthi attacks on commercial ships in the Red Sea in late 2023 showed that such disruptions can have a huge impact on global trade through shipping, which comprises 80% of world trade volume. Following the rocket attacks by the Houthi rebels, some commercial shipping re-routed from the Red Sea to the Cape of Good Hope, leading to significant delays in travel times and increased freight costs. As a result, the Shanghai Containerized Freight Index – a measure of sea freight rates – rose by around 260% in the second quarter of 2024 with additional disruptions to supply chains. Our analysis shows that an increase of 10 percentage points in shipping cost inflation can lead to import prices rising by up to around 1% and consumer inflation increasing by around 0.5% in OECD countries. As Figure 4 shows, the impact of shipping costs on inflation shows its full effects over six quarters. This means that inflationary concerns could be with us for the next year and a half as a result of higher shipping costs that may emerge from any possible escalation of the Middle East conflict.   Wider economic implications and policy responses While rising geopolitical risk and increased oil and shipping costs can each individually exert upward pressure on inflation and may slow down economic activity in the global economy, the combined impacts are likely to be greater. Countries with stronger trade and financial ties to the Middle East and those that rely heavily on oil imports as an input for domestic production would be most affected. On the monetary policy front, central banks may have to take a more hawkish stance in response to rising inflationary pressures from the Middle East conflict. This could lead to higher interest rates, which would further dampen economic activity, particularly in an environment where there are already recessionary concerns in some major economies. Beyond its immediate economic implications, an escalation of the Middle East conflict could trigger large-scale displacement of people, which would increase economic and social pressures on neighbouring countries. Many countries may also have to increase their military spending in response to growing regional tensions. Given that public debt levels are already elevated in many countries due to successive shocks to the global economy over the past decade, any additional defence spending could come at the expense of public infrastructure investments that would otherwise boost productivity growth. Overall, the global economy is already underperforming as a result of the lagged effects of tight monetary policies, weaker global trade, a slowing Chinese economy and uncertainties surrounding the upcoming US election and possible changes to US trade policy. A potential escalation of conflict in the Middle East could exacerbate the situation by increasing uncertainties, harming efforts to bring down inflation and reducing global GDP growth. Over the medium and long term, it could further damage the global economy, with the possibility of refugee crises as well as increased defence spending, making the effects more complex and longer lasting. This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском Abstract  This paper looks at the development of Chinese exports to Central Asian countries after Russia’s invasion of Ukraine in February 2022. The analysis, which relies on export data from China to Asian countries at a general product level, shows that China’s exports to Central Asia have significantly increased since the start of the war. In particular, exports to Kazakhstan, Uzbekistan, and Kyrgyzstan have increased significantly. The analysis focuses on exports in Harmonized System (HS) categories 84, 85, 87, and 90. Many of the products sanctioned by the West in trade with Russia belong to these categories, but the categories also include many non-sanctioned products. Although the value of China’s exports to Central Asia is still smaller than direct trade with Russia, China’s exports – especially to Kyrgyzstan – have seen dramatic increases in the HS 84, 85, 87, and 90 categories. Along with the export growth from China to Central Asia, exports in these categories from Central Asia to Russia have also increased significantly.  Keywords: China, Central Asia, Russia, exports 1. Introduction  This policy brief sheds light on the development of Chinese exports to Central Asia after Russia’s invasion of Ukraine in early 2022. The analysis, which focuses on China’s dollar-denominated exports to Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan between 2018 and 2023, is based on the monthly and yearly customs data on goods exports from CEIC, China Customs Administration, Kazakhstan Bureau of National Statistics, and UN Comtrade. The analysis considers exports from Central Asian countries to Russia in some key product categories in the same time frame. Data on Chinese exports to Russia and the rest of the world (excluding Russia and Central Asian countries) help broaden the analysis.  The European Union, the United States, as well as a number of other countries, imposed sanctions on Russia in response to its invasion of Ukraine in February 2022. The sanctions packages targeted trade, investment, and cooperation with Russia, including sanctions on exports and imports of goods and services. While China has yet to impose sanctions on Russia, Chinese companies increasingly face the threat of secondary sanctions.  There is evidence that trade sanctions imposed against Russia have been circumvented by redirecting trade through Russia's neighboring countries (e.g. Chupilkin et al., 2023) and that China exports to Russia dual-use goods exploited by the Russian military (Kluge, 2024). This analysis shows that Chinese exports to Central Asia increased significantly after the Russian invasion of Ukraine in 2022. The soaring trade with Kyrgyzstan, a relatively tiny economy, is particularly notable. Chinese exports to Kazakhstan and Uzbekistan also rose sharply. Exports from Central Asian countries to Russia in selected key export categories increased in 2022, with Kazakhstan’s exports growing significantly, making it the largest exporter to Russia among Central Asian countries.  The paper analyzes the export of China to Central Asia by examining Harmonized System (HS) categories 84 (Machinery), 85 (Electrical equipment), 87 (Vehicles), and 90 (Optical and medical instruments). Categories 88 (Aircraft) and 89 (Ships) were omitted from the analysis since their export volumes were irregular and the data are inconsistent. These categories are important since many of the sanctions goods belong to these broad categories and often involve sophisticated technologies essential to Russian military efforts. Additionally, China is a major technology producing country and Russia’s main supplier of sanctioned technology products (Simola, 2024). Not all products in these categories are subject to sanctions and instead the analysis here only provides a broad view of the development of categories with sanctioned products.  The three-part analysis in this brief begins with a discussion of the development of Chinese exports to Central Asian countries at a general level. We then consider Chinese exports to Central Asia in HS categories 84, 85, 87 and 90, and conclude with an overview of Central Asia country exports to Russia in the same HS categories.  2. Chinese trade relations with Central Asia  From a trade perspective, China dominates trade relations with Central Asian countries. Most Central Asian countries run trade deficits with China. While Central Asian countries are geographically proximate with China (Kazakhstan, Kyrgyzstan, and Tajikistan share borders with China), total exports to these countries have traditionally represented a small slice of China’s total exports. In 2018, for example, Kazakhstan accounted for around 0.5 % of China’s total exports, and the shares of China’s exports to Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan were between 0.01 % and 0.2 %. China’s exports to Russia in 2018 were around 2 % that year. In 2023, however, exports to Kazakhstan had grown to 0.7 % of China’s total exports, and exports to other Central Asian economies were between 0.03 % and 0.6 %. The share of exports to Kyrgyzstan grew from 0.2 % to 0.6 % in terms of China’s total exports. In comparison, Chinese exports to Russia in 2023 represented 3 % of China’s total exports. In terms of annual growth, Kyrgyzstan on-year increase between stands out, with Chinese exports (measured in dollars) growing by 150 % in 2021 and 110 % in 2022.  The countries in the region are not a homogeneous group. Their economies differ in size and trade patterns. Measured by GDP, Kazakhstan was the largest regional economy in 2023, with a GDP of $260 billion. The second largest was Uzbekistan ($90 billion), followed by Turkmenistan ($59 billion), Kyrgyzstan ($14 billion), and Tajikistan ($12 billion) (World Bank, 2024). China’s top export destination in 2023 was Kazakhstan ($25 billion) and Kyrgyzstan ($20 billion). Turkmenistan had the least exports ($1 billion).  In addition to Russia’s war of aggression, new trade routes and warm bilateral relations may have played a role in Chinese exports to Central Asia. New trade routes have opened under the Belt & Road Initiative, and Xi Jinping’s relations with the leaders of Central Asian countries have been generally friendly.  China has been particularly active in Kyrgyzstan, where it has helped to build several transport infrastructure projects to improve transport connections within the country and the region. Especially in mountainous areas, new transport routes and improved logistics connections could have a major impact on trade volumes. Kyrgyzstan also changed presidents in 2021 following snap elections to quell a wave of protest. Kyrgyzstan’s newly elected president, Sadyr Zhaparov, emphasizes China’s importance as Kyrgyzstan’s trading partner and investor, and has called for closer relations with China.  A new trade route from China to Kazakhstan was opened in the summer of 2023 during the China-Central Asia Summit. During Xi Jinping’s visit to Kazakhstan in 2022, the leaders announced to deepen bilateral relations.  Uzbekistan, Turkmenistan, and Tajikistan have established friendly relations with Xi and China. With regard to vehicle exports, it is worth noting that the re-export of cars through the Eurasian Economic Union to Russia previously received tax relief, a policy that ended this year. 3. An overview of  Chinese exports to Central Asia Between 2018 and 2023, China primarily exported textile and wood-related products, as well as machinery, electronics, and vehicles to Central Asia (Figure 1). Compared to China’s overall export structure to the world (Figure 2), the share of textile and wood products in China’s exports to Central Asia is significantly higher. In contrast, approximately 50 % of China’s global exports consist of machinery, electronics, and vehicles, whereas these categories account for about 30–40 % of China’s exports to Central Asia.   In dollar terms, Chinese exports to Central Asia grew by 170 % from 2018 to 2023. This growth parallels China's export growth to Russia, which increased by 130 % over the same period. For comparison, Chinese exports to the rest of the world grew by around 40 % in that period. The largest export growth was seen in Kazakhstan, Kyrgyzstan, and Uzbekistan (Figure 3), with exports to Kyrgyzstan experiencing an explosive increase at the beginning of 2021. While more moderate, export growth to Kazakhstan and Uzbekistan also took off in the first half of 2022. Chinese exports to Kazakhstan, which were valued at $11 billion in 2018, surged to $25 billion in 2023. Chinese exports to Uzbekistan tripled from $4 billion in 2018 to $12 billion in 2023. Chinese exports more than tripled to Kyrgyzstan during the period from $6 billion in 2018 to $20 billion in 2023. Chinese exports to Kyrgyzstan are significant given the country’s modest GDP. Growth in Chinese exports to Russia mirrors the growth in exports to Central Asia (Figure 3). In dollar terms, however, China's exports to Russia are about double to those of China’s total exports to Central Asia.   The largest export categories to Central Asia in China’s 2023 export structure were footwear, textiles, and clothes ($20 billion); machinery and vehicles ($11 billion); electronics ($3 billion); and iron and steel ($2 billion). Exports of iron and steel to Tajikistan, Kyrgyzstan, and Turkmenistan were minimal, but significant for Kazakhstan and Uzbekistan, with growth starting in early 2023.  Chinese exports of footwear, textiles and clothes to Kyrgyzstan (and exports generally) began took off in early of 2021 (Figure 4). Kazakhstan’s export growth in the same category started after Russia’s invasion of Ukraine in 2022. Exports of machinery and vehicles to Kazakhstan, Uzbekistan, and Kyrgyzstan (Figure 4) skyrocketed in 2023. Chinese exports of iron and steel to Kazakhstan and Uzbekistan also soared in 2023 (Figure 5). In the export of electronics, Uzbekistan stands out as exports from China more than doubled in 2023 from 2022 levels (Figure 5). Electronics exports to Kyrgyzstan started increase in early 2021 (Figure 5).     When examining annual changes in these export categories, the dollar-based annual growth of Chinese exports to Kyrgyzstan clearly stands out from other Central Asian countries across all export categories (see Figures 6 and 7). The annual growth to Kyrgyzstan began to increase in early 2021 and remains high throughout 2022. For instance, Chinese exports to Kyrgyzstan in electronics and in footwear, textiles and clothes peaked around 300 % in early 2022. Chinese exports to Turkmenistan and Tajikistan are significantly smaller in dollar terms than for other Central Asian countries, so they do not stand out in earlier figures. However, annual growth patterns show that China’s annual export growth to Turkmenistan and Tajikistan also rose in 2022.     This section examines Chinese exports to Central Asian countries in the HS categories 84 “Machinery,”1 85 “Electrical equipment,”2 87 “Vehicles”,3 and 90 “Optical and medical instruments.”4 HS categories 88 “Aircraft”5 and 89 “Ships”6 were omitted from the analysis since the export volumes were irregular and inconsistent. The data used in the analysis is the sum of HS8-level customs data for the respective category, so values may slightly differ from the actual HS2-level values.  China’s dollar-denominated exports in machinery (HS 84) increased in 2022 and 2023 from the pre-invasions period (Figure 8). Growth in exports is already apparent in 2022 for Kazakhstan, Kyrgyzstan, and Tajikistan, while the rise in Uzbekistan begins in 2023. Exports of machinery to Russia started to increase in 2021, with higher growth in 2022 and 2023 (Figure 9). China’s exports to the rest of the world in the same category rose through 2021, and decreased from 2022 to 2023 (Figure 9).   For electrical equipment (HS 85), China’s exports increased significantly compared to the period before the war, especially to Kyrgyzstan, where exports surged in 2022 and continued to grow in 2023 (Figure 10). China’s exports to Uzbekistan also surged in 2023. Exports to Kazakhstan decreased from 2021 to 2022, but grew in 2023, slightly surpassing the 2021 level. When examining Chinese exports to Russia, dollar-denominated changes follow a similar trend (Figure 11). During the same period, China’s exports to the rest of the world increased from 2021 to 2022 and decreased in 2023, a trend similar to that of machinery (Figure 11).   In the export of vehicles (HS 87), China’s exports to Central Asia followed a similar trend in exports to Kazakhstan, Kyrgyzstan, and Uzbekistan, i.e. initial growth in 2022 and strong growth in 2023 (Figure 12). Chinese exports to Russia also surged in 2023 (Figure 13). In the vehicle category, Chinese exports to the rest of the world grew steadily in 2021, 2022, and 2023 (Figure 13).   For optical and medical instruments (HS 90), China’s exports to Kazakhstan and Kyrgyzstan increased significantly in 2022, and grew further  in 2023, albeit at a more moderate pace (Figure 14). China’s exports to Uzbekistan increased post-invasion in 2022 and 2023, although export levels were similar to 2019 and 2020. Exports to Turkmenistan grew by 260 % in 2022 from the previous year, although this is less noticeable in the figures due to the smaller dollar value amounts related to other Central Asian countries. China’s exports of optical and medical instruments to Russia grew steadily, with a sharper increase beginning in 2022 (Figure 15). However, China’s exports to the rest of the world in this category decreased from 2021 to 2022 (Figure 15).   In summary, China’s dollar-denominated exports to Central Asia increased significantly over the past couple of years, particularly those to Kazakhstan, Kyrgyzstan, and Uzbekistan. Reflecting the general trend of China’s exports to Central Asian countries, the highest dollar amounts for Chinese exports involved products to Kazakhstan across all analyzed harmonized system categories. The most significant dollar-denominated export growth was observed for Kyrgyzstan: the annual growth rate of China’s exports in electrical equipment in 2022 approaches 400 %, and for vehicles nearly 500 % in 2022 and about 300 % in 2023. Additionally, in optical and medical instruments, China’s 2022 exports grew by nearly 300 % to Kyrgyzstan and Turkmenistan from the previous year. When comparing China’s exports to Central Asia with its exports to Russia, it is evident that the dollar value of China’s exports to Russia is higher than to Central Asian countries, and the dollar value changes in exports are also more significant. For instance, in 2023, China’s exports of machinery to Russia amounted to $24 billion, while exports to the entire Central Asia region were approximately $7 billion. In the electrical equipment category, China’s exports to Russia were $13 billion compared to $5 billion to Central Asia. In the vehicles category, exports to Russia were $18 billion, while exports to Central Asia were $8 billion. On the other hand, the annual growth rates of individual Central Asian countries are higher in percentage terms compared to Russia. For example, as illustrated in Figure 12, China’s exports to Kyrgyzstan grew from $41 million in 2021 to $1.5 billion in 2022, while China’s exports to Russia increased from $1.2 billion dollars to $1.8 billion in the same period. The annual growth rates for Russia do not exhibit similar spikes, nor do they significantly exceed the growth rates for any Central Asian country in any category. 5. Central Asian exports to Russia in HS categories 84, 85, 87 and 90 In the HS categories 84 (Machinery), 85 (Electrical equipment), 87 (Vehicles), and 90 (Optical and medical instruments), exports from Central Asian countries to Russia exhibited significant growth in 2022 (Figures 16 and 17), with continued expansion in 2023 (with the exception of Kazakhstan in vehicles and parts). In total, exports from Central Asia (Kazakhstan, Kyrgyzstan, Turkmenistan, and Uzbekistan) in these categories grew in 2022 by 600 % from the previous year. Notably, Kazakhstan was the biggest export in dollar terms. Its exports to Russia surged across all categories in 2022, with on-year growth rates for machinery, electrical equipment and sound devices, and optical and medical instruments ranging between 400 % and 600 %. In addition to Kazakhstan, Uzbekistan and Kyrgyzstan recorded substantial increases in exports in 2022, particularly in the machinery and electrical equipment categories. Kyrgyzstan’s exports machinery increased from $2 million in 2021 to $49 million in 2022, a jump of about 2,500 %. However, when comparing the Chinese exports to Kyrgyzstan in electrical equipment, the dollar value in exports to Russia seems considerably smaller. Thus, no direct conclusion should be drawn from the fact that higher quantities of electronics pass through Kyrgyzstan to Russia. Although not depicted in the graph, it is important to highlight Turkmenistan’s growth in the export of electrical equipment in 2023 when it grew from $2,075 (2022) to $3 million in 2023, onyear growth of approximately 200,000 %. Similarly, Uzbekistan’s annual growth in exports of optical and medical instruments was around 40,000 % in 2022. As to vehicles and parts, Kyrgyzstan’s export growth commenced already in 2021. In the optical and medical instruments category, both Kyrgyzstan and Uzbekistan experienced notable export growth, particularly in 2023. At the HS category levels of 84, 85, 87 and 90, data for Tajikistan’s exports to Russia were unavailable.     6. Conclusion Chinese exports to Central Asia have significantly increased since Russia’s 2022 invasion of Ukraine, with concurrent growth China’s exports to Russia. Notably, there was a substantial surge in Chinese exports to Kyrgyzstan prior to invasion. Chinese exports to Kyrgyzstan, which has a modest GDP, saw the largest dollar-value increase from 2021 to 2023 in the categories of footwear, textiles, and clothes, as well as machinery and vehicles starting in 2022. The annual growth rates in Chinese exports to Kyrgyzstan show clear increases in the major export categories in 2022.  In dollar terms, Chinese exports to Kazakhstan and Uzbekistan also rose significantly from 2018 to 2023. For Uzbekistan, the largest growth in China's exports began in 2021 in electronics. Exports to Kazakhstan grew the most in 2022–2023 in the categories of footwear, textiles, and clothes, and machinery and vehicles.  The trade categories with notable growth in Chinese exports to Central Asian countries were machinery (HS 84), electrical equipment (HS 85), vehicles (HS 87), and optical and medical instruments (HS 90). Generally, the steepest rise in Chinese exports to Central Asia occurred in the vehicles category, with significant increases in exports to Kazakhstan, Kyrgyzstan, and Uzbekistan in 2022 continuing to a sharp rise in 2023. The trend for Chinese vehicle exports to Russia is similar. It is worth noting that Chinese vehicle exports to the rest of the world also accelerated after 2020. Additionally, there was substantial growth in Chinese exports to Kyrgyzstan in the electrical equipment category in 2022 and 2023. In these categories, Chinese exports to Russia are significantly higher in dollar terms that exports to Central Asia. However, the annual growth rates in between 2018 and 2023 of Chinses exports to individual Central Asian countries have generally seen larger increases in percentage terms than those for Russia.  Exports from Central Asian countries to Russia in the selected key export categories increased significantly across all examined categories in 2022. Among Central Asian countries, Kazakhstan was the largest exporter to Russia in dollar terms from 2018 to 2023, with sharp growth in 2022 in all four categories examined in this paper. Additionally, the exports of Uzbekistan and Kyrgyzstan to Russia grew significantly in 2022, particularly in the categories of machinery, and electrical equipment. The most notable annual growth in exports was posted by Turkmenistan – an increase from $2,075 in 2022 to $3 million in 2023, a 200,000 % increase in electrical equipment exports from the previous year. References Chupilkin, Maxim and Javorcik, Beata and Plekhanov, Alexander. (2023). The Eurasian Roundabout: Trade Flows Into Russia Through the Caucasus and Central Asia. EBRD Working Paper No. 276, Available at SSRN: http://dx.doi.org/10.2139/ssrn.4368618 or https://ssrn.com/abstract=4368618 Kluge, Janis. (2024). Russia-China economic relations: Moscow’s road to economic dependence, SWP Research Paper, No. 6/2024, Stiftung Wissenschaft und Politik (SWP), Berlin, https://doi.org/10.18449/2024RP06 Simola, H. (2024). Recent trends in Russia’s import substitution of technology products. BOFIT Policy Brief 5/2024, June 2024.  World Bank, 2024, read 14.8.2024, https://www.worldbank.org/en/region/eca/brief/central-asia 1 Harmonized System code 84: Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof.  2 Harmonized System code 85: Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles.  3 Harmonized System code 87: Vehicles other than railway or tramway rolling stock, and parts and accessories thereof.  4 Harmonized System code 90: Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus; parts and accessories thereof. 5 Harmonized System code 88: Aircraft, spacecraft, and parts thereof.  6 Harmonized System code 89: Ships, boats, and floating structures.