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Diplomacy
Zipper separates or connects US and Iranian flags with radiation symbol

Does the Muscat Round Pave the Way for a Potential Deal Between Washington and Tehran?

by Sherif Haridy

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском Does the Muscat Round Pave the Way for a Potential Deal Between Washington and Tehran? The US-Iranian talks held in Muscat concluded on Saturday, April 12, 2025, successfully addressing contentious issues between the two nations, particularly the Iranian nuclear program crisis. Foreign Minister Abbas Araqchi led the Iranian delegation, while Middle East envoy Steve Witkoff headed the US team, with Oman serving as mediator throughout the proceedings. Both delegations expressed satisfaction with the prevailing atmosphere during the discussions. President Donald Trump characterized the talks as "progressing very well," while Witkoff described the Oman negotiations as "very positive and constructive." According to Araqchi, all parties demonstrated their commitment to advancing discussions until reaching a mutually beneficial agreement. Upon conclusion of these productive negotiations, the Iranian Foreign Ministry announced a second round of indirect talks would be held on Saturday, April 19, again in Muscat with Omani mediation. Round One The US-Iran talks in Muscat hold significant importance as they represent the first diplomatic engagement since negotiations ceased between April 2021 and September 2022, which had occurred in a 4+1 format with indirect US participation. Notably, these Muscat discussions mark the first diplomatic exchange under both Iranian President Masoud Pezeshkian and US President Donald Trump. Several key implications emerge from these talks: 1- A face-saving negotiation format for both sides: Following the announcement of planned discussions, Washington consistently pressed for direct talks to expedite the process and quickly reach an agreement. Tehran, conversely, insisted on indirect engagement, at least initially, to build confidence in American sincerity. According to published reports, the American and Iranian delegations occupied separate rooms in Omani Foreign Minister Badr al-Busaidi's residence, exchanging written messages through Omani mediators—satisfying Iran's requirement for indirect negotiations. Reports also indicate that after the approximately two-and-a-half-hour session concluded, Araghchi met briefly with Uytkov, conversing for several minutes in the Omani Foreign Minister's presence before departing—thereby fulfilling Washington's desire for direct engagement. Beyond these procedural arrangements for the initial round, such compromises demonstrate both sides' willingness to overcome obstacles impeding an agreement, potentially foreshadowing solutions to other challenges expected during future negotiation rounds. 2- Disagreement over the framework for negotiations: A disagreement over the scope of negotiations has persisted between the two sides since the initial round of talks. Iran adamantly maintains that discussions should focus exclusively on nuclear matters, leaving out both the missile program and regional role concerns. Supporting this position, Iranian Foreign Ministry spokesman Esmail Baghaei stated on April 13 that an agreement had been reached to limit negotiations to the nuclear issue and sanctions relief, confirming these topics would constitute the agenda for upcoming talks. Meanwhile, Washington remains adamant about including additional issues in negotiations with Tehran, particularly arms programs, with the missile program at the forefront. Witkoff stated that any diplomatic agreement with Iran would depend on verification of its uranium enrichment programs and, ultimately, confirmation of the missile arsenal Iran has developed over the years. Tehran has repeatedly declared openness to measures verifying it does not possess nuclear weapons, often citing Supreme Leader Ali Khamenei's fatwa prohibiting such weapons. Such declarations may indicate willingness to reduce its nuclear program and potentially return to the 3.67% enrichment levels stipulated in the 2015 agreement—significantly lower than current levels exceeding 60%. However, Iran has firmly rejected completely dismantling its nuclear program (like the "Libyan model") or transferring highly enriched uranium to third countries, citing distrust of Washington and concerns about another withdrawal from agreements as occurred during Trump's presidency in 2018. Regarding the missile program, Revolutionary Guards spokesman Ali Mohammad Naeini responded to Witkoff's statement about including the missile arsenal in negotiations by declaring that Iran's military capabilities, including its missile program, represent a "red line" that remains non-negotiable under any circumstances. 3- Potential Iranian economic incentives: Some sources indicate that, in response to Trump's letter, Iran offered "economic benefits" that could advantage American companies if an agreement was reached between the two sides. These sources estimated potential benefits at $1 trillion or more. The proposal aligns with President Pezeshkian's April 9 statement that Supreme Leader Khamenei would not object to American investments entering Iran, "but without conspiring against Iran." Araghchi confirmed this position in his Washington Post article published that same day, calling on the United States to prefer diplomatic options when dealing with Iran and describing the Iranian economy as a "trillion-dollar opportunity" for American companies and businessmen. Tehran's attempts reveal a desire to motivate the Trump administration, which prioritizes trade and investment as key determinants of political engagement. One reason Trump withdrew from the 2015 nuclear agreement was Washington's lack of benefit from investment deals allowed by the opening to Iran, while Europeans gained advantages, particularly in oil and petrochemical sectors. Consequently, Tehran is strategically focusing on economic opportunities, potentially driving Iran toward diplomatic approaches with Washington and an agreement that would lift the burden of sanctions imposed on the country. 4- European exclusion: No European party participated in the Muscat negotiations, and Washington likely held no consultations with the "European Troika" (Britain, France, and Germany) that participated with Iran in the 2015 agreement. Sources indicate that the meeting between US Secretary of State Marco Rubio and the foreign ministers of the three European countries, on the sidelines of the NATO foreign ministers' meeting in Brussels on April 3, failed to produce any joint plan addressing contentious issues with Iran. The exclusion reflects tense relations between Washington and its European allies, stemming from numerous disagreements—most notably the current US administration's position on the Russian-Ukrainian war and the tariffs imposed on most countries, including European ones. Moreover, it highlights Trump's desire to engage with Iran unbound by other parties' interests. Europeans prefer a diplomatic approach to dealing with Tehran, an approach Trump does not see as entirely reliable. Instead, he considers the military option a viable alternative should negotiations fail or not yield an agreement with Tehran. Nevertheless, the "European Troika" maintains significant leverage over Tehran through the so-called "trigger mechanism." The mechanism enables automatic reinstatement of UN sanctions imposed on Iran prior to the 2015 agreement if any of these countries complains to the Security Council about Iran's violation of the agreement. Such leverage perhaps explains why the Iranian delegation in Muscat requested its American counterpart ensure Washington assumes responsibility for preventing activation of the "trigger mechanism" against Tehran. Consequently, the "European Troika" countries will remain parties to negotiations between the United States and Iran, regardless of their format. Potential Effects Following the initial US-Iran discussions in Muscat, several potential repercussions can be anticipated: 1- Postponing the military option: The positive atmosphere during the Muscat talks, coupled with the announcement of future rounds of discussions, suggests Washington may delay military action regarding the Iranian nuclear issue. Initially, the Trump administration advocated for military intervention as a pressure tactic to compel Tehran back to negotiations and secure a swift agreement on its nuclear program. Nevertheless, with ongoing dialogue between both parties, any military options might remain on hold until the results of these diplomatic exchanges become clearer. The escalating costs of military conflict may compel both sides to favor diplomatic negotiations and concessions. Tehran recognizes that American strikes on its nuclear facilities—whether conducted unilaterally or with Israeli cooperation—would present an overwhelming challenge to counter and manage. Similarly, Washington acknowledges that bombing Iran's nuclear installations could expose American forces and bases throughout the region to retaliatory attacks from Tehran or its armed proxies, while potentially disrupting vital maritime traffic. Given these high-stakes calculations, both nations may increasingly prioritize diplomatic solutions to resolve their differences, with Washington maintaining military action only as a final option should negotiations fail. 2- Supporting the chances of signing an agreement: Unlike previous negotiations during the Hassan Rouhani and Ebrahim Raisi administrations, realistic data suggests Tehran faces severe time constraints. Trump has imposed a temporary deadline for Iran to resolve its nuclear program, with military action serving as the alternative. The military option has gained momentum as Tehran lost substantial capabilities among its regional proxies, which would have increased the cost of any attack against it. Moreover, according to Israeli and American accounts, the Israeli strike on October 26, 2024, successfully destroyed critical defense systems within Iranian territory. The approaching October 18 expiration date of the 2015 nuclear agreement intensifies pressure on Iran. Urgency mounts as the nation seeks a solution before the European Troika countries activate the "trigger mechanism" prior to that deadline. Unlike negotiations during the Rouhani and Raisi administrations, current talks will likely proceed more rapidly. Trump's April 13 statement that he expects "a decision on Iran will be made very quickly" further suggests the possibility of an expedited agreement with Iran. 3- Internal Iranian opposition: The move to hold negotiations with Washington may face opposition from some hardline fundamentalist groups. Despite Tehran's negotiations with Washington receiving approval from Khamenei and influential institutions rather than originating from Pezeshkian's government, resistance to these discussions remains possible. Statements from hardline Islamic Consultative Assembly (parliament) member Hamid Rasaei suggest underlying opposition when he claimed "the current negotiations were conducted with the Supreme Leader's approval to prove their failure, and for some optimistic officials to discover once again that the Americans are not committed and that it is irrational to rely on them." Additionally, any potential deal allowing American investments into the Iranian market might trigger objections based on constitutional restrictions. Articles 81 and 153 specifically prohibit granting concessions to foreign companies and foreign control of resources. From this perspective, such diplomatic moves could encounter resistance from institutions controlling key economic sectors, including the Revolutionary Guard and the bazaar. Some hardliners may interpret these developments as "Westernization of the economy," viewing them as concerning repetitions of historical scenarios embedded in Iranian collective memory. 4- Strengthening the role of the Iranian Foreign Ministry: The information that preceded the Muscat round of talks claimed three figures had been appointed to represent the Iranian delegation: Ali Larijani, advisor to the Supreme Leader; Mohammad Foruzandeh, a member of the Expediency Discernment Council; and Mohammad Javad Zarif, former assistant to the Iranian president for strategic affairs. However, the actual Iranian delegation to Oman was headed by Foreign Minister Araghchi, and included his aides for political affairs, Takht-e Ravanchi; Kazem Gharibabadi, for legal and international affairs; and Ismail Baghaei, the Foreign Ministry spokesman, along with other negotiators and technical experts. The composition aligned with Araghchi's earlier assertion that responsibility for the negotiations would fall to the Ministry of Foreign Affairs. Such prioritization indicates the regime's desire to send diplomatic messages, similar to events following former Iranian President Rouhani's election in 2013, which ultimately led to the signing of the 2015 nuclear agreement. The diplomatic approach contrasted with periods when Tehran leaned toward hardline positions, during which broad powers were granted to the National Security Council to manage the nuclear issue, as seen during the terms of former presidents Mahmoud Ahmadinejad and Raisi. The regime's strategy appears inseparable from other domestic preparations made in anticipation of signing an agreement with the West. Notable examples include moving toward approval of conditions necessary for joining the Financial Action Task Force on Terrorism and Money Laundering (FATF), which would help Iranian banks access services provided by the SWIFT international financial transfer system. Some analysts attribute additional internal measures to this effort, including revisions to the strict provisions of the "chastity and hijab" law, the release of individuals under house arrest such as prominent reformist figure Mehdi Karroubi, and the easing of certain restrictions on internet use. 5- Russian and Chinese discontent: Negotiations between the United States and Iran may provoke discontent from Russia and China, fellow parties to the 2015 nuclear agreement. Both nations fear Tehran might forge an agreement with Washington that would undermine the coordination among Russia, China, and Iran. These concerns intensify amid severely strained Washington-Beijing relations following the announcement of historically high mutual tariffs between the two countries. Adding to the tension is Trump's apparent indifference resulting from Russian President Putin's delay regarding the US peace plan for Ukraine. Accordingly, Iranian Foreign Minister Araqchi's visit to Moscow was announced ahead of the second round of talks scheduled for April 19 to brief the Russian side on the progress of the talks with Washington. Additionally, Iranian Deputy Foreign Minister Kazem Gharibabadi met with his Russian counterpart, Sergey Vasilievich Vershinin, during a meeting of supporters of the UN Charter in Moscow. The diplomatic efforts represent an attempt to allay Russian concerns and send a message to Washington that Tehran has other international alternatives if the current negotiations fail. In conclusion, the Muscat negotiations served as an exploratory round for both American and Iranian delegations, allowing each side to clarify intentions and demonstrate commitment before proceeding to subsequent steps. Complex and difficult differences persist between the parties, yet both clearly favor diplomatic solutions, at least temporarily, with success hinging upon American demands and potential Iranian concessions. Future rounds will likely experience heightened tension, leaving all possibilities open regarding the ultimate outcome of these diplomatic efforts.

Diplomacy
Washington,DC, United States, April 14 2025, President Donald J Trump greets El Salvadors President Nayib Bukele outside the West Wing of the White House

Bukele at a Crossroads: Washington or Beijing?

by César Eduardo Santos

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском Bukele appears to have the green light from the United States to deepen his authoritarian project with the help of Beijing. Recently, the ruling Salvadoran party, Nuevas Ideas, inaugurated a political training school in Nuevo Cuscatlán. The event was headlined by Félix Ulloa, Vice President of the Central American country, and China’s ambassador to El Salvador, Zhang Yanhui. According to the Central American news portal Expediente Público, the institute was reportedly sponsored by the Chinese Communist Party (CCP), following a previous visit to Beijing by Ulloa and Xavier Zablah Bukele – leader of Nuevas Ideas and cousin of the Salvadoran president – during which several interparty cooperation agreements were finalized. This event highlights the diversified strategies China employs to expand its influence in the Western Hemisphere. While public attention toward the Asian giant typically focuses on intergovernmental diplomacy, trade relations, or the Belt and Road Initiative (BRI), less consideration is given to the forms of cooperation carried out by various international outreach bodies tied to the CCP in Latin America. The Czech think tank Sinopsis, which specializes in Chinese studies, notes: “Unlike many other countries, China’s foreign affairs extend beyond the jurisdiction of the Ministry of Foreign Affairs (MoFA) and transcend official state-to-state diplomacy […] This system consists of various bodies and operates under the overarching concept of total diplomacy.” The CCP behind the scenes According to Central American and Chinese-language media, Zablah Bukele and Félix Ulloa held a meeting in April 2024 with Liu Jianchao, Minister of the International Liaison Department (ILD) of the CCP. On that occasion, representatives of bukelismo signed an agreement with the CCP’s cadre school, securing Chinese sponsorship for the newly inaugurated Political Training Institute of Nuevas Ideas. The ILD was established in 1951 to promote ties between the CCP and other communist parties across Asia, the Middle East, Africa, and Eastern Europe. Following the Sino-Soviet split in the 1960s, the organization turned its focus to cultivating relationships with leftist groups of all kinds, from European social democrats to liberation movements in the Global South. Under Hu Jintao’s leadership, the ILD began adopting a pragmatic approach, fostering good relations with both left- and right-wing parties. For instance, center-right organizations like Argentina’s Republican Proposal (PRO) have maintained ties with the CCP since 2009. Xi Jinping, while maintaining this approach, has made the ILD’s operations more assertive, turning it into a key instrument of Chinese foreign influence. Various think tanks and scholars of Chinese foreign policy have noted the quiet diplomacy exercised by the Asian giant through the ILD and other bodies. These include the United Front Work Department and the Chinese People’s Association for Friendship with Foreign Countries, which function as parallel bureaucracies to the MoFA and are characterized by opaque activities and a purported autonomy from Beijing. However, these organizations aim to connect various sectors of foreign politics and civil society with the CCP. In particular, the ILD builds influence networks by training foreign politicians. Beyond offering training courses funded in China, the department has promoted the construction of training centers in countries such as Tanzania. In this way, the ILD seeks to forge close ties with foreign elites who, in addition to promoting Chinese soft power narratives – such as the superiority of the one-party model or the primacy of development over democracy and civil liberties – can lobby on Beijing’s behalf in agencies, cabinets, and parliaments. In this sense, Chinese support for Nuevas Ideas’ Political Training Institute marks a significant step forward in cooperation between the CCP and El Salvador’s ruling party. The ILD’s training programs have also become spaces for transmitting authoritarian know-how. Researchers such as Lina Benabdallah and Christine Hackenesch point out that the CCP promotes the Chinese governance model to foreign elites – a model based on mass surveillance technologies, personal data storage, and internet censorship, typically provided by state-owned enterprises like Huawei. These practices are presented as alternatives for strengthening public security and internal stability, but in practice, they reinforce state control and restrict civil liberties in adopting countries. The paradoxes of Bukelismo The link between Nuevas Ideas and the CCP raises questions about the ideological leanings of Nayib Bukele. Just a few weeks ago, the Salvadoran president hosted U.S. Secretary of State Marco Rubio in San Salvador to seal, in Rubio’s words, “a historic agreement, the most extraordinary in the world” on migration. Suppose this event signaled El Salvador’s intent to become one of the United States’ most important regional partners. How should we now interpret the growing political cooperation with China, the U.S.’s main strategic rival? On one hand, it is understandable that El Salvador’s ruling party seeks alignment with the CCP. The inauguration of Nuevas Ideas’ Political Training Institute, with ILD’s blessing, is another episode of authoritarian cooperation in Latin America, where a regime well-versed in repression and control transfers knowledge and resources to another with similar aims. Similar patterns have been observed in the region with Cuba, Venezuela, and Nicaragua, which collaborate among themselves and with extra-regional autocracies like Russia, Iran, and China itself. Given this, it is not surprising that a self-proclaimed socialist regime and another linked to the Conservative Political Action Conference (CPAC) would cooperate beyond ideological differences. In fact, this has been the ILD’s hallmark in the 21st century: pragmatism in engaging with parties across the spectrum, ensuring long-term ties with various governments. This phenomenon reflects a central feature of our times: the erosion of the left-right divide in favor of a new tension between democracies and autocracies. On the other hand, the indoctrination of Nuevas Ideas’ cadres might even be tolerable to Trump, given that some CCP perspectives align with his political agenda. The pursuit of a multipolar order that secures spheres of influence for major powers – such as the South China Sea or Greenland – as well as the promotion of illiberal models of democracy – like China’s “whole-process democracy” or the unitary executive without checks and balances – are not foreign concepts to Make America Great Again. Based on this, Bukele may seem to have the green light to deepen his authoritarian project with Beijing’s help. As long as the PRC does not interfere with U.S. strategic interests in El Salvador – such as migration management or control of critical infrastructure – the 47th American president might remain content, regardless of China’s growing soft power in the hemisphere.

Energy & Economics
Nottinghamshire, UK 03 April 2025 : Attitudes of UK broadsheet newspaper after Trump unleashes Liberation Day Tariff announcement

The EU at the Crossroads of Global Geopolitics

by Krzysztof Sliwinski

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском Abstract This study examines the short-term, medium-term, and long-term implications of recent "tariff wars" on the European Union (EU). The imposition of tariffs by the United States, particularly the "Liberation Day" tariffs announced by President Trump on April 2, 2025, led to significant disruptions in global supply chains, negatively impacted GDP growth, increased financial market volatility, and exacerbated geopolitical tensions. The EU faces challenges in navigating this shifting geopolitical landscape while maintaining its economic interests and influence. However, the EU has opportunities to leverage these conflicts to strengthen its internal market, foster international cooperation, and emerge as a more resilient global actor. The paper concludes by discussing the potential end of transatlanticism, the future of the EU, and the implications for globalisation in light of the current "tariff chaos." Keywords: Tariffs, Geopolitics, European Union, Trade Wars Introduction Before we examine the topic of tariffs, let us recall that the terms "tariff war" or "trade war" are not strictly academic. International Security scholars generally believe that the notion of war is reserved for military conflicts (both domestic and international) that involve at least a thousand casualties in any given year.[1] One of the most prominent sources in this regard is the Armed Conflict Dataset Codebook, published by the Uppsala Conflict Data Program at the Department of Peace and Conflict Research, Centre for the Study of Civil Wars, and the International Peace Research Institute at Uppsala University in Uppsala.[2] Therefore, "tariff war" or "tariff wars" are more journalistic and hyperbolic. Hence, they are used in this study with quotation marks. Journalists and commentators from various backgrounds often use inflated language to impress their readers. On the other hand, wars are cataclysmic events that have game-changing consequences. In this sense, some tools that state leaders use to achieve political and economic goals, such as tariffs, may have short- and long-term outcomes. Nonetheless, scholars who tend to be precise in their explanations will mainly discuss economic competition rather than "economic war" or "wars." This study investigates the short-, medium-, and possible long-term implications of "tariff wars" on the European Union. These implications appear multifaceted and encompass stability, political relationships, and a broader international order."Liberation Day" On April 2, US President Trump announced new tariffs under the banner of "Liberation Day" – a minimum baseline of 10 per cent tariffs on goods imported from all foreign countries and higher, reciprocal tariffs on nations that impose tariffs on US exports.[3]  Crucially, the White House claims that the new tariffs are reciprocal: "It is the policy of the United States to rebalance global trade flows by imposing an additional ad valorem duty on all imports from all trading partners except as otherwise provided herein. The additional ad valorem duty on all imports from all trading partners shall start at 10 per cent, and shortly thereafter, the additional ad valorem duty shall increase for trading partners enumerated in Annex I to this order at the rates set forth in Annex I to this order. These additional ad valorem duties shall apply until such time as I determine that the underlying conditions described above are satisfied, resolved, or mitigated".[4] We did not have to wait for strong reactions to occur worldwide. China vowed to retaliate against the 34 per cent tariffs imposed by the US on Wednesday (April 2 2025) and protect its national interests while condemning the move as "an act of bullying".[5] Doubling down, a few days later, Trump threatened a 50 per cent tariff on China on top of previous reciprocal duties,[6] to which Chinese President Xi Jinping already replied hawkishly.[7] In an equally hawkish response, the Trump administration declared that Chinese goods would be subject to a 145 per cent tariff.[8] In a twist of events, on April 9, the US  declared a 90-day-long pause for previously declared tariffs covering the whole world (keeping a minimum of 10 per cent, though) except against China.[9] The next couple of weeks will show whether the world will enter the "tariff arms race" or we will enter some "tariff détente". Importantly, as one can surmise, "Xi has sold himself domestically and internationally as the guy standing up to America, and people that want to stand up to America should get in line behind Chairman Xi".[10] For the EU, European Commission President Ursula von der Leyen described US universal tariffs as a significant blow to the world economy and claimed that the European Union was prepared to respond with countermeasures if talks with Washington failed. Accordingly, the EU was already finalising a first package of tariffs on up to 26 billion Euro ($28.4 billion) of US goods for mid-April in response to US steel and aluminium tariffs that took effect on March 12.[11] Consequently, on April 7, 2025, a meeting was organised in Luxembourg[12] regarding the EU's response to US tariffs on steel and aluminium and the preparation of countermeasures, which included a proposal to impose 25 per cent tariffs on US goods. Interestingly, the "Liberation Day" tariffs do not include Russia. According to numerous commentators, this indicates Moscow's importance as a future trade partner once the Ukrainian war is over. However, the official explanation issued by the White House suggests that the existing sanctions against Russia "preclude any meaningful trade."[13] Tariff imposition: short, medium and long-term consequences Several observable phenomena can be identified regarding their economic ramifications: First, the imposition of tariffs can lead to significant disruptions in global supply chains, thereby affecting industries that rely heavily on international trade. This disruption can lead to increased costs and reduced competitiveness for EU businesses, particularly in sectors such as agriculture and manufacturing.[14] While national measures may yield political and economic benefits in the short term, it is essential to note that global prosperity cannot be sustained without cooperative and stable international trade policies. Second, the Gross Domestic Product is likely to be impacted. The imposition of tariffs has been shown to negatively affect GDP growth. For instance, the US-China "trade war" decreased the GDP of both countries, which could similarly affect the EU if it becomes embroiled in similar conflicts.[15] Third, we examine volatility in the financial markets. "Tariff wars" contribute to financial market volatility, which can cause a ripple effect on EU economic stability. This volatility can deter investment and slow economic growth.[16] Fourth, political targeting and retaliation. "Tariff wars" often involve politically targeted retaliations, as seen in the US-China trade conflict. The EU has been adept at minimising economic damage while maximising political targeting, which could influence its future trade strategies and political alliances.[17] Fifth, global alliances are shifting. The EU may need to reconsider its trade alliances and partnerships in response to these shifting dynamics. This could involve forming new trade agreements or strengthening existing ones to mitigate the impact of "tariff wars."[18] Next, increased geopolitical competition and economic nationalism can exacerbate tensions between major powers, potentially leading to a crisis in globalization. As an aspiring global player, the EU must navigate these tensions carefully to maintain its influence and economic interests.[19] Social impacts should also be considered. "Trade wars" can lead to changes in employment and consumer prices, thus affecting the EU's social equity and economic stability. These changes necessitate policies that enhance social resilience and protect vulnerable populations.[20] Does Team Trump have a plan? The tariffs imposed by the Trump administration appear to be part of a broader strategy that Trump describes as a declaration of economic independence for the US, notably heralding them as part of the national emergency. The long-term effects of this strategy depend on how effectively the US can transition to domestic production without facing significant retaliation or trade barriers from other nations. Notably, the US dollar's status as the world's primary reserve currency has been supported by military power since the introduction of the Bretton Woods system. The US military, especially the US Navy, has helped secure trade routes, enforce economic policies, and establish a framework for international trade, favouring the US. dollar. The countries that subscribed to the system also gained access to the US consumer market. Importantly, what is explained by the Triffin Dilemma, back in the 1960s, the US had a choice: to either increase the supply of the US Dollar,  sought after by the whole world as a reserve currency and international trade currency and that way to upkeep global economic growth, which was pivotal for the US economy or to end the gold standard. In 1971, the US finished its Bretton Woods system. What followed was a new system primarily dictated by neoliberalism based on low tariffs, free capital movement, flexible exchange rates and US security guarantees.[21] Under that neoliberal system, reserve demand for American assets has pushed up the dollar, leading it to levels far in excess of what would balance international trade over the long run.[22] This made manufacturing in the US very expensive, and consequently, the deindustrialisation of the US followed. Therefore, it appears that Trump wants to keep the US dollar as the world's reserve currency and reindustrialise the US. According to Stephen Miran, chair of the Council of Economic Advisers (a United States agency within the Executive Office of the President), two key elements to achieve this goal are tariffs and addressing currency undervaluation of other nations.[23] The second element in that duo is also known as the Mar-a-Lago Accord.[24] Scott Bessent, 79th US Secretary of the Treasury, picked up this argument.[25] In a nutshell, the current "tariff chaos" is arguably only temporary, and in the long term, it is designed to provide an advantage for the US economy.A readjustment of sorts fundamentally reshapes the existing international political economy. Whether or not this plan works and achieves its goals is entirely different. As market analysts observe, "For the past two decades, the US has focused on high-tech services like Amazon and Google services, which have added to a service surplus. However, the real sustainable wealth comes from the manufacturing of goods, which, for the US, went from 17 per cent in 1988 to 10 per cent in 2023 of GDP. The entire process of building goods creates many mini ecosystems of production/capital value that stay in a country for many decades. […] Initially, the Chinese started in low-tech and low-cost labour manufacturing before 2001, but shifted towards becoming major manufacturers of high-tech products like robotics and EV automobiles. […] For President Trump to levy high tariffs on the Chinese in the current moment, he is doing everything that he can to resuscitate US manufacturing".[26] EU's options The EU and the US share the world's largest bilateral trade and investment relationship, with 2024 data showing EU exports to the US at 531.6 billion euros and imports at 333.4 billion euros, resulting in a 198.2 billion Euro trade surplus for the EU.[27] While the EU faces significant challenges due to "tariff wars," there are potential opportunities for positive outcomes. The EU can leverage these conflicts to strengthen its internal market and enhance its role in global trade. By adopting proactive trade policies and fostering international cooperation, the EU can mitigate the negative impacts of "tariff wars" and potentially emerge as a more resilient and influential global actor. However, this requires careful navigation of the complex geopolitical landscape and a commitment to maintaining open and cooperative trade relations. It seems likely that the EU can leverage recent US tariffs to strengthen ties with China and India, potentially reducing its dependency on US trade. China is the EU's second-largest trading partner for goods, with bilateral trade at 739 billion euros in 2023, though a large deficit favouring China (292 billion euros in 2023).[28] The EU's strategy is to de-risk, not decouple, focusing on reciprocity and reducing dependencies; however, competition and systemic rivalry complicate deeper ties. Meanwhile, India's trade with the EU was 124 billion euros in goods in 2023, and ongoing free trade agreement (FTA) negotiations, expected to conclude by 2025, could yield short-term economic gains of 4.4 billion euros for both.[29] India's fast-growing economy and shared interest in technology make it a potentially promising partner. EU and China: Opportunities and Challenges Economically, there are more opportunities than challenges. China remains the EU's second-largest trading partner for goods, with bilateral trade reaching 739 billion euros in 2023, down 14 per cent from 2022 due to global economic shifts.[30] The trade balance shows a significant deficit of 292 billion euros in 2023, driven by imports of telecommunications equipment and machinery, whereas EU exports include motor cars and medicaments. The EU's strategy, outlined in its 2019 strategic outlook and reaffirmed in 2023, positions China as a partner, competitor, and systemic rival, focusing on de-risking rather than decoupling. Recent actions, such as anti-dumping duties on Chinese glass fibre yarns in March 2025, highlight tensions over unfair trade practices. Despite these challenges, China's market size offers opportunities, especially if the EU can negotiate for better access. However, geopolitical rivalry complicates deeper ties, including EU probes, in Chinese subsidies. Politically, the EU and China differ significantly in this regard. Regarding human rights policies, the EU consistently raises concerns about human rights issues in China.[31] These concerns often lead to friction, with the European Parliament blocking trade agreements and imposing sanctions on them. Moreover, China's stance on the war in Ukraine has created tension, with the EU viewing Russia as a major threat, and China's support of Russia is a significant concern.[32] China is often perceived in Western European capitals as not making concessions on issues vital to European interests.[33] The understanding of the war's root causes, the assessment of implications, risks or potential solutions - in all these areas, the Chinese leadership on the one hand and the European governments and the EU Commission in Brussels on the other hand have expressed very different, at times even contrary, positions.[34] Finally, China's political model demonstrates that democracy is not a prerequisite for prosperity, challenging Western emphasis on democracy and human rights.[35] EU and India: Growing Partnership and FTA Prospects and Political Challenges Economically, it seems that there are more opportunities than challenges. India, ranked as the EU's ninth-largest trading partner, accounted for 124 billion euros in goods trade in 2023, representing 2.2 per cent of the EU's total trade, with growth of around 90 per cent over the past decade.[36] Services trade reached nearly 60 billion euros in 2023, almost doubling since 2020, with a third being digital services.[37] The EU is India's largest trading partner, and ongoing negotiations for a free trade agreement (FTA), investment protection, and geographical indications, initiated in 2007 and resuming in 2022, aim for conclusion by 2025.[38] A 2008 trade impact assessment suggests positive real income effects, with short-term gains of 3–4.4 billion euros for both parties. The EU seeks to lower Indian tariffs on cars, wine, and whiskey. Simultaneously, India has pushed for market access to pharmaceuticals and easier work visas for IT professionals. However, concerns remain regarding the impact of EU border carbon taxes and farm subsidies on Indian farmers. Politically, challenges to EU-India relations stem from several sources. Trade has been a persistent friction point, with negotiations for a free trade agreement facing roadblocks (Malaponti, 2024). Despite the EU being a significant trading partner for India,[39] differing approaches to trade liberalization have hindered progress. India's historical emphasis on autonomy and self-reliance can sometimes clash with the EU's multilateral approach.[40] Further, India's complex relationship with Russia, particularly its continued reliance on Russian defence technology, presents a challenge for closer EU-India security cooperation.[41] Finally, while the EU and India share concerns about China's growing influence, their strategies for managing this challenge may differ. These issues, if left unaddressed, could limit the potential for a deeper, more strategic partnership between the EU and India.[42] Conclusions "What does Trump want? This question is on the minds of policymakers and experts worldwide. Perhaps we are witnessing the opening salvo of a decisive phase of the US-China economic conflict - the most serious conflict since 1989. It is likely the beginning of the end of the ideology of Globalism and the processes of globalisation. It is arguably aggressive "decoupling" at its worst and the fragmentation of the world economy. For the EU, this is a new situation which dictates new challenges. Someday, probably sooner than later, European political elites will have to make a choice. To loosen or perhaps even end the transatlantic community and go against the US. Perhaps in tandem with some of the BRICS countries, such as India and China, or swallow the bitter pill, redefine its current economic model, and once again gamble with Washington, this time against the BRICS. It seems that the EU and its member states are at a crossroads, and their next choice of action will have to be very careful. In a likely new "Cold War" between the US and this time, China, the EU might not be allowed to play the third party, neutral status. One should also remember that Trump, like Putin or Xi, likes to talk to EU member states' representatives directly, bypassing Brussels and unelected "Eureaucrats' like Ursula Von der Leyen. In other words, he tends to leverage his position against the unity of the EU, which should not be surprising given the internal EU conflicts. More often than not, Hungary, Slovakia, Italy, or Nordic members of the EU clash on numerous Issues with Berlin, Paris and most importantly, Brussels. (I write more about it here: Will the EU even survive? Vital external and internal challenges ahead of the EU in the newly emerging world order. https://worldnewworld.com/page/content.php?no=4577).   References [1] See more at:  For detailed information, consult one of the most comprehensive databases on conflicts run by Uppsala Conflict Data Programme at: https://ucdp.uu.se/encyclopedia[2] Pettersson, Therese. 2019. UCDP/PRIO Armed Conflict Dataset Codebook, Version 19.1. Uppsala Conflict Data Program, Department of Peace and Conflict Research, Uppsala University, and Centre for the Study of Civil Wars, International Peace Research Institute, Oslo. https://ucdp.uu.se/downloads/ucdpprio/ucdp-prio-acd-191.pdf[3] Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits. https://www.whitehouse.gov/presidential-actions/2025/04/regulating-imports-with-a-reciprocal-tariff-to-rectify-trade-practices-that-contribute-to-large-and-persistent-annual-united-states-goods-trade-deficits/[4] Regulating Imports with a Reciprocal Tariff to Rectify… op. cit.[5] Hanin Bochen, and Ziwen Zhao. "China vows to retaliate after 'bullying' US imposes 34% reciprocal tariffs". South China Morning Post. April 3 2025. https://www.scmp.com/news/us/diplomacy/article/3304971/trump-announced-34-reciprocal-tariffs-chinese-goods-part-liberation-day-package[6] Megerian, Chris and Boak, Josh. "Trump threatens new 50% tariff on China on top of 'reciprocal' duties". Global News. April 7, 2025. https://globalnews.ca/news/11119347/trump-added-50-percent-tariff-china/[7] Tan Yvette, Liang Annabelle and Ng Kelly. "China is not backing down from Trump's tariff war. What next?". BBC, April 8 2025. https://www.bbc.com/news/articles/ckg51yw700lo[8] Wong, Olga. “Trump further raises tariffs to 120% on small parcels from mainland, Hong Kong”. South China Morning Post, 11 April 2025. https://www.scmp.com/news/hong-kong/hong-kong-economy/article/3306069/trump-further-raises-tariffs-120-small-parcels-mainland-hong-kong?utm_source=feedly_feed[9] Chu, Ben. “ What does Trump's tariff pause mean for global trade?”, BBC, 10 April, 2025. https://www.bbc.com/news/articles/cz95589ey9yo[10] Wu, Terri. "Why US Has Upper Hand Over Beijing in Tariff Standoff". The Epoch Times April 7, 2025. https://www.theepochtimes.com/article/why-us-has-upper-hand-over-beijing-in-tariff-standoff-5838158?utm_source=epochHG&utm_campaign=jj  [11] Blenkinsop, Philip, and Van Overstraeten, Benoit. "EU plans countermeasures to new US tariffs, says EU chief." April 3, 2025. https://www.reuters.com/markets/eu-prepare-countermeasures-us-reciprocal-tariffs-says-eu-chief-2025-04-03/[12] Payne, Julia. The EU Commission proposes 25% counter-tariffs on some US imports, document shows". Reuters, April 8, 2025. https://www.reuters.com/markets/europe/eu-commission-proposes-25-counter-tariffs-some-us-imports-document-shows-2025-04-07/  [13] Bennett, Ivor. "US seems content to cosy up to Russia instead of imposing tariffs." Sky News, April 4, 2025. https://news.sky.com/story/us-seems-content-to-cosy-up-to-russia-instead-of-coerce-it-with-tariffs-13341300[14] Angwaomaodoko, Ejuchegahi Anthony. "Trade Wars and Tariff Policies: Long-Term Effects on Global Trade and Economic Relationship." Business and Economic Research, 14, no. 4 (October 27, 2024): 62. https://doi.org/10.5296/ber.v14i4.22185[15] Ilhomjonov, Ibrohim, and Akbarali Yakubov. "THE IMPACT OF THE TRADE WAR BETWEEN CHINA AND THE USA ON THE WORLD ECONOMY," June 16, 2024. https://interoncof.com/index.php/USA/article/view/2112[16] Angwaomaodoko, Ejuchegahi Anthony. "Trade Wars and Tariff Policies: Long-Term Effects on Global Trade and Economic Relationship." Business and Economic Research 14, no. 4 (October 27, 2024): 62. https://doi.org/10.5296/ber.v14i4.22185[17] Fetzer, Thiemo, and Schwarz Carlo. "Tariffs and Politics: Evidence from Trump's Trade Wars." Economic Journal 131: no. 636 (May 2021): 1717–41. https://doi.org/10.1093/ej/ueaa122[18] Angwaomaodoko, Ejuchegahi Anthony. "Trade Wars and Tariff Policies: Long-Term Effects on Global Trade and Economic Relationship …op. cit.[19] Mihaylov, Valentin Todorov, and Sławomir Sitek. 2021. "Trade Wars and the Changing International Order: A Crisis of Globalisation?" Miscellanea Geographica 25: 99–109. https://doi.org/10.2478/mgrsd-2020-0051[20] Wheatley, Mary Christine. "Global Trade Wars: Economic and Social Impacts." PREMIER JOURNAL OF BUSINESS AND MANAGEMENT, November 5, 2024. https://premierscience.com/wp-content/uploads/2024/11/pjbm-24-368.pdf[21] Money & Macro, https://www.youtube.com/watch?v=1ts5wJ6OfzA&t=572s[22] Miran, Stephen. "A User's Guide to Restructuring the Global Trading System." November 2024. Hudson Bay Capital. https://www.hudsonbaycapital.com/documents/FG/hudsonbay/research/638199_A_Users_Guide_to_Restructuring_the_Global_Trading_System.pdf[23] Miran, Stephen. "A User's Guide to Restructuring the Global Trading System"... op.cit.[24] Zongyuan Zoe Liu, "Why the Proposed Mar-a-Lago Accord May Not be the Magic Wand That Trump Is Hoping For", 9  April 2025. https://www.cfr.org/blog/why-proposed-mar-lago-accord-may-not-be-magic-wand-trump-hoping  [25] Treasury Secretary Scott Bessent Breaks Down Trump's Tariff Plan and Its Impact on the Middle Class. https://www.youtube.com/watch?v=zLnX1SQfgJI[26] Park, Thomas. https://www.linkedin.com/feed/update/urn:li:activity:7316122202846765056/[27] See more at: https://ec.europa.eu/eurostat/fr/web/products-eurostat-news/w/ddn-20250311-1[28] See more at: https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/countries-and-regions/china_en[29] Kar, Jeet. "The EU and India are close to finalising a free trade agreement. Here's what to know." World Economic Forum. March 7 2025. https://www.weforum.org/stories/2025/03/eu-india-free-trade-agreement/[30] See more at: https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/countries-and-regions/china_en[31] "The paradoxical relationship between the EU and China'. Eastminster: a global politics & policy blog, University of East Anglia. http://www.ueapolitics.org/2022/03/29/the-paradoxical-relationship-between-the-eu-and-china/[32] Vasselier, Abigaël. "Relations between the EU and China: what to watch for in 2024". January 25 2025. https://merics.org/en/merics-briefs/relations-between-eu-and-china-what-watch-2024 [33] Benner, Thorsten. "Europe Is Disastrously Split on China." Foreign Policy, April 12 2023. https://foreignpolicy.com/2023/04/12/europe-china-policy-brussels-macron-xi-jinping-von-der-leyen-sanchez/[34] Chen, D., N. Godehardt, M., Mayer, X., Zhang. 2022. "Europe and China at a Crossroads." 2022. https://thediplomat.com/2022/03/europe-and-china-at-a-crossroads.[35] Sharshenova, A. and Crawford. 2017. "Undermining Western Democracy Promotion in Central Asia: China's Countervailing Influences, Powers and Impact." Central Asian Survey 36 (4): 453. https://doi.org/10.1080/02634937.2017.1372364.[36] See more at: https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/countries-and-regions/india_en[37] See more at: https://digital-strategy.ec.europa.eu/en/news/key-outcomes-second-eu-india-trade-and-technology-council[38] Kar, Jeet. "The EU and India are close to finalising a free trade agreement. Here's what to know"… op. cit.[39] Malaponti, Chiara. 2024. “Rebooting EU-India Relations: How to Unlock Post-Election Potential.” https://ecfr.eu/article/rebooting-eu-india-relations-how-to-unlock-post-election-potential/.[40] Sinha, Aseema, and Jon P. Dorschner. 2009. “India: Rising Power or a Mere Revolution of Rising Expectations?” Polity 42 (1): 74. https://doi.org/10.1057/pol.2009.19.[41] Chandrasekar, Anunita. 2025. “It’s Time to Upgrade the EU-India Relationship.” https://www.cer.eu/insights/its-time-upgrade-eu-india-relationship.[42] Gare, Frédéric and Reuter Manisha. “Here be dragons: India-China relations and their consequences for Europe”. 25 May 2023. https://ecfr.eu/article/here-be-dragons-india-china-relations-and-their-consequences-for-europe/

Energy & Economics
South America Map with Shown in a Microchip Pattern. E-government. Continent Vector maps. Microchip Series

Polyglobalization, Big Tech, and Latin America, or what happens to the digital periphery when the center shifts.

by Carina Borrastero

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском So far in the 21st century, we are witnessing the consolidation of an international division of labor in which the levers of economic, political, and technological power are increasingly decoupled from local capacities for the vast majority of nations and relocated to the international arena. The cooperative competition among oligopolistic forces vying for control of key assets to secure global hegemony—energy, finance, digital technology, logistics, military, and space—is one of the fundamental vectors of this framework. The constant expansion of these forces is rooted in the constitutive interaction between giant corporations in strategic sectors and the core states of the new poly-globalization—namely the United States and China—whose geopolitical rivalry is intrinsically linked to the success of the accumulation regime. The oligopolies and their centers of origin appropriate the market and innovation rents generated by the new productive map, accumulating a structural and relational power (in Susan Strange’s terms) that is quickly and markedly outpacing the rest. In this way, both companies and states outside these core zones are being pushed into increasingly dependent positions regarding the technologies, goods, and basic services produced by the winning oligopolies. They are, we might say, being shifted to the new extended periphery. How does this happen? What role does technology play, and where is Latin America in this story? GEOPOLITICS Today, the United States and China sit at the center, while the rest of the world occupies the periphery. UNCTAD Secretary-General Rebecca Grynspan (2023) describes the novel emergence of “centers within the periphery” as part of a process she calls poly-globalization: both China’s rise to the top ranks of global power and the consolidation of highly productive and commercial hubs in other parts of Asia challenge the sustainability of the post–Cold War unipolar world and the traditional North–South divide. Within this framework, historical peripheral dependency does not disappear, but rather changes in form and geography—especially considering that a growing number of developed countries are becoming productively and technologically dependent on countries like China, more so than the reverse (a case in point is Germany in the automotive industry; Zhang & Lustenberger, 2025). However, the periphery is not a homogeneous entity, and not all regions and countries have the same capacities or room for maneuver within this scheme, where starting points significantly shape long-term trajectories. Developed countries (formerly located at the center) remain better equipped than developing countries to face the challenges of their new condition. We can conceptualize the peripheral configuration as tiers or peripheral rings: there is no “semi-periphery”, but rather tiers or rings within the periphery. From this perspective, we might say that Western Europe constitutes a first peripheral ring (1st tier periphery), and industrialized Asia a second ring (2nd tier periphery). Latin America, in this framework, occupies a third ring: it possesses certain accumulated productive capabilities, but due to being more "distant" from the center in terms of the criticality of its production, it receives fewer benefits from integration into major global value chains in terms of investment and technological learning (as Evolutionary Economics and Latin American Development Theory have long pointed out, producing semiconductors, AI, or green hydrogen technology —as in Taiwan, India, or Germany, respectively— is not the same than assembling automobiles as in Mexico and Argentina). In this scenario, the Latin American region—historically subordinated to a single center (the North-Center)—is now subordinate to two. China has been rapidly tightening its economic ties with the region, primarily through trade and financial assistance (Dussel Peters, 2021; Ugarteche & De León, 2020; Villasenin, 2021). Chinese foreign direct investment (FDI) in Latin America and the Caribbean, for example, rose from less than 1% of the region’s total FDI in 2012 to 10.8% in 2019 (although it still lags behind investment from the US and the European Union) (Dussel Peters, 2022). The Asian giant is already Brazil’s main trading partner, is rapidly deepening its ties with Mexico, and an increasing number of countries across the continent have joined the Belt and Road Initiative, including Argentina since 2022 (the other two major Latin American economies have not joined so far). However, the benefits of these relationships for the region remain ambivalent: on the one hand, they have reduced financial dependence on the US—a significant achievement—but they have not yet translated into higher value-added development such as export diversification or upgrading. On the contrary, they have tended to reinforce the trend toward re-commoditization of local economies (Wainer, 2023; Alami et al., 2025). DIGITAL ECONOMY The current dynamics of the tech industry are particularly illustrative of the broader landscape described above, and for that reason, we take it as a focal point of observation. Google, Apple, Meta, Amazon, Microsoft, Alibaba, Tencent, and Huawei—the flagship tech giants of the US and China, commonly referred to as Big Tech (BT)—operate collectively as a global oligopoly. This formation increasingly relegates Latin America to the role of data provider and accelerates the shift of other industrial powers from technology innovators to adopters—that is, to a position of subsidiarity. To this picture we must add Nvidia, the Musk ecosystem, and DeepSeek, among other firms whose products and executives carry significant weight in the global chain of technological decision-making, beyond even their specific market shares. No country outside of the US and China has leading firms in AI, cloud computing, advanced chip knowledge, or 5G champions (with the exception of Ericsson in the latter sector, which remains Swedish. It’s worth noting that Nokia is not included here, as although its production and brand profile are still centered in Norway, the largest shareholding stake belongs to BlackRock). An example of an interesting yet ultimately failed challenge to Big Tech dominance in large-scale projects is the European federated cloud initiative Gaia-X (European Association for Data and Cloud AISBL, https://gaia-x.eu/about/). Originally promoted by the Ministers of economic affairs of Germany and France, Gaia-X is a non-profit international association that brings together companies, state agencies, and third-sector organizations involved in European industrial and technological development (such as SAP, Siemens, the Fraunhofer-Gesellschaft, or Luxembourg’s National Data Service, alongside hundreds of SMEs). Its aim is to pool capabilities in order to create a large shared cloud infrastructure that allows companies and public bodies to store and develop applications securely—that is, independent of servers located outside the continent that fail to meet European data protection standards. In short, the goal is to enable competition with US tech giants and ultimately establish a “gold standard” in data security that tends to exclude them—driven by European governments’ stated concern over the region’s digital sovereignty. The conceptually appealing strategy of combining the complementary capacities of local companies of different sizes on a single platform and offering joint products, initially acted as a carrot for the industry (over 300 members joined, up from 22 at the beginning). However, over time, even the governments most vocal about sovereignty declined to adopt Gaia-X as a primary provider: Germany, for instance, signed a €3 billion agreement with Oracle Cloud (a strategic partner of AWS, Microsoft, and Nvidia) to provide cloud services in 2024. To this day, US tech giants continue to control 70% of the European cloud market (Gooding, 2024). Gaia-X remains a valuable project with over five years of development, but with frankly limited real-world reach—also, it must be said, due in part to the tech giants’ own offensive, as they increasingly offer services aimed at the “territorialization” of data (e.g., https://www.oracle.com/cloud/sovereign-cloud/what-is-sovereign-cloud/). As things stand, the European industrial powers do not control the supply, circulation, or demand of digital technologies, and major Asian players—such as India or Taiwan—occupy intermediate links in the value chains of either the Western bloc or China, depending on the case. This kind of displacement is not so surprising when we consider the oligopolistic dynamics that currently govern the global economy, involving the leadership of core countries across all strategic sectors. Particularly in the digital economy. Oligopoly is a market structure in which a small number of firms control the supply of certain goods and/or services—that is, a large-scale market dominated by a few major sellers, who are often interconnected. Oligopolies are everywhere (in oil, automotive, telecommunications, and more), but in certain sectors, structural traits such as the hyper-scale at which production is viable and profitable, the pace of innovation required for sectoral expansion, or the relevance of brand reputation drive the formation of so-called natural oligopolies (NOs): markets in which open competition (several smaller actors producing the same and rotating their market shares over time) would tend to hinder efficient production. In these markets, the number of firms capable of minimizing total industry costs is “naturally” low, due to the high entry barriers that are established. Each NO actor holds considerable market power, allowing it to develop productive and technological capacities in a privileged way over long periods. As a result, the minimum threshold for joining the oligopoly becomes increasingly difficult for outsiders to overcome. This is the case in sectors such as the extraction of scarce and critical natural resources (like lithium), energy generation and supply (e.g., wind farms), large physical and cyber-physical infrastructure for logistics (commercial ports and oceanic bridges, 5G, or submarine internet cables), or transversal digital technologies (like AI, big data, or cloud computing). All of these require massive upfront investments, accumulated know-how, strong commercialization capacity, and the ability to retain rents—which includes “artificial” legal barriers such as intellectual property rights, trade secrets, and various mechanisms to capture innovation rents. It’s not the same to have oil reserves in your territory and develop or invite companies to exploit them (which several countries do, with companies of varying sizes) as it is to develop powerful AI models using 20 years of data from the entire public internet (which only OpenAI-Microsoft of the US originally achieved with ChatGPT, even though the data came from millions of people around the world). In fact, comparable AI capabilities have only been reached by Google’s Gemini and the open-source DeepSeek model recently developed in China following US sanctions on Nvidia chip acquisitions. In a technological oligopoly, the ability to invest and innovate at scale grants companies significant prospective power: they can pour enormous sums into R&D and start-up acquisitions to develop innovations that will pay off a decade later—after numerous failed attempts costing millions—thus shaping future markets in the process (Google, for example, has heavily invested in AI development since the 1990s and has, at times, acquired one start-up per week). Additionally, NO actors actively exclude potential competitors outside the oligopoly through more questionable mechanisms such as collusion or lobbying, among others (Borrastero & Juncos, 2024). Today, given the broad productive and geographic scope of global value chains and the extreme concentration of investment capacity typical of financial capitalism, more and more markets are becoming structured as natural oligopolies. Especially in digital technologies. Only Amazon, Microsoft, Alibaba, and Google together dominate 75% of the global cloud computing market (with respective shares of 47.8%, 15.5%, 7.7%, and 4%, according to Gartner, 2024), a sector whose relevance is crucial for the development of technologies such as generative AI. In the years leading up to the COVID-19 pandemic, Google, Facebook, Amazon, and Microsoft also became owners or lessees of more than half of the world’s submarine bandwidth capacity—a market historically controlled by states and large telecommunications companies like NEC, Alcatel, and Fujitsu, which still make up the backbone of global data traffic infrastructure (Business Research Insights, 2025). Huawei is the world’s largest supplier of telecommunications equipment, particularly for 5G networks and smartphones, holding a 28% share of the global market and over 4,000 patents (Merino et al., 2023). This helps explain Donald Trump’s insistence on making it both a material and symbolic target in the US-China trade war. The fact that Big Tech companies share technological and market domains—beyond specializing in particular niches—fuels an intense internal competitive race that, unlike monopolies, drives continuous innovation. This means that, in addition to competing to outdo one another, these firms also cooperate extensively to maintain their global leadership far ahead of the rest of the market: each company develops interoperability features to ensure their apps function properly on others’ platforms, and they share open source projects on GitHub (now owned by Microsoft), for instance. Microsoft has contributed significantly to the development of AI in China through its Microsoft Research Asia lab in Beijing and collaborations with Chinese institutions such as the National University of Defense Technology (Hung, 2025)—efforts that neither the US nor Chinese governments have blocked. Long before the current reloaded geopolitical confrontation emerged, core-country governments had already been promoting initiatives aimed at the expansion and globalization of their tech firms, such as China’s Digital Silk Road (Borrastero, 2024) or Silicon Valley itself in the US (it bears repeating just how much state R&D funding is packed inside an iPhone; Mazzucato, 2013). And what each state has done to strengthen its own technological base has ended up, in some way, benefiting the other. Consider, for example, that what China’s customs agency classifies as “foreign-invested enterprises” are mostly US-based companies, which control three-quarters of the country’s most advanced high-tech products. These include large-scale electronics exports that often involve importing key components from the US, assembling them in China via foreign companies like Foxconn (which builds Apple’s iPhones), and then exporting them. At the same time, private Chinese firms have also expanded their role in these core exports, going from virtually zero in the 1990s to over 20% today (Kenji Starrs, 2025). The offshoring of US tech production has helped the US continue leading by producing more cheaply, and has helped China learn how to lead too. As can be seen, the actors of a Global Technological Oligopoly (GTO) are deeply interdependent. To this picture, we must add the increasingly blatant symbiosis between dominant governments and individual stakeholders, as exemplified by the Trump-Musk case. We are no longer simply talking about "public-private complexes", "revolving doors" or "intimate relations". These notions describe very close ties, but between separate entities. What we are seeing now is a kind of fusion (or confusion) between a tiny handful of public and private actors who are able to govern strategic global value chains and set the rules of the game for the rest of the world. In China’s case, the country is characterized by what Weber and Qi (2022) describe as a “state-constituted market economy”: a strong state deeply intertwined with a fundamentally marketized economy, resulting in a political-economic balance that differs somewhat from Western models but still yields a global power that is difficult to challenge. In sum, we are witnessing a competition scheme designed for the very few, that generates a spiraling cycle of leveraged success in which core states play a crucial role. LATIN AMERICA A scheme like this reinforces Latin America's historic peripheral condition. GTO companies operate directly within the territory (setting up data centers, having subsidiaries, providing services, among other things), but they also rely on regional actors to amplify the generation of indigenous data, the large-scale paid consumption of BT’s technological infrastructures, and the global dissemination of their business models. The free domestic use of email applications or social networks enables data capture, but not the monetization of digital assets, whose massive volume comes from services provided to businesses and governments (as someone aptly put it, Amazon is famous for its store but rich from its servers; Lacort, 2021). In Latin America, there is a handful of large technology companies – the so-called 'tecnolatinas' – that replicate the e-marketplace, fintech, or cryptocurrency development models characteristic of the BT, managing to stand out as champions in the regional league far ahead of the rest. However, they continue to be dependent users of the fundamental technologies produced by the GTO. Mercado Libre, originally from Argentina, is the largest and most widely used digital platform on the continent, the one with the highest market value, and the first to be listed on Nasdaq. Modeled after Alibaba, it is a marketplace with an integrated online payments and credit system, technology development and service divisions, and an extensive ground-based logistics infrastructure. For its data storage and management, Mercado Libre is a client of Amazon Web Services (AWS): it processes over 40 purchases per second across 18 countries and has migrated more than 5,000 databases to Amazon DynamoDB (AWS, 2021). As of 2024, it was using nearly a dozen services from the tech giant with which it had signed an agreement to reduce its data computing costs by 13% (AWS, 2024). The other two regional champions, both Brazilian in origin, also maintain strong ties with the BTs: the marketplace Magazine Luiza runs on Google Cloud; and the fully digital bank Nubank (of Nu Holdings) is an AWS client, has received investments from Warren Buffett, Tencent Holdings and Sequoia Capital, and many of its executives have worked at Google, Facebook, Amazon, and Alibaba. The following chart illustrates the stark imbalance in market value and profits between the GTO firms, other global tech giants, and two of Latin America's top champions, in descending order: Source: Own elaboration based on data from Forbes Global 2000 (2024).* Originally in Borrastero & Juncos (2024).** Magazine Luiza is not publicly traded.  Regional firms, in turn, capture data from countless Latin American users, acquire local start-ups, participate in scientific research networks, and work with governments to access tax and especially regulatory benefits—mechanisms that enable their gradual “giantization” (Borrastero & Juncos, 2024). In short, they are part of this kind of stratified oligopoly led by Big Tech, which tecnolatinas help sustain while securing their regional slice of the pie. Far from being a marginal arena, despite Latin America’s relatively low share in global cross-border data flows compared to Asia or Europe (UNCTAD, 2021), the region represents a key market to conquer. This includes sectors with crucial resources for Big Tech’s vertical integration strategies, such as lithium. For instance, Tesla is one of the main buyers of Arcadium Lithium, which operates in the salt flats of northern Argentina, and along with other tech moguls like Bill Gates, is planning new direct investments and investments in companies developing technologies related to extraction (such as Lake Resources, which works on reducing freshwater usage in lithium mining) (López King, 2025). Big Tech companies form true global ecosystems for resource capture and the monetization of informational assets, supported by states and firms across the globe. SYSTEMIC RISKS One of the main problems of the dynamics described so far is the deepening of the international division of learning which—already highly unequal—continues to grow at breakneck speed, while technological learning becomes increasingly fundamental to value creation, and peripheral states are less and less equipped to deal with ever-larger corporations. In this context, peripheral countries risk becoming mere providers of informational raw material for platforms developed in the global centers, and end up having to pay for the digital intelligence extracted from them. Meanwhile, industrial hyper-concentration makes it increasingly difficult for the market to address these structural issues on its own. Rent refers to income derived from control over a scarce and strategic asset. The oligopolistic control of such rent-generating assets by central countries drives an endogenous concentration of rent in the central regions, and the result, in terms of income distribution both between and within nations, is a deepening of inequality at all levels (UNCTAD, 2021; Milanovic, 2019; Torres and Ahumada, 2022). Another major issue stemming from the scale reached by dominant actors and the penetration of their digital infrastructures is how difficult it has become to reverse the technological path — in terms of how to generate and provide services in a different way, while maintaining the reach and quality. Just imagine, for example, trying to establish alternative global data traffic routes or to produce world-class AI for diagnosing and treating rare diseases, without at some point relying on the technological resources of the oligopoly. The key question is how societies across the globe can harness these accumulated technological capabilities for collective purposes, without depending so heavily on heteronormative political and market-driven decisions. The list of systemic risks is a long one, and there isn’t space here to delve into the broader political dimensions of the issue. But it is worth highlighting these two particular risks tied to the current techno-economic order, given their impact on the very possibility of building concrete alternatives. LOCAL INITIATIVE Latin America enjoys neither structural power (that is, the ability to shape the rules of the game in terms of production, finance, security, or the global control of knowledge and culture), nor relational power in relation to other regions with accumulated techno-productive capacities (the ability to influence other actors into doing something they otherwise wouldn’t, following Strange’s 1988 classification). This essay may lean more toward pessimism of the intellect than optimism of the will when it comes to the global order within which Latin America must forge a new place.  Yet it is clear that the continent holds bargaining potential, rooted in the fact that it remains a highly coveted region for all the reasons discussed above—and many more (including the fact that it is, for now, a territory free of military wars). In the context of a “divide and conquer” logic typical of today’s intensified inter-core battles, strategies of absolute alignment with any single power are far from the wisest. The global oligopolistic economy will only deepen Latin America’s peripheral status if countries in the region fail to adopt a solidary non-alignment—or poly-alignment—approach, one that allows them to consolidate minimum thresholds of technological sovereignty. From dependent adoption to sovereign adoption (deciding what and how to adopt in order to learn), and from there to emancipation (integrating and developing what is needed for the people’s well-being). In Brazil, multiple state-led projects are underway to develop a sovereign data economy in collaboration with small and medium-sized enterprises and the academic sector (Gonzalo & Borrastero, forthcoming), along with large-scale initiatives to build national tech and energy infrastructures by leveraging the techno-productive capabilities accumulated over decades by Petrobras, BNDES, the national research council, and public venture capital funds (Alami et al., 2025). Mexico and Colombia are currently undergoing political processes inspired by the ideals of a “common home” and the care of virtual lands, advocating for continental unity on the one hand and strict regulation of Big Tech on the other (BBC News Mundo, 2025; Forbes Central America, 2025; Government of Colombia, 2024; Colombian Presidency, 2025; Wired, 2025). Argentina has a range of digital development projects based on policy frameworks designed to autonomously leverage the productive capacity the country has accumulated since the 1940s (Gonzalo & Borrastero, 2023)—though these efforts have been obstructed by the pro-Trump government of Javier Milei. EPILOGUE As these lines are being written, stock markets around the globe are tumbling amid the tariff war unleashed by the United States, forcing everyone else to adjust. Even the “Magnificent Seven” (Google, Apple, Meta, Amazon, Microsoft, Nvidia, and Tesla) have lost billions in just a few days. This raises the question of whether we are witnessing the birth of a new international economic order. Whether this is a true turning point or merely another heightened episode in the ongoing geopolitical rivalry remains to be seen. What we can already observe, however, is that global control over strategic assets for development places the GTO and core economies in a structurally advantageous position to lead long-term value chains. At the same time, the polycrisis opens up opportunities for marginalized regions to seize the momentum and assert their own demands. In financial capitalism, not everything is determined in the marketplace, and amid widespread and persistent instability, self-determination remains, without a doubt, one of the most powerful antidotes. References Alami, I., DiCarlo, J., Rolf, S. & Schindler, S. (2025). The New Frontline. The US-China battle for control of global networks. In Transnational Institute, State of Power 2025. Geopolitics of Capitalism, Ch. 2.AWS (2024). Mercado Libre acelera el time to market con servicios de la nube de AWS. Amazon Web Services. Recuperado de: https://aws.amazon.com/es/solutions/case-studies/mercado-libre-migration/.AWS (2021). Mercado Libre escala su negocio y mejora su fiabilidad al migrar 5000 bases de datos a Amazon DynamoDB. Recuperado de: https://aws.amazon.com/es/solutions/case-studies/mercado-libre-dynamodb/.BBC News Mundo (2025). Plan México: cómo es el ambicioso proyecto de Claudia Sheinbaum para colocar a su país entre las 10 principales economías del mundo. BBC News Mundo, 15 Enero 2025. Recuperado de: https://www.bbc.com/mundo/articles/cre8ze0dvdno.Borrastero, C. (2024). Estado, empresas y factores geopolíticos en el sendero de desarrollo de las redes 5G en Argentina. Estudios Sociales del Estado, 10(19), pp. 104-138.Borrastero, C. y Juncos, I. (2024). El Oligopolio Tecnológico Global, la periferia digital y América Latina. Desarrollo Económico, 64(243), pp. 110-136.Business Research Insights (2025). Submarine Cable Market Size, Share, Growth and Industry Analysis, By Type        (Impregnated Paper Insulated Cable, Oil-filled Cable), By Application (Shallow Sea, Deep Sea), and Regional Insight and Forecast to 2033). Retrieved from: https://www.businessresearchinsights.com/market-reports/submarine-cable-market-121770Dussel Peters, E. (2022). Capitalismo con características chinas. Conceptos y desa-rrollo en la tercera década del siglo XXI. El Trimestre Económico, 89(354).Dussel Peters, E. (2021). Monitor de la OFDI China en América Latina y el Caribe 2021. Recuperado de: https://www.redalc-china.org/monitor/images/pdfs/menuprincipal /DusselPeters_MonitorOFDI_2021_Esp.pdfForbes Centroamérica (2025). Petro aboga por la colaboración entre países ante tensión entre multilateralismo y soledad. Forbes Centroamérica, 9 Abril 2025. Recuperado de: https://forbescentroamerica.com/2025/04/09/petro-aboga-por-la-colaboracion-entre-paises-ante-tension-entre-multilateralismo-y-soledad.Gartner (2024). Gartner Says Worldwide IaaS Public Cloud Services Revenue Grew 16.2% in 2023. Retrieved from: https://www.gartner.com/en/newsroom/press-releases/2024-07-22-gartner-says-worldwide-iaas-public-cloud-services-revenue-grew-16-point-2-percent-in-2023Gonzalo, M. y Borrastero, C. (2025). América Latina y la “Economía de datos”: definiciones, temas de agenda e implicancias de política, en Lastres, H. y Cassiolato, J. Economia Política de Dados e Soberania Digital: conceitos, desafios e experiências no mundo, ContraCorrente, en prensa.Gonzalo, M. y Borrastero, C. (2023). Misión 7 “Profundizar el avance de la digitalización escalando la estructura productiva y empresarial nacional”. En Argentina Productiva 2030 - Plan para el Desarrollo Productivo, Industrial y Tecnológico. Ministerio de Economía de la Nación, Argentina.Gooding, M. (2024). Gaia-X: Has Europe's grand digital infrastructure project hit the buffers?. Data Center Dynamics, May 13th 2024. Retrieved from: https://www.datacenterdynamics.com/en/analysis/gaia-x-has-europes-grand-digital-infrastructure-project-hit-the-buffers/Grynspan, R. (2023). Globalización dislocada: Prebisch, desbalances comerciales y el futuro de la economía global. Revista de la CEPAL, 141, 45-56.Gobierno de Colombia (2024). Estrategia Nacional Digital de Colombia 2023-2026. Recuperado de: https://www.mintic.gov.co/portal/715/articles-334120_recurso_1.pdf.Hung, K. (2025). Beyond Big Tech Geopolitics. Moving Towards Local and People-Centred Artificial Intelligence. In Transnational Institute, State of Power 2025. Geopolitics of Capitalism, Ch. 10.Kenji Starrs, S. (2025). Can China Challenge the US Empire?. In Transnational Institute, State of Power 2025. Geopolitics of Capitalism, Ch. 6.Lacort, J. (2021). Así es como gana dinero Amazon: cada vez más nube y un futuro de producciones audiovisuals. Xataka, 3 Febrero 2021. Recuperado de: https://www.xataka.com/empresas-y-economia/asi-como-gana-dinero-amazon-cada-vez-nube-futuro-producciones-audiovisuales-1López King. E. (2025). Litio: Argentina pudo unir a Elon Musk y a Bill Gates en una inversión clave en la que ambos coinciden. Litio.com.ar. Recuperado de: https://litio.com.ar/litio-argentina-pudo-unir-a-elon-musk-y-a-bill-gates-en-una-inversion-clave-en-la-que-ambos-coinciden/Mazzucato, M. (2013). The Entrepreneurial State: Debunking Public vs. Private Sector Myths. London: Anthem Press.Merino, G., Bilmes, J. y Barrenegoa, A. (2023). Economía en el (des)orden mundial: Ascenso de China, estancamiento del norte global y nuevo paradigma tecno-económico en disputa. Instituto Tricontinental de Investigación Social, Cuaderno 5.Milanovic, B. (2019). Capitalism, Alone. The Future of the System That Rules the World. Harvard University Press.Presidencia de Colombia (2025). Intervención del Presidente Gustavo Petro Urrego durante la plenaria IX Cumbre de Jefas y Jefes de Estado y Gobierno de la Comunidad de Estados Latinoamericanos y Caribeños (CELAC), Tegucigalpa, 9 de Abril de 2025. Recuperado de: https://www.facebook.com/watch/live/?ref=watch_permalink&v=1727297164867599Strange, S. (1988). States and Markets. An introduction to International Political Economy. Pinter Publishers, London.Torres, M. y Ahumada, J. M. (2022). Las relaciones centro-periferia en el siglo XXI. El Trimestre Económico, LXXXIX (1), 53, 151-195.Ugarteche, Ó. y De León, C. (2020). El financiamiento de China a América Latina. http://www.obela.org/analisis/el-financiamiento-de-china-a-ame¬rica-latina#:~:text=EnLatinoaméricaexisten4sucursales,en Brasil%2C Chile y PerúUNCTAD (2021). Digital Economy Report 2021. Cross-border data flows and development: For whom the data flow. Recuperado de https://unctad.org/publication/digital-economy-report-2021.Villasenin, L. (2021). Las oportunidades de América Latina en su relación con China en el siglo XXI. Interacción Sino-Iberoamericana / Sino-Iberoamerican Interaction, 1(1).Wainer, A. (2023). ¿Un puente al desarrollo? Cambios en el comercio de América Latina con Estados Unidos y China. Problemas del Desarrollo. Revista Latinoamericana de Economía, 54(213).Weber, I. & Qi, H. (2022). The state-constituted market economy: A conceptual framework for China’s state–market relations. Economics Department Working Paper Series, 319, University of Massachusetts Amherst.Wired (2025). Claudia Sheinbaum propone aumentar los impuestos a plataformas como Google, Netflix y Amazon en México. Wired.es, 17 Febrero 2025. Recuperado de: https://es.wired.com/articulos/claudia-sheinbaum-propone-aumentar-los-impuestos-a-plataformas-como-google-netflix-y-amazon-en-mexico.Zhang, Y. & Lustenberger, U. (2025). Balancing Protectionism and Innovation: The Future of the European Automotive Industry in the Age of Chinese Electric Vehicles. Singularity Academy Frontier Review, #20250219.

Energy & Economics
NEW DELHI, INDIA - February 25, 2020: U.S. President Donald Trump wife Melania Trump, Indian President Ram Nath Kovind, Prime Minister Narendra Modi during a ceremonial at the presidential palace

Trump's tariffs: an economic windfall for India

by Catherine Bros

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском US tariffs on Indian goods will rise from 17% in 2023 to 26% in 2025. Yet the world's most populated country can see this aggressive US policy as an economic boon for three reasons: its low level of integration into the global market, its ‘Atmanirbhar Bharat’ policy of strategic autonomy and its position as an alternative to China. The United States is India's biggest customer. It accounts for 19% of India's exports. India considered itself relatively unaffected by the new US customs policy unveiled on April 2. US tariffs on Indian goods will rise from 17% in 2023 to 26% in 2025, if President Trump does not postpone the implementation date once again... This 26% figure is much lower than the duties imposed on other South-East Asian nations, which to some extent compete with Indian industry. Bangladesh, for example, has tariffs of 37%, Vietnam 46% and Thailand 36%. Certain key sectors of Indian industry, such as pharmaceuticals, are even exempt from additional duties. This exemption underlines the strategic importance of India's exports of generic medicines to the United States. A variable geometry customs strategy. India, which has no plans to retaliate, is confident of concluding a relatively advantageous agreement thanks to the bilateral negotiations that began in February 2025, following Indian Prime Minister Narendra Modi's visit to the United States. Indian reindustrialisation? Some see this new customs policy as an opportunity for India to reindustrialise, something it badly needs to boost employment. Over the years, India has lost its comparative advantage in certain sectors to other South and South-East Asian countries such as Bangladesh, Thailand and Vietnam. The latter face customs duties that are higher than India's, and that are rising faster. Is this likely to boost the competitiveness of these Indian industries? However, they would require long-term investment. India's industrial strategy has preferred to focus on more technologically advanced sectors, by introducing subsidies for the creation of production capacity through the Production Linkes Incentive (PLI) Scheme. The aim is to reduce dependence on imports and boost exports in priority sectors. The semi-conductor sector, for example, has benefited greatly, with the hope, among other things, of turning India into a manufacturing hub for these products. It hopes to attract €27 billion in foreign direct investment (FDI). The task will certainly be made more difficult by the protectionist policies of the United States. Re-industrialisation in India will require regulatory reforms and investment in infrastructure. Despite the substantial progress made in these areas, more remains to be done. In any case, for US protectionist policy to encourage the development of Indian industry, it would have to be stable, which does not seem to be the primary orientation of the current Trump administration. Weak integration into world trade India's participation in world trade in goods is modest given the size of its economy: in 2023, India's market share in world trade was 2%. Despite its growing trade surplus with the United States, India has been relatively unaffected by the rise in tariffs, partly because Indian imports account for only 3% of total US imports. Its economy, which is very little integrated into global value chains, will de facto be less severely affected by the new US customs policy.  Although its economy trades few goods with the rest of the world, India has a comparative advantage in the service sector, which accounts for almost half of its exports of goods and services. Yet services are largely unaffected by tariffs and remain outside the perimeter of the new US policy. Indian protectionism: "Atmanirbhar Bharat" The protectionist stance adopted by the United States may reinforce the Indian government's conviction that it is right for its economy to be only marginally integrated into world trade in goods. The Indian economy is not very open and its trade policy has long tended towards protectionism. The latest industrial policy plan, "Atmanirbhar Bharat" ("Self-sufficient India"), aims to promote both exports and the strategic autonomy of the Indian economy in a number of sectors, including pharmaceuticals, solar energy and electronics. Since the ‘Made in India’ programme, India's industrial policy has not sought to create growth through exports, but to attract foreign capital to create production capacity in India, mainly for the Indian market. Foreign direct investment (FDI) has risen sharply, albeit from a relatively low base: it stood at 45.15 billion dollars in 2013. By 2022, it will have risen to $83.6 billion. India, more than ever courted India is strengthening its strategic position on the international stage. Its economy was already attracting the attention of investors, thanks to its potential market of 1.4 billion consumers and its position as Asia's alternative to China. The erratic behaviour of the Trump administration makes any partnership with India even more desirable, particularly for Europeans. There is no doubt that the trade talks for an agreement between the European Union and India, that began in 2022 and were brought back to the forefront by the visit of the President of the European Commission to New Delhi in February 2025, will take on a new dimension in the eyes of the Europeans. India's current nationalist government has worked hard to ensure that India becomes a pivotal player in the international community. This leading role on the international stage is a significant electoral asset that should strengthen Narendra Modi's influence within the country.

Defense & Security
HAJJAH, YEMEN – October 29, 2023: A visit by senior military leaders to internationally recognized forces in the Yemeni Saada axis

Trump, Tehran, and the Trap in Yemen

by Mohd Amirul Asraf Bin Othman

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском As the Middle East braces for another escalation of conflict, Tehran finds itself cornered by Donald Trump’s coercive diplomacy, facing the stark choice between strategic concession or regional confrontation. Donald Trump’s return to the presidency has reignited US–Iranian hostilities, transforming Yemen into a strategic flashpoint. His administration’s doctrine of militarised diplomacy, cloaked in zero-sum calculations, has elevated the Houthis from a peripheral proxy to a principal trigger for escalation. By explicitly linking Houthi missile fire to Iranian command, Trump has effectively nullified Tehran’s longstanding strategy of plausible deniability.  Historically, Iran’s use of proxies has relied on operating within a grey zone; projecting influence while avoiding direct confrontation. Trump’s return seeks to dismantle this strategic ambiguity, reclassifying all proxy activity as acts of Iranian statecraft. The US military has launched its most expansive campaign under United States Central Command (CENTCOM) against the Houthis since the Red Sea crisis began in late 2023, targeting ballistic missile infrastructure, drone depots, and senior leadership in Yemen. The operation, launched on 15 March, marked a strategic shift, following Trump’s re-designation of the Houthis as a Foreign Terrorist Organisation and his vow to “rain hell” on their positions if the attacks continued. Trump’s rhetoric has escalated accordingly, and he has warned: “Every shot fired by the Houthis will be looked upon, from this point forward, as being a shot fired from the weapons and leadership of Iran.”  This traps Tehran in a paradox: either abandon the Houthis, risking both reputational credibility and strategic depth, or absorb the full brunt of US retaliation. Neither option is strategically tenable. Recognising the stakes, Iran has reportedly urged the Houthis, via Omani intermediaries and back channel diplomacy in Tehran, to scale down their maritime attacks, particularly in the Red Sea. However, Houthi leadership has publicly dismissed such appeals, reaffirming their commitment to targeting Israeli shipping and rejecting external interference in their operational decisions. Their resistance is fuelled by ideological conviction, conflict-tested resilience, and an expanding sense of regional purpose.  Since the beginning of the recent Israel-Hamas conflict, and amid Hezbollah’s decline, Hamas’s isolation, and Syria’s collapse, the Houthis have emerged as Iran’s most assertive proxy. Their attacks on Red Sea shipping and missile strikes against Israel, while mostly intercepted, nonetheless embarrass Arab regimes and stretch Israeli and American defensive postures.  The renewed Gaza conflict, triggered by Israel’s March 2025 bombing that killed five Hamas leaders and over 400 civilians, according to the Gaza Health Ministry, has collapsed the fragile ceasefire and reignited a multifront war involving Hamas, Hezbollah, and the Houthis. With Gaza’s death toll now exceeding 50,000, Hamas frames its actions as part of a broader resistance to Israeli aggression. This development has galvanised regional anger and contributed to a broader mobilisation among Iran-aligned actors. Hezbollah has resumed intermittent rocket fire along the Lebanese border, while the Houthis, citing solidarity with Gaza, have intensified missile launches towards Israeli territory, including attempted strikes near Ben Gurion Airport, underscoring their expanding operational capacity and the symbolic coordination anchoring the Axis of Resistance.   Tehran’s influence may be weakening. The Houthis have repeatedly demonstrated a higher risk appetite, often acting beyond Iran’s preferred thresholds of escalation. This divergence complicates Tehran’s efforts to preserve plausible deniability while reaping the strategic dividends of proxy activism. The resulting imbalance reveals a deeper problem: Iran seeks the benefits of Houthi militancy without bearing the cost, an increasingly unsustainable equilibrium under Trump’s zero-tolerance posture.  Iran’s dilemma: no more deniability  According to the 2025 US Intelligence Community Threat Assessment, the Houthis continue to enhance their military capabilities through arms and dual-use technology imports from Russia and China. The smuggling of drone components through the Red Sea and the Omani-Yemeni border indicates a pattern of sustained logistical support. By dismantling Iran’s plausible deniability and publicly attributing every Houthi strike to Tehran, Washington seeks to force a binary: either Iran controls its proxies or accepts full strategic liability.  This exposes Tehran to a potential regional escalation that it is likely unprepared to navigate. The US narrative, amplified by Trump’s statements and CENTCOM’s operational tempo, collapses the operational gap between proxy and patron. This leaves Iran with shrinking room for strategic manoeuvre, particularly as it seeks to avoid direct conflict while preserving deterrent credibility. The Israeli Defence Forces (IDF) have already conducted cross-border raids into Yemen, and Israel is lobbying for expanded UN sanctions on Iran’s missile program.  Backchannel bargains: araghchi’s high-wire diplomacy  Amid growing domestic unrest, Iranian Foreign Minister Abbas Araghchi has reportedly been granted authority to pursue indirect negotiations with Washington. While Supreme Leader Khamenei maintains opposition to direct talks, the use of European and Omani channels offers Tehran a diplomatic off-ramp, though under immense diplomatic and political pressure. Araghchi, a veteran of the original Joint Comprehensive Plan of Action (JCPOA) talks, is viewed as more pragmatic than hardliners in the regime.  This opening follows Trump’s letter to Khamenei, demanding a new nuclear agreement within two months. The letter includes explicit demands: dismantle uranium enrichment, abandon missile development, and sever ties with regional proxies.   Iran’s nuclear posture remains opaque. The IAEA confirms Tehran has stockpiled enough 60 percent enriched uranium for multiple warheads if refined further. Yet, Iran insists its nuclear aims are peaceful. Semi-official sources suggest that continued Western escalation could prompt withdrawal from the Non-Proliferation Treaty.   Iran’s domestic pressures are compounding. The economy suffers under inflation, sanctions, and currency collapse. The unrest in Urmia during Nowruz—the Persian New Year celebrated on the spring equinox—driven by inter-ethnic Kurdish-Azeri tensions, underscore the regime’s waning ability to manage internal dissent. With state institutions weakened, and central authority increasingly concentrated in the hands of Khamenei, public disillusionment is deepening.  The squeeze on Iran: less room to manoeuvre  Iran’s ability to maintain the status quo is under unprecedented strain. Its decades-old strategy of “strategic patience” is becoming harder to sustain. Though Iran continues to nurture ties with China and Russia, and remains engaged with European interlocutors,these relationships no longer offer the same buffer. The European Union, constrained by Washington’s hard-line approach, lacks the independence to offer credible guarantees.  Meanwhile, Israel and Saudi Arabia remain resolute in preventing a nuclear-armed Iran. The Begin Doctrine, which justified Israel’s pre-emptive strikes on Iraq (1981) and Syria (2007), may resurface should diplomacy falter. The spectre of unilateral military action now shapes Tehran’s strategic calculus.  Regionally, Iran’s proxy entanglements are escalating. The synchronised attacks from the Houthis, Hamas, and Hezbollah are overstretching Israeli defences and fuelling calls in Tel Aviv for broader regional offensives. Israeli retaliation, paired with US military strikes, has intensified the risk of a wider conflagration. Arab regimes, especially the UAE and Saudi Arabia, fear being drawn into the fray, threatening their economic visions for 2030 and beyond.  Meanwhile the Palestinians remain largely abandoned, with no Arab state willing to absorb the population of Gaza as Trump toys with expulsion scenarios. This hard-line vision, absent regional consensus, risks igniting further instability across Jordan, Egypt, and the broader Arab world. Trump’s coercive diplomacy may satisfy tactical aims but alienates Arab publics, a recipe for internal backlash across fragile states.  Yet, abandoning its nuclear leverage is not politically viable for the Iranian regime. Any concessions must be matched by credible, enforceable guarantees—a lesson painfully learned from Trump’s unilateral exit from the JCPOA in 2018. Tehran may accept a phased or limited deal but will resist anything perceived as total capitulation.  In sum, Iran now faces a multidimensional siege: external coercion, proxy volatility, domestic instability, and ideological polarisation. Trump’s second term seeks to corner Tehran into submission, not negotiation. Yet, by collapsing the space between proxy action and state responsibility, Washington may provoke precisely what it seeks to prevent: a regional war with no clear exits. This article was published under a Creative Commons Licence. For proper attribution, please refer to the original source

Energy & Economics
United States Global Trade War as American tariffs and US government taxation or punative trade war policy or duties imposed on imports and exports  as a 3D illustration.

The trade deficit isn’t an emergency – it’s a sign of America’s strength

by Tarek Alexander Hassan

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском When U.S. President Donald Trump imposed sweeping new tariffs on imported goods on April 2, 2025 – upending global trade and sending markets into a tailspin – he presented the move as a response to a crisis. In an executive order released the same day, the White House said the move was necessary to address “the national emergency posed by the large and persistent trade deficit.” A trade deficit – when a country imports more than it exports – is often viewed as a problem. And yes, the U.S. trade deficit is both large and persistent. Yet, as an economist who has taught international finance at Boston University, the University of Chicago and Harvard, I maintain that far from a national emergency, this persistent deficit is actually a sign of America’s financial and technological dominance. The trade deficit is the flip side of an investment magnet A trade deficit sounds bad, but it is neither good nor bad. It doesn’t mean the U.S. is losing money. It simply means foreigners are sending the U.S. more goods than the U.S. is sending them. America is getting more cheap goods, and in return it is giving foreigners financial assets: dollars issued by the Federal Reserve, bonds from the U.S. government and American corporations, and stocks in newly created firms. That is, a trade deficit can only arise if foreigners invest more in the U.S. than Americans invest abroad. In other words, a country can only have a trade deficit if it also has an equally sized investment surplus. The U.S. is able to sustain a large trade deficit because so many foreigners are eager to invest here. Why? One major reason is the safety of the U.S. dollar. Around the world, from large corporations to ordinary households, the dollar is used for saving, trading and settling debts. As the world economy grows, so does foreigners’ demand for dollars and dollar-denominated assets, from cash to Treasury bills and corporate bonds. Because the dollar is so attractive, the Federal Reserve gets to mint extra cash for use abroad, and the U.S. government and American employers and families can borrow money at lower interest rates. Foreigners eagerly buy these U.S. financial assets, which enables Americans to consume and invest more than they ordinarily could. In return for our financial assets, we buy more German machines, Scotch whiskey, Chinese smartphones, Mexican steel and so on. Blaming foreigners for the trade deficit, therefore, is like blaming the bank for charging a low interest rate. We have a trade deficit because foreigners willingly charge us low interest rates – and we choose to spend that credit. US entrepreneurship attracts global capital – and fuels the deficit Another reason for foreigners’ steady demand for U.S. assets is American technological dominance: When aspiring entrepreneurs from around the world start new companies, they often decide to do so in Silicon Valley. Foreigners want to buy stocks and bonds in these new companies, again adding to the U.S. investment surplus. This strong demand for U.S. assets also explains why Trump’s last trade war in 2018 did little to close the trade deficit: Tariffs, by themselves, do nothing to reduce foreigners’ demand for U.S. dollars, stocks and bonds. If the investment surplus doesn’t change, the trade deficit cannot change. Instead, the U.S. dollar just appreciates, so that imports get cheaper, undoing the effect of the tariff on the size of the trade deficit. This is basic economics: You can’t have an investment surplus and a trade surplus at the same time, which is why it’s silly to call for both. It’s worth noting that no other country in the world enjoys a similarly sized investment surplus. If a normal country with a normal currency tries to print more money or issues more debt, its currency depreciates until its investment account – and its trade balance – goes back to something close to zero. America’s financial and technological dominance allows it to escape this dynamic. That doesn’t mean all tariffs are bad or all trade is automatically good. But it does mean that the U.S. trade deficit, poorly named though it is, does not signify failure. It is, instead, the consequence – and the privilege – of outsized American global influence. The president’s frenzied attacks on the nation’s trade deficit show he’s misreading a sign of American economic strength as a weakness. If the president really wants to eliminate the trade deficit, his best option is to rein in the federal budget deficit, which would naturally reduce capital inflows by raising domestic savings. Rather than reviving U.S. manufacturing, Trump’s extreme tariffs and erratic foreign policy are likely to instead scare off foreign investors altogether and undercut the dollar’s global role. That would indeed shrink the trade deficit – but only by eroding the very pillars of the country’s economic dominance, at a steep cost to American firms and families.

Energy & Economics
US - 11.14.2024:

The Economic Impacts of Trump Administration's Tariffs

by World & New World Journal Policy Team

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском I. Introduction  We are only two and a half months into the new Trump administration. However, President Donald Trump's long-threatened tariffs have plunged the country into a trade war abroad. On-again, off-again, new tariffs continue to escalate uncertainty around the world. Trump already launched a trade war during his first term in office, but he has more sweeping tariff plans right now. The second Trump administration has embarked on a new and more aggressive tariff policy, citing various economic and national security concerns. His administration has proposed, imposed, suspended, revoked, and then reimposed various new tariffs. It could be difficult for average citizens to keep up with all the proposals. As of March 19, 2025, there are ten proposed or active tariff initiatives. They range from broad-based tariffs that cover all goods from a certain country (China, Mexico, Canada) to tariffs that cover certain types of goods (aluminum & steel), promises of future tariffs (copper, lumber, automotive, semiconductor, and pharmaceutical), and promised retaliatory tariffs (European wine and other alcoholic beverages). Moreover, although we have seen more tariff announcements in the first two months of the second Trump administration than in the entire first Trump administration, "fair and reciprocal" tariff rollout will overpower the tariffs imposed until today. The ten tariff initiatives that are proposed or in play are as follows in Table 1.   This paper aims to evaluate economic impacts of tariffs imposed by the Trump administration. It first explains the effects of tariffs imposed by the first Trump administration and then forecasts the impacts of the second Trump administration's tariffs.  II. Literature on Tariff Effects A tariff is a type of tax that a government adds to imported goods. Companies importing goods pay the tariff to the government. If any part of a product arrives with a tariff, whether it is an imported avocado or a car built locally with imported steel, its cost is part of the price everyday consumers pay before sales tax.  Economists reject tariffs as an effective tool to improve the welfare of U.S. citizens or strengthen key industries. In a survey conducted during the first Trump administration, 93 % of economic experts did not agree that targeted tariffs on aluminium and steel would improve Americans' welfare. Recent research has strengthened economists' opposition to this policy instrument. Numerous studies demonstrate that American consumers entirely bear the burden of tariffs imposed during the first Trump administration, with disproportionately large impacts on lower-income U.S. households. A framework for analysing the impact of higher import tariffs on the economy is provided by Mundell and Fleming. Mundell (1961) claimed that the country that raised tariffs on imported products may benefit because more people choose domestically produced products over imported ones. Protection from foreign competition could also benefit domestic industries. Large countries can also benefit from improved terms of trade. However, increased tariffs on imported products are assumed to lead to an increase in the current account balance by increasing savings relative to investment. Higher savings dampen aggregate demand. The situation of households deteriorates because of rising consumer prices. Domestic industries are also negatively affected by lower household demand and the need to pay more for imported input products.  Over the years, Mundell and Fleming's model has been developed further by other scholars such as Eichengreen (1981), Krugman (1982), Obstfeld and Rogoff (1995) and Eichengreen (2018). Overall, the theoretical literature demonstrates that higher import tariffs could affect the economy through various channels. The impacts of tariffs on the economy differ between a nation imposing the tariffs and nations exporting to the nation raising the tariffs. However, nations that are not subject to the increased import duties are also affected. Main effects of higher tariffs are as follows: Higher inflation: Higher import tariffs lead to higher prices for imported products. Depending on which tariffs are increased, this could lead to higher prices for both consumers and companies. Domestic firms may also raise their prices because of reduced competition from foreign companies (Cavallo et al. (2021)).  Higher consumer prices lead to a decline in real disposable household income, which hampers private consumption. Higher business costs have impacts on companies' profits, which in turn dampen employment and companies' willingness to invest. Companies are also more likely to pass on some of their higher costs to consumers in the form of higher prices. The rise in imported prices might be smaller in large countries, as they are more able to influence the world price of products. Increased consumption of other products: Higher imported prices can lead companies and consumers to increasingly buy cheaper domestic products. But it can also lead to increased imports of products from countries not subject to higher import tariffs.  Domestic industries are protected: Higher import tariffs improve the competitive position of domestic companies. These benefits can lead to increased investment, production, and employment in protected industries. However, the longer-term effect of protecting some domestic industries from foreign competition can be negative, as it might reduce incentives to improve production efficiency, thereby dampening productivity and GDP.  Decreased trade: Increased tariffs usually lead to reduced trade. This can lead to reduced knowledge transfer between nations in the form of less direct investment, reduced technology transfer, and reduced access to skilled labour. These factors in turn can lead to companies moving further away from the technological frontier, thereby hampering productivity (Dornbusch (1992) and Frankel and Romer (1999)).  Stronger exchange rate: When demand changes from foreign to domestic production, the exchange rate tends to rise to balance it out. One reason is that higher inflation often leads to higher interest rates relative to other nations. The nominal exchange rate might appreciate if imports decline significantly and demand for foreign currency drops. An appreciation of the exchange rate hampers exports but keeps imports cheaper.  Global value chains: Higher tariffs can lead to disruptions in global value chains by making imported inputs from abroad pricier. If firms are part of global value chains, higher costs for firms facing higher import costs may also lead to higher costs for domestic firms further down the production chain.  Uncertainty and confidence: Higher import tariffs may increase uncertainty about future trade policy and lead to increased pessimism among households and companies. Such uncertainty may hamper household consumption and business investment (Boer and Rieth (2024)).  III. Tariffs under the first Trump administration The first Trump administration's tariffs involved protectionist trade initiatives against other nations, notably China.  In January 2018, the Trump administration-imposed tariffs on solar panels and washing machines of 30–50%. In March 2018, the administration-imposed tariffs on aluminium (10%) and steel (25%), which are imported from most countries. In June 2018, the Administration expanded these tariffs to include the EU, Mexico, and Canada. The Trump administration separately set and escalated tariffs on products imported from China, leading to a trade war between the U.S. and China.  In their responses, U.S. trading partners imposed retaliatory tariffs on U.S. products. Canada imposed matching retaliatory tariffs on July 1, 2018. China implemented retaliatory tariffs equivalent to the $34 billion tariff imposed on it by the U.S. In June 2019, India imposed retaliatory tariffs on $240 million worth of U.S. products.  However, tariff negotiations in North America were under way and successful, with the U.S. lifting steel and aluminium tariffs on Mexico and Canada on May 20, 2019. Mexico and Canada joined Argentina and Australia, which were the only countries exempted from the tariffs. But on May 30, Trump announced on his own that he would put a 5% tariff on all imports from Mexico starting on June 10, 2019. The tariffs would go up to 10% on July 1, and then by another 5% every month for three months, until illegal immigrants stopped coming through Mexico and into the U.S. Then the tariffs were averted on June 7 after negotiations between the U.S. and Mexico. U.S. tariffs on Chinese products had been applied as follows: On March 22, 2018, Trump signed a memorandum under Section 301 of the Trade Act of 1974 to apply tariffs of $50 billion on Chinese products. In response, China announced plans to implement its tariffs on 128 U.S. products. 120 of those products, such as fruit and wine, will be taxed at a 15% duty, while the remaining eight products, including pork, will receive a 25% tariff. China implemented their tariffs on April 2, 2018.  On April 3, 2018, the U.S. Trade Representative's office (the USTR) published an initial list of 1,300+ Chinese products to impose levies upon products like flat-screen televisions, medical devices, aircraft parts and batteries. On April 4, 2018, China's Customs Tariff Commission of the State Council decided to announce a plan to put 25% more tariffs on 106 U.S. goods, such as soybeans and cars.  In the response, On April 5, 2018, President Trump directed the USTR to consider $100 billion in additional tariffs. On May 9, 2018, China cancelled soybean orders exported from the United States to China. On June 15, 2018, President Trump released a list of Chinese products worth $34 billion that would face a 25% tariff, starting on July 6. Another list with $16 billion of Chinese products was released, with an implementation date of August 23.  On July 10, 2018, in reaction to China's retaliatory tariffs that took effect July 6, the USTR issued a proposed list of Chinese products amounting to an annual trade value of about $200 billion that would be subjected to an additional 10% in duties. During the G20 summit in Japan in June 2019, the U.S. and China agreed to resume stalled trade talks, with Trump announcing he would suspend an additional $300 billion in tariffs that had been under consideration. IV. Economic Effects of the Tariffs from the First Trump Administration Changes in tariffs affect economic activity directly by influencing the price of imported products and indirectly through changes in exchange rates and real incomes. The extent of the price change and its impact on trade flows, employment, and production in the United States and abroad depend on resource constraints and how various economic actors (producers of domestic substitutes, foreign producers of the goods subject to the tariffs, producers in downstream industries, and consumers) respond as the effects of the increased tariffs reverberate throughout the economy. According to the U.S. Congressional Research Service (CRS), the following six outcomes came out at the level of individual firms and consumers as well as at the level of the national economy. 1. Increased costs for U.S. consumers Higher tariff rates lead to price increases for consumers of products subject to the tariffs and for consumers of downstream products as input costs rise. Higher prices in turn lead to decreased consumption, depending on consumers' price sensitivity for a particular product. For example, consider the monthly price of U.S. laundry equipment, which includes washing machines subject to tariff increases as high as 50% since February 2018. The monthly price of this equipment increased by as much as 14% in 2018 compared to the average price level in 2017, before the tariffs took effect (see Figure 1).   Figure 1: U.S. laundry equipment prices According to Jin (2023), many companies passed the costs of the Trump tariffs on to consumers in the form of higher prices. Following impositions of the tariffs on Chinese products, the prices of U.S. intermediate goods rose by 10% to 30%, an amount equivalent to the size of the tariffs. An April 2019 working paper by Flaaen, Hortaçsu, and Tintel not found that the tariffs on washing machines caused the prices of washers to rise by approximately 12% in the United States. A Goldman Sachs analysis by Fitzgerald in May 2019 found that the consumer price index (CPI) for tariffed products had increased dramatically, compared to a declining CPI for all other core goods. According to the Guardian, the Budget Lab at Yale University found that American consumer prices could rise by 1.4% to 5.1% if Trump implemented his comprehensive tariff plan, which would amount to an additional $1,900 to $7,600 per household. 2. Decreased domestic demand for imported goods subject to the tariffs and less competition for U.S. producers of substitute goods: U.S. producers competing with the imported products subject to the tariffs (e.g., domestic aluminium and steel producers) may benefit to the degree they are able to charge higher prices for their domestic products and may expand production because of increased profitability. Since March 2018, U.S. imports of steel and aluminium have faced additional tariff charges of 25% and 10%, making foreign supplies of these products more expensive relative to domestic products. Because of these tariffs, U.S. imports of these goods went down in 2018 and 2019 compared to what they were usually like in 2017 before the tariffs, while U.S. production went up (see Figure 2 and Figure 3). By the first quarter of 2020, real U.S. imports of steel and aluminium (adjusted for price fluctuations) had decreased by more than 30% and 16%, respectively, from their average 2017 levels. The quarterly production of steel and aluminium in the U.S. during this period, however, increased by as much as 13.5% and 9.0%, respectively, above average 2017 levels.   Figure 2: Domestic production and imports: Steel  Figure 3: Domestic production and imports: Aluminium 3. Increased costs for U.S. producers in downstream industries, resulting in a decline in employment U.S. producers that use imported products subject to the additional tariffs as inputs ("downstream" industries, such as auto manufacturers in the case of the aluminium and steel tariffs) might be harmed as their costs of production increase. Higher input costs are more likely to lead to some combination of lower profits for producers, which in turn might dampen demand for these downstream products, leading to some contraction in these sectors.  A study (2019) by Federal Reserve Board economists Flaaen and Pierce, which examined effects on the manufacturing sector from all U.S. tariff actions in 2018, found that higher input costs from the tariffs were associated with higher prices, employment declines, and reductions in output for affected firms. Another study (2020) by Handley, Kamal, and Monarch found that the higher input costs associated with the tariffs might have led to a decrease in U.S. exports for firms reliant on imported intermediate inputs. Handley, Kamal, and Monarch suggested that export growth was approximately 2% lower for products made with products subject to higher U.S. tariffs, relative to unaffected products. Another study (2019) by Federal Reserve Board economists Flaaen and Pierce found that the steel tariffs led to 0.6% fewer jobs in the manufacturing sector than would have happened in the absence of the tariffs; this cut amounted to approximately 75,000 jobs. A study (2024) by Ma and David concluded that the United States lost 245,000 jobs because of the Trump tariffs.  4. Decreased demand for U.S. exports subject to retaliatory tariffs  Retaliatory tariffs place U.S. exporters at a price disadvantage in export markets relative to competitors from other countries, potentially decreasing demand for U.S. exports to those markets. Since Q3 2018, after Section 232 retaliatory tariffs took effect in China, the EU, Russia, and Türkiye, U.S. exports to these trading partners subject to the tariffs declined by as much as 44% below their 2017 average values (Figure 4). U.S. exports to China subject to retaliation during the same period declined even further from their 2017 levels, falling as much as 68% on a quarterly basis. By contrast, during this same period, overall U.S. exports were as much as 10% higher each quarter relative to 2017, suggesting the retaliatory tariffs played a role in the product-specific export declines.  Figure 4: Declines in U.S. exports subject to retaliation A study by Fajgelbaum, Goldberg, Kennedy, and Khandelwal published in the Quarterly Journal of Economics in October 2019 estimated that consumers and firms in the U.S. who buy imports lost $51 billion (0.27% of GDP) because of the 2018 tariffs. This study also found that retaliatory tariffs resulted in a 9.9% decline in U.S. exports. This study also found that workers in counties with a lot of Republicans were hurt the most by the trade war because agricultural products were hit the hardest by retaliatory tariffs.  5. U.S. National Economy In addition to industry- or consumer-level effects, tariffs also have the potential to affect the broader U.S. national economy. Quantitative estimates of the effects vary based on modelling assumptions and techniques, but most studies suggest a negative overall impact on U.S. GDP because of the tariffs.  The Congressional Budget Office (2020) estimated that the increased tariffs in effect as of December 2019 would reduce U.S. GDP by 0.5% in 2020, below a baseline without the tariffs, while raising consumer prices by 0.5%, thereby reducing average real household income by $1,277. From a global perspective, the International Monetary Fund estimated that the tariffs would reduce global GDP in 2020 by 0.8%. Dario Caldara et al. (2020) also found that in 2018, investment dropped by 1.5% because of the uncertainty caused by U.S. trade policy. Moreover, a study (2019) by Amiti, Redding, and David published in the Journal of Economic Perspectives found that by December 2018, Trump's tariffs resulted in a reduction in aggregate U.S. real income of $1.4 billion per month in deadweight losses and cost U.S. consumers an additional $3.2 billion per month in added tax. Furthermore, Russ (2019) found that tariffs, which Trump imposed through mid-2019, combined with the policy uncertainty they created, would reduce the 2020 real GDP growth rate by one percentage point.  6. Trade balance  The Trump administration repeatedly raised concerns over the size of the U.S. trade deficit, thereby making trade deficit reduction a stated objective in negotiations for new U.S. trade agreements. Broad-based tariff increases affecting a large share of imports may reduce imports initially, but they are unlikely to reduce the overall trade deficit over the longer period due to at least two indirect impacts that counteract the initial reduction in imports. One indirect effect is a potential change in the value of the U.S. dollar relative to foreign currencies. Another potential effect of U.S. import tariffs is retaliatory tariffs. Economists argue that while tariffs placed on imports from a limited number of trading partners may reduce the bilateral U.S. trade deficit with those specific nations, this is likely to be offset by an increase in the trade deficit or reduction in the trade surplus with other nations, leaving the total U.S. trade deficit largely unchanged.  Figure 5 shows the relative change in the U.S. goods trade deficit with the world as well as the bilateral U.S. deficits with three major partners, China, Mexico, and Vietnam, from 2017 to 2019. Since the U.S. tariffs took effect, the overall U.S. trade deficit has increased, rising 8% from 2017 to 2019. However, the U.S. trade deficit in goods with China declined by 8% from 2017 to 2019, while the U.S. trade deficit in goods with Vietnam and Mexico significantly increased by more than 40% during the same period.  Figure 5: Changes in the U.S. goods trade deficits with China, Mexico, and Vietnam According to Zarroli (2019), between the time Trump took office in 2017 and March 2019, the U.S. trade deficit increased by $119 billion, reaching $621 billion, the highest it had been since 2008. American Farm Bureau Federation data showed that agriculture exports from the U.S. to China decreased from $19.5 billion in 2017 to $9.1 billion in 2018, a 53% reduction.  V. What are the Potential Consequences of Trump's Tariff Plan? Last year, the Peterson Institute for International Economics examined the impact of President Trump's proposed tariffs based on his campaign promises, which would impose 10 % additional tariffs on US imports from all sources and 60 % additional tariffs on imports from China. The major outcomes were lower national income, lower employment, and higher inflation. McKibbin, Hogan, and Noland (2024) at the Peterson Institute for International Economics found that both of Trump's tariff plans—imposing 10% additional tariffs on U.S. imports from all sources and 60% additional tariffs on imports from China—would reduce both U.S. real GDP and employment by 2028. But the former proposal damages the U.S. economy more than the latter. If other nations retaliate with higher tariffs on their imports from the U.S., the damage intensifies.  Assuming other governments respond in kind, Trump's 10 % increase results in U.S. real GDP that is 0.9 % lower than otherwise by 2026, and U.S. inflation rises 1.3 % above the baseline in 2025.  The 10 % added tariffs hurt the economies of Canada, Mexico, China, Germany, and Japan—all major US trading partners that see a lower GDP relative to their baselines through 2040. Mexico and Canada take much larger GDP hits than the U.S. The 60 % added tariffs on imports from China reduce its GDP relative to its baseline, much more than that of other U.S. trading partners. Mexico, however, sees a higher GDP than otherwise as some production shifts to Mexico from China. This paper focuses on Trump's universal 10 % tariffs rather than 60 % tariffs on imports from China because extreme 60 % tariffs on Chinese imports are not expected. McKibbin, Hogan, and Noland (2024) assume the 10 % tariff increase is implemented in 2025 and remains in place through the forecast period. They also consider a second scenario in which U.S. trading partners retaliate with equivalent tariff increases on products they import from the U.S.  Figures 6–11 show the results for the uniform additional 10 % increase in the tariff on imports of goods and services from all trading partners.   Figure 6: Projected change in real GDP of selected economies from an additional 10 % increase in US tariffs on imports of goods and services from all trading partners, 2025-40 (Source: McKibbin, Hogan, and Noland, 2024) When tariffs go up by 10%, the U.S. real GDP goes down by 0.36 % by 2026, and it goes down even more in Mexico and Canada by 2027 (see Figure 6). Chinese GDP drops by 0.25 % below the baseline in 2025. After the initial demand-induced slowdown, U.S. GDP recovers as production shifts from foreign suppliers to U.S. suppliers, leading to a slightly lower long-term GDP of 0.1 % below baseline by 2030 in the U.S.   Figure 7: Projected change in employment (hours worked) in selected economies from an additional 10 % increase in US tariffs on imports of goods and services from all trading partners, 2025-40 (Source: McKibbin, Hogan, and Noland, 2024) The results for aggregate employment are like the GDP outcomes (see figure 7). Employment drops in the United States by 0.6 % by 2026 but recovers due to a supply relocation towards U.S. suppliers. U.S. employment returns to baseline eventually because real wages decline permanently to bring employment back to baseline by assumption.  Figure 8: Projected change in inflation in selected economies from an additional 10% increase in US tariffs on imports of goods and services from all trading partners, 2025-40 (Source: McKibbin, Hogan, and Noland, 2024) The imposition of higher tariffs increases prices of both consumer and intermediate goods, contributing to a rise in inflation of 0.6 % above baseline in 2025 (see figure 8).  The higher tariff is inflationary everywhere except in China due to the tightening of Chinese monetary policy to resist change in the exchange rate relative to the U.S. dollar.   Figure 9: Projected change in the trade balance in selected economies from an additional 10 % increase in US tariffs on imports of goods and services from all trading partners, 2025-40 (Source: McKibbin, Hogan, and Noland (2024)) Figure 9 shows the change in the trade balance as a share of GDP. In theory, the trade balance can worsen or improve due to changes in exports and imports. From 2025 to 2028, the U.S. trade deficit narrows slightly but then widens as capital flows into the U.S. economy, appreciating the U.S. real effective exchange rate. By 2030, the U.S. trade deficit will worsen by 0.1 % of GDP due to capital moving from Mexico and Canada into the U.S. Government savings rise due to additional tariff revenues.  VI. Conclusion  This paper showed that tariffs imposed by the first Trump administration had negative impacts on the U.S. economy, particularly inflation, incomes, and employment. It also demonstrated that tariffs which will be imposed by the second Trump administration are expected to have negative effects on the U.S. economy. Then a question arises: "Why does Trump attempt to impose tariffs on products from abroad?" Today, more people mention tariffs as tools to protect U.S. companies and farmers. They are discussed as a tool for bringing back manufacturing businesses into the U.S. as well as a bargaining tactic in negotiations over the flow of fentanyl and immigration. Trump has used and promised to increase tariffs for three purposes: to raise revenue, to bring trade into balance, and to bring rival countries to heel. It is unclear whether Trump will achieve his goals. However, President Donald Trump believes that tariffs are a panacea. Trump believes that his tariffs would bring hundreds of billions—trillions— into the US Treasury. Moreover, Trump is confident that he can force countries to give up something he believes is in America's best interest. For example, his tariffs on Canada and Mexico have led Mexico and Canada to agree to expand their border patrols. Reference  Amiti Mary, Redding Stephen, David E, “The Impact of the 2018 Tariffs on Prices and Welfare,” Journal of Economic Perspectives. 33 (Fall 2019): 187–210. Boer, L. and M. Rieth, “The Macroeconomic Consequences of Import Tariffs and Trade Policy Uncertainty,” IMF Working Paper 2024/013, International Monetary Fund. Cavallo, A., G. Gopinath, B. Neiman, and J. Tang (2021), “Tariff Pass-Through at the Border and at the Store: Evidence from US Trade Policy,” American Economic Review: Insights 3(1): 19-34.  Congressional Budget Office, The Budget and Economic Outlook: 2020 to 2030, January 28, 2020. https://www.cbo.gov/system/files/2020-01/56020-CBO-Outlook.pdf.  Dario Caldara et al., “The Economic Effects of Trade Policy Uncertainty,” Journal of Monetary Economics, vol. 109 (January 2020), pp. 38-59. Dornbusch, R. (1992), “The Case for Trade Liberalization in Developing Countries,” Journal of Economic perspectives 6 (1): 69-85.  De Loecker, J., P.K. Goldberg, A.K. Khandelwal and N. Pavcnik (2016), “prices, markups, and trade reform,” Econometrica 84(2): 445-510.  Eichengreen, B. (1981), “A Dynamic Model of Tariffs and Employment under Flexible Exchange Rates,” Journal of International Economics 11:341-359.  Eichengreen, B. (2018), “Trade Policy and the Macroeconomy,” Keynote address Mun dell-Fleming Lecture, International Monetary Fund, 13 March 2018.  Fajgelbaum, P.D., P.K. Goldberg, P.J. Kennedy and A.K. Khandelwal (2019), “The Return to Protectionism,” The Quarterly Journal of Economics 135(1): 1-55.  Fitzgerald, Maggie, “This Chart from the Goldman Sachs Shows Tariffs are Rasing Prices for Consumers and It could Get Worse.” CNBC. May 13, 2019. Flaaen, A. and J.R. Pierce (2019), “Disentangling the effects of the 2018-2019 tariffs on globally connected U.S. Manufacturing sector,” Working Paper, Finance Economic Discussion Series 2019-086, Board of Governors Federal Reserve System, Washington DC.  Flaaen, A., A. Hortacsu and F. Tintelnot (2020), “The production relocation and price effects of US trade policy: the Case of Washing Machines,” American Economic Review 110(7): 2103-2127.  Frankel, J.A. and D.H. Romer (1999), “Does Trade Cause Growth,” American Economic Review 89 (3): 379-399. Handley, K., F. Kamal, and R. Monarch (2020), “Rising Import Tariffs, Falling Export Growth: When Modern Supply Chains Meet Old-Style Protectionism,” NBER Working paper 26611. https://www.nber.org/papers/w26611. Handley, K. and N. Limao (2022), “Trade Policy Uncertainty,” NBER Working Paper 29672.  Handley, Kyle, Fariha Kamal, and Ryan Monarch, “Rising Import Tariffs, Falling Export Growth: When Modern Supply Chains Meet Old-Style Protectionism,” National Bureau of Economic Research, NBER Working Paper No. 26611, January 2020. Jin, Keyu (2023). The New China Playbook: Beyond Socialism and Capitalism. New York: Viking. Kreuter, H. and M. Riccaboni (2023), “The Impact of Import Tariffs on GDP and Consumer Welfare: A Production Network Approach,” Journal of Economic Modelling 126.  Krugman, P. (1982), “The Macroeconomics of Protection with a Floating Exchange rate,” Carnegie-Rochester Conference Series on Public Policy 16: 141-182.  Ma, Xinru; Kang, David C. (2024). Beyond Power Transitions: The Lessons of East Asian History and the Future of U.S.-China Relations. Columbia Studies in International Order and Politics. New York: Columbia University Press.  McKibbin, W., M. Hogan, and M. Noland (2024), “The International Economic Implications of a Second Trump Presidency,” Peterson Institute for International Economics, Working Paper 24-20.  Mundell, R. (1961), “Flexible Exchange Rates and Employment Policy,” Canadian Journal of Economics and Political Science 27: 509-517.  Obstfeld, M., and K. Rogoff (1995), “Exchange Rate Dynamics Redux,” Journal of Political Economy, 103: 624-660.  Russ, Katheryn (December 16, 2019). “What Unilateralism Means for the Future of the U.S. Economy,” Harvard Business Review. January 2, 2020.  Zarroli, Jim. “Despite Trump’s Promises, The Trade Deficit is Only Getting Wider,” NPR. March 6, 2019.

Diplomacy
Toronto, Canada - March 9, 2025 - Image of Donald Trump and Mark Carney the new Canadian prime minister

Canada on the way of change

by Natalia Viakhireva

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском First months of the 2025 year were uneasy for Canada, it started with waves of changes. The era of Justin Trudeau, who was the leader of the country for 10 years from 2015 to 2025, and the beginning of the new presidential term of Donald Trump made things different for Canada and added uncertainty. On the ninth of march the new leader of the Liberal Party has been chosen, Mark Carney became the new prime minister of Canada. It remains unclear how long he will stay in his position, because Canada is standing on the threshold of federal elections. The end of era Like any leader, Justin Trudeau had certain achievements but also enough failures that affected the decline in his popularity among the population, lack of trust from fellow party members and opposition parties, which in the best years were even ready to collaborate with him together. In 2022 the New Democratic Party (NDP) and Liberal Party make an agreement to build trust and solidify a position on significant socio-economic issues. However, by the end of autumn 2024 the leader of the New democratic party Jagmeet Singh said that Justin Trudeau was not coping with the tasks facing the country and announced the NDP withdrawal from the agreement. This statement had a negative impact on the rating of the Liberal Party while they were passing decisions through Parliament. In the end of December Jagmeet Singh asked Justin Trudeau to resign and state that he is ready to support a vote of no confidence in the government, which the Conservative Party has been systematically calling for by that time. In the end of December of 2024 suddenly minister of finance and deputy prime minister of Canada Chrystia Freeland unexpectedly announced her resignation. This action raised a wave of negative sentiments around Justin Trudeau. The greatest criticism of the Prime Minister was caused by the failed migration policy, shortage of housing stock coupled with the sharp increase in housing prices, high inflation, and unemployment and the introduction of unpopular carbon tax. As a result of severe pressure of fellow party members and leaders of opposition parties Justin Trudeau was forced to announce the resignation on 6th of January, from the moment when a successor will be found within the liberal party. At the same time, he noted that if he must wage and internal party struggle, he does not consider himself as a suitable candidate for the role of a leader for the party during the next elections.  Beginning of New Uncertainty The era of political uncertainty in Canada worsened when Donald Trump repeatedly “attacked” the country’s sovereignty by verbally proposing Canada to become the 51st state of the United States. He also threatened to impose a 25% tariff on Canadian products, although he canceled this decision several times. On December 1st, Donald Trump signed an executive order imposing a 25% tariff on products coming from Canada and a 10% tariff on energy from Canada. The U.S. stated that this was a measure to combat emerging threats due to high levels of migration and fentanyl trafficking across the U.S.-Canada border. In response, Canada threatened to impose retaliatory tariffs on critically important minerals and fossil, electricity supplies, energy resources, and other products. Justin Trudeau, who was in the final days of his term, achieved some success during negotiations on February 3rd between Canadian and American leaders. As a result, Donald Trump agreed to postpone the imposition of tariffs on Canadian products for 30 days. This decision followed Canada’s promise to strengthen border security measures and invest an additional $1 million into those efforts. The tariffs were imposed on March 4th, and Justin Trudeau responded with retaliatory measures targeting U.S. products. However, on March 5th, Donald Trump canceled the tariffs on the automobile industry, and on March 6th, after a phone call with the leaders of Mexico and Canada, he signed an executive order temporarily suspending tariffs on Canadian and Mexican products that comply with the terms of the USMCA (United States–Mexico–Canada Agreement). If the tariffs were imposed in full, they would have had a negative impact on the Canadian economy. Supply chain channels would suffer, leading to an increase in the prices of various goods traded between Canada and the U.S. Additionally, the tariffs would reduce the competitiveness of Canadian products in the U.S. market. The most harmful consequences would be felt by sectors and products highly dependent on the American market. Trust credit The topics related to tariffs and bilateral agreements with the USA during the last two months became the main subject of discussion in Canada and in the main election campaign for the leader of the Liberal Party. On the 9th of March, the successor of Justin Trudeau was selected. It was Mark Carney, who received 85.9% of the votes. During the final stage, there were four candidates for the position of leader of the Liberal Party. The second after Mark was the Minister of Finance and Deputy Prime Minister of Canada, Chrystia Freeland. She did not get many votes, receiving only 8% of the votes from the electorate. The other two candidates — Karina Gould, the leader of the Government in the House of Commons, and Frank Baylis, who was a member of Parliament, received 3.2% and 3%, respectively. The main topics of Mark Carney’s internal party campaign were the economic development of Canada, climate change, and a green incentive program. He proposed a carbon tax from consumers to large companies, removing trade barriers between Canadian provinces and territories, increasing the pace of housing construction and investments in this sphere while cutting the government budget. The success of Mark Carney can be attributed to a few reasons. He is the only candidate who did not hold any official position in Justin Trudeau’s Cabinet and did not have a position in Parliament. So, he represents some distance from the course of the prime minister, which Canadians did not like during the post-pandemic times. Canadians associate Mark Carney with new opportunities and changes for Canada. He is not a person from politics; he is related to the economy and business sector. Among his numerous roles, he was the Governor of the Bank of Canada during the 2008 crisis, when Canada avoided the worst impacts due to good financial and banking policies. In 2013, he was appointed as Governor of the Bank of England. He handled the economic processes during Brexit and the following economic and political crises. This experience casts Mark Carney in a positive light for voters and provides him with trust during tough times in the country, marked by unfriendly statements and actions from the closest partner — the US. Carney himself highlights his success in crisis management and believes that he would be able to negotiate with Trump, even though he agrees that the 25% tariff and policy that Trump has stated are a serious challenge in modern Canadian history. In his victory speech after being elected as the leader of the Liberal Party, he highlighted that: "The United States of America are not Canada. Canada will never become a part of the US in any form, in any way." All other political elites are in solidarity with him. Carney states that Canada must fight Trump’s tariffs using retaliatory measures in the form of "dollar for dollar." The main goal is the diversification of trade agreements in the medium term. Both goals are important. For now, Canadian analysts are concerned that Trump’s tariffs in the short term may cause a recession in the Canadian economy. It is important to remember that Donald Trump is a businessman, and in political discussions, he has often said that he is ready for deals. Maybe Carney, with his experience in the economy and finance, will find a way to make such a deal — if he has time. What is next? For how long Mark Carney will stay in the prime minister position is hard to predict now. According to the schedule, another federal election in Canada should take place no later than October 2025, however, the Canada Elections Act provides the opportunity for long-term elections. There is a high probability that Mark Carney will use his popularity and announce voting in the next few weeks. According to the law, the pre-election period must last from 37 to 51 days. The main opposition for Carney will be the leader of the Conservative Party, Pierre Poilievre. For the last 1.5 years, the rating of the Conservative Party has been significantly higher than the rating of the Liberal Party. According to the data, the popularity rate of the Conservative Party on January 6th was equal to 44.2%, and the Liberal Party had 20.1%. However, the rating of the Liberals started to grow after Justin Trudeau announced his resignation. According to the data on March 5th, the rating of the Conservative Party was equal to 40.3%, and the Liberal Party had 30.8%. Pierre Poilievre, with his views, is close to the ideas of right-wing populism. He is a supporter of the Freedom Convoy — the protest movement that spread across Canada in early 2022. People often say that his positions and approaches are similar to those of Donald Trump. Even though the pre-election campaign has not officially started yet, Pierre Poilievre unofficially began his campaign in January.  After Justin Trudeau announced his impending resignation, Pierre Poilievre changed his political slogan “Axe the Tax” (which referred to the unpopular carbon tax) to “Canada First,” which is similar to Trump’s slogan “America First.” Poilievre promises that he will remove trade barriers for provinces, tighten punishments for fentanyl dealers, strengthen border security, construct a base in the Arctic, the construction of which will be financed by cutting foreign aid. Border security, fentanyl contraband, and low defense costs in Canada are the main complaints of Donald Trump. Mark Carney, talking about his opponent Pierre Poilievre, said: “Donald Trump is trying to weaken our economy, but there is also another person who is doing the same. And this person is Pierre Poilievre. Pierre Poilievre’s plan will leave us divided and ready for conquest because he is a person who worships Trump, and he will stay on his knees in front of Trump, not oppose him.” The election on March 9th for the leader of the Liberal Party is not the final stage of the political situation in Canada. It remains to be seen who will become the new prime minister for the next four years.

Energy & Economics
Canadian and Chinese flag. Canada and China flag.

The Fruits of Trump Tariffs: Closer Ties Between Canada and China

by Dean Baker

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском With Donald Trump seemingly determined to push the US economy on a path towards autarky, our major trading partners will need to make alternative arrangements. This is especially the case with Canada, since its economy is so closely tied to the US economy. At this point, Mark Carney, the country’s new Prime Minister, knows there is little possibility of dealing with Trump rationally. Trump has bizarre and totally imagined grievances against Canada. His main complaint seems to be that the United States runs a $200 billion trade deficit with Canada, which Trump describes as Canada ripping off the United States. It’s hard to believe that anyone would say that selling stuff to a willing and well-informed customer is ripping them off. Presumably we buy stuff from Canada because it’s cheaper than the stuff we either produce ourselves or could buy from other countries. Also, the deficit is entirely due to purchases of oil from Canada, something Trump sought to promote in his first term. We have mostly balanced trade if we exclude oil. In fact, the claims of unfairness are based on a treaty that Trump himself negotiated in his first term. Trump can’t even get his numbers straight. Rather than being $200 billion, our trade deficit is less than one-third this size, at just over $60 billion. Trump’s erratic craziness makes the prospect of a real and lasting deal very dim. Carney has to look to secure stronger trade deals with more stable partners. Europe and Latin America are clearly part of the that story, but China needs to be too, as the world’s largest economy. There are opportunities for major gains from trade with China, especially in the auto sector, which had been thoroughly intertwined with the United States and Mexico. Carney has to work from the assumption that these links could be severed for the indefinite future. Here China’s enormous progress in developing electric vehicles offers a great opportunity to Canada. China now sells high quality, low-cost EVs. It has also developed battery technology to the point where a battery can be fully charged in six minutes, not much different than the time it takes to fill a tank of gas. Canada can in principle negotiate trade deals with China where it partially opens its market to its EVs, in exchange for a commitment to technology transfer. The plan would be that in a few years Canadian manufacturers would adopt the latest Chinese technology and supply much of the market themselves. Since Canada has more union-friendly labor law than the United States, they can structure their deal so that the factory jobs would be largely good-paying union jobs. This would be good for the environment, good for Canadian workers and consumers, and good for Canada’s economy, since it means car buyers will have considerably more money to spend on other items or to save. It would also set up a great contrast with the United States, where Trump is determined to try to lock the country into building and buying cars that rely on old-fashioned internal combustion (IC) engines. While Canadians are buying high-quality EVs, people in the United States will be buying IC cars for two or even three times the price. Furthermore, while we are paying $40 to $60 to fill our tanks every couple of weeks, Canadians will be able to power their vehicles for ten or fifteen dollars a charge. The move to EVs will also mean that Trump will have imposed a permanent cost on the US car industry, even if he eventually learns a little economics and discovers his tariffs were not a good idea. If Canada develops a vibrant EV industry, it will not be going back to the integrated production structure with the United States that it had with IC vehicle producers before the trade war. Trump is not going to be able to get Canadians to buy more expensive IC vehicles. The only way for the United States auto industry to go forward, if we move back towards more normal trade with Canada, will be for it to double-down on developing EVs itself. There obviously will be many other problems that Canada will have to deal with as it attempts to cope with unwinding decades of economic integrations with the United States, but working with China on adopting EV technology should be a no-brainer. In this area, Trump may have done Canada a big favor.