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한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском The Liberal Party led by Mark Carney has secured a fourth consecutive term in government. This victory has come at a time when Canada is facing an unprecedented threat to its economic security and sovereignty from United States President Donald Trump. In an election defined by concerns over Trump’s erratic tariff policy and talk of making Canada a 51st state, voters decided Carney was the leader best equipped to deal with these challenges. Carney previously served as governor of the Bank of Canada, where he guided the country through the 2008 global financial crisis. He later became the first non-British person to head the Bank of England, helping guide the United Kingdom through Brexit, one of the biggest shocks to the British economy in decades. Now the world is facing similar financial shocks from Trump’s trade war. The on-again, off-again nature of Trump’s tariff policy could inflict significant damage to the global economy — even more to the American economy — and cause irreparable damage to its reputation as a rational entity in international trade. In the face of the ill-advised and self-defeating U.S. tariffs, the new Canadian government should take prudent, urgent and bold steps to strengthen the nation’s economy. Here are major and important economic priorities for the government to reshape the economy and spur much-needed economic growth. Stabilize and strengthen the national economy As a primary act, the new government should stabilize the Canadian economy from the tariff shocks. It must continue to develop carefully calibrated retaliations to Trump’s tariffs. The revenue raised from the tariffs should be used to compensate those directly affected by them, using a multi-pronged mechanism that includes training, increased employment insurance benefits and additional transfers to low-income households to reduce the impact of tariffs on food costs. Currently, a series of provincial regulations restrict the goods and services that cross Canada’s provincial borders daily. The new government should urgently remove longstanding interprovincial trade barriers. According to a report by the Canadian Federation of Independent Business, removing these impediments could boost the economy by up to $200 billion annually. Similarly, a study by the International Monetary Fund indicates the effect of these barriers is equivalent to a 21 per cent tariff. Removing interprovincial trade barriers would significantly offset the negative effects of Trump’s tariffs on the Canadian economy, and provide a boost to the “Buy Canadian” movement. Carney seems to have made this a priority already, which is promising. In March, he said he aims to have “free trade by Canada Day” among provinces and territories. Streamlining natural resource projects Canada is a natural resource superpower. However, for natural resources and critical minerals to be extracted efficiently, regulatory processes need to be streamlined by cutting red tape and duplicative assessments. The federal government and the provinces should agree to a single environmental assessment that meets the standards of both jurisdictions. Additionally and importantly, respectful, genuine and meaningful consultations must be undertaken by project proponents and governments with the relevant Indigenous communities to address their concerns, respect their rights and safeguard their economic well-being in the development of the natural resources projects. Carney has said he will uphold the principle of free, prior and informed consent when it comes to initiating resource extraction projects and make it easier for Indigenous communities to become owners of said projects. A similar approach should also guide the construction of infrastructure projects such as pipelines and ports, which play a crucial role in facilitating Canada’s exports. Boost Canada’s productivity through innovation A country’s ability to raise living standards for its people mostly depends on its capacity to improve its productivity. Economist Paul Krugman once stated, “productivity is not everything, but, in the long run, it is almost everything.” Canada’s productivity is lagging, according to the Organization for Economic Co-operation and Development. The new Canadian government should take steps to boost the nation’s productivity by increasing direct expenditures on research and development. Additional funding should be allocated to higher institutions of learning, and incentivizing businesses to spend more on research and development through significant tax credits. Although research and development spending continues to grow in Canada, as a percentage to GDP, it is the second lowest among G7 nations. Boosting investments will drive innovation, spur economic growth and ensure Canada remains competitive on the global stage. Dealing with U.S. tariffs One of the government’s primary tasks will be preparing meticulously for trade negotiations with the U.S. to address the threat of tariffs and reach a “win-win” trade deal. Given Trump’s highly unpredictable nature, negotiations will not be easy. Although Trump could have withdrawn from the Canada-US-Mexico Agreement (CUSMA), he has not done so, and zero-tariffs remain in effect for products that are certified as being North American origin under the CUSMA rules. This could be a solid starting point for future trade negotiations. At the same time, Carney and his team must work to stabilize the Canadian economy against the unprecedented threat of Trump’s tariffs by strengthening the domestic economy, diversifying Canada’s exports and reducing the country’s dependence on the U.S. Pulling away from the world’s largest economy will not be easy for Canadian businesses, given the deep integration of Canada’s economy with that of the U.S. Still, expanding trade with the European Union, the U.K., Africa and the Association of Southeast Asian Nations — and exploring other opportunities to reducing trade barriers with nations in Asia, the Middle East and Latin America — will enlarge Canada’s export market. By doing all this, Canada can not only prepare for a tough round of U.S. trade talks but also position itself as a stronger, more self-reliant global trading partner.

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском I. Introduction U.S. trade with China has significantly grown in recent decades and is crucial for both countries. Today, China is one of the largest export markets for U.S. goods and services (second to Mexico), and the United States is the top export market for China. As Figure 1 shows, this trade—much of which increased after China joined the World Trade Organization (WTO) in 2001—has brought lower prices to U.S. consumers and higher profits for American companies. But it also comes with costs, notably the loss of American jobs because of import competition, automation, and multinational companies moving manufacturing overseas.   Figure 1: US-China Trade over the 20 years Source: U.S. Bureau of Economic Analysis. After President Donald Trump began a so-called trade war with China in 2018, economic tensions between China and the U.S. have been on the rise. Chinese officials have warned that there are “no winners” in a trade war, but the second Trump administration embarked on a new and more aggressive tariff policy. In the first months of his second administration, Trump has threatened tariffs as high as 145 percent on all Chinese goods, while China’s latest retaliatory tariffs on U.S. imports are as high as 125 percent. The Trump administration claims the levies attempt to punish China for unfair trade practices, including Chinese subsidies that hurt U.S. workers and the long-standing accusation that China pressures American companies to hand over their technology and intellectual property, as well as China’s role in illicit fentanyl trafficking. Some economists doubt, however, that Trump’s aggressive approach will achieve its desired goals and raise concerns that tariffs will drive up inflation and the costs of goods, hurting American consumers and exports. This paper attempts to examine the economic effects of the U.S.-China trade war. It first shows the economic effects of the U.S.-China trade war under the first Trump administration and then forecasts for the second Trump administration. II. Trade War between the U.S. and China As Figure 2 shows, the US trade deficit with China has increased as trade between both countries expanded. Therefore, the first Trump administration started the trade war by imposing higher tariffs on Chinese goods. Figure 2: US-China Goods Trade (2001-2024) Figures 3-1, 3-2, and 4 show U.S. and Chinese tariff rates for each other’s goods. As Figure 3-1 shows, the US tariffs on Chinese goods were less than 5 per cent when the first Trump administration began on January 20, 2018. Then the tariff continued to rise. As Figure 3-2 shows, the average US tariffs on China goods were 20.8 percent when the second Trump administration began on January 20, 2025. As Figure 4 shows, after the second Trump administration took office, US tariffs of 10 percent were imposed on all imports from China under the International Emergency Economic Powers Act (IEEPA) on February 1, 2025. Then the Trump administration increased tariffs on Chinese goods to 20 percent on March 3 and to 34 percent on April 2. US tariffs of 10 percent were imposed on nearly all countries under IEEPA, but with some sector carve-outs on April 5. China retaliated against US tariffs by increasing tariffs on U.S. products to 34 percent on April 4 and to 84 percent on April 10. US tariffs ranging from 1 percent to 74 percent were imposed on nearly all countries with a trade surplus with the US, including China (74 percent). US tariff on Chinese goods included an additional 50 percent tariff as counter-retaliation for China’s retaliation announcement on April 10. Then again China faced an additional 41 percent tariff increase under IEEPA (to 125 percent total). However, Trump instituted a broad 90-day pause on steep Liberation Day tariffs, aiming to give time for negotiators to work out new deals. But Trump has not provided a pause for China. In response, China has raised its duties on imports of US goods to 125 percent from 84 percent on April 12, while US tariffs on Chinese imports have increased to 145 percent by adding a 20 percent tariff in relation to the fentanyl. Figure 3-1: US–China tariff rates toward each other and the rest of the world (ROW) before 2025 Source: MacroMicro. https://en.macromicro.me/charts/130548/china-us-tariff-rates  Figure 3-2: US–China tariff rates toward each other and rest of world, 2018-2025  Figure 4: US–China tariff rates toward each other in 2025 Source: Reuters, April 11, 2025. III. Economic Effects of the Trade War between the U.S. and China A.  The first Trump administration Chad Bowen (2023) at the Peterson Institute for International Economics raised a question “was the trade war between U.S. and China worth it for US exporters”? And his answer so far is no. In the middle of the trade war, the United States and China signed a historic trade agreement on a ‘Phase One trade deal’ on January 15, 2020. Bowen supposes that in 2018–21, US goods exports to China of phase one products had grown at the same pace as China’s imports of those products from the world and that US services exports to China had grown at the rate of US services exports to the world. Cumulative US goods and services exports to China in 2018–21 were about 19 percent lower with the trade war and phase one agreement between the two countries (see Figure 5). His estimates suggest that the United States would have avoided export losses of $24 billion (16 percent) in 2018 and $30 billion (20 percent) in 2019 resulting from the trade war. Exports would also have been $27 billion (18 percent) higher in 2020 and $40 billion (23 percent) higher in 2021 than under phase one agreement.   Figure 5: US exports to China would be higher with no trade war. i. US manufacturing exports suffered in the trade war and did not recover. As Figure 6 shows, China purchased only 59 percent of the full commitment of US manufactured products in 2020–21 under Phase One trade deal. Manufacturing was the most economically significant part of the trade deal, making up 44 percent of covered US exports in 2017. Autos and aircraft dominated US exports before the trade war. Both did poorly during the period of 2020–2021. US auto exports reached only 39 percent of the target over 2020–21. The sector’s suffering is a trade war warning. In July 2018, Trump’s tariffs on Chinese imports included auto parts; China’s tariff retaliation hit US car exports. US car exports decreased sharply in 2018, as car makers like Tesla and BMW reacted to the higher costs by moving production destined for the Chinese market out of the United States. (Ford, another major car exporter, including through its Lincoln brand, complained in 2018 that Trump’s separate steel and aluminum tariffs raised the cost of its US-based manufacturing by $1 billion.) Even when China lifted the retaliatory tariffs in early 2019, US exports did not recover. Sales of US aircraft, engines, and parts to China did even worse, reaching just 18 percent of the 2020–21 target. Though the industry was less directly impacted by trade war tariffs, US sales to China plummeted in 2019 after the two crashes of the Boeing 737 MAX. Between March 2019 and late 2020, the airplane model was grounded, with Boeing shutting down production in early 2020. China cancelled orders in April 2020, and though the legal text allows credit for aircraft “orders and deliveries”, additional orders had not been publicly announced by the end of 2021, despite complaints by the Biden administration that China's trade policy was holding back sales. (Exports of the 737 MAX might eventually resume, as Chinese regulators instructed airlines in December 2021 to implement the changes needed to allow the model to fly again in China.) Not all manufactured exports performed poorly during the period of 2020–21. Medical supplies needed to treat Covid-19 significantly increased. US exports of semiconductors and manufacturing equipment also boomed – thanks to a combination of stockpiling by Chinese companies as US export controls in 2019-20 threatened to cut off Chinese firms like SMIC and Huawei as well as increased demand for chips needed for consumer electronics and data servers brought on by the Covid-19 pandemic shift to remote work, schooling, and leisure.  Figure 6: US-China war battered hard US manufacturing exports to China ii.  US agricultural exports suffered in the trade war, received subsidies, and then recovered. To the Trump administration, agriculture was a very politically important part of the trade deal in 2020, despite accounting for only 14 percent of covered exports. As Figure 7-1 shows, when China's retaliatory tariffs hurt US farm exports during the period of 2018–19, the Trump administration awarded the sector tens of billions of dollars in federal subsidies. In the days leading up to the 2020 presidential election, the Trump administration released a report that touted resuming farm sales to China—ignoring the continued troubles facing US manufacturing, energy, and service exports. US farm exports did get back to 2017 pre-trade war levels and ultimately reached 83 percent of the 2020–21 commitment under Phase One deal (see Figure 7-1 & 7-2).  Figure 7-1: US agricultural exports to China Soybeans made up approximately 60 percent of US agricultural exports to China in 2017. As Figure 7-2 shows, exports of US soybeans to China were devastated by the trade war, falling from $12 billion to $3 billion in 2018, because China imposed retaliatory tariffs. Though soybean exports managed to reach their pre-trade war levels during the period of 2020–21, they still fell over 30 percent short of their target under Phase One deal. Products like pork, corn, wheat, and sorghum exceeded expectations, though not necessarily because of the trade deal in January 2020. The outbreak of African swine fever led China to increase pork imports from the U.S. in 2019 before the deal was agreed. (In 2020–21, China's pigmeat imports from the rest of the world also averaged five times 2017 levels.) Wheat and corn imports increased after China began to comply with a 2019 WTO dispute settlement ruling against its unfilled tariff rate quotas. (Compared with 2017, China's imports from the rest of the world in 2020–21 were about 200 percent higher for wheat and 350 percent higher for corn.) Some farm exports also benefitted less from the Chinese purchase commitments under the trade deal in January 2020. Seafood and farm products did not rebound from the effects of the trade war. After being hit with Chinese tariffs, US lobster exports re-achieved about half of their target in 2020–21. US exports of raw hides and skins ended up at less than one-third (see Figure 7-2).  Figure 7-2: US agricultural exports to China (sub-category) iii. U.S. Imports from China: Total US imports from China were down with the beginning of the trade war. For 15 months beginning in July 2018, the Trump administration imposed higher tariffs on Chinese products. The Trump administration began the trade war by imposing tariffs of 25 percent on products covering roughly $34 billion of US imports from China in July 2018 (List 1) and on $16 billion of imports in August (List 2). When China retaliated against the U.S., the trade war continued with Trump imposing 10 percent tariffs on an additional $200 billion of imports in September 2018 (List 3), increasing the tariff rate of those duties to 25 percent in June 2019. In September 2019, Trump hit another $102 billion of imports (List 4A) with 15 percent tariffs, later reducing them to 7.5 percent upon implementation of the US-China Phase One trade agreement in February 2020. (The administration identified another set of products covering most of the rest of US imports from China of more than $160 billion—List 4B—for which it scheduled tariffs to take effect on December 15, 2019 but was cancelled on December 13, 2019.) As a result, as Figure 8-1 & 8-2 show, overall, the trade war reduced US imports from China. Then US imports recovered only slowly, starting in mid-2020. In January 2022, when the term of the first Trump administration ended, US imports from China (red line) remained well below the pre-trade war trend (dashed line), while US imports from the rest of the world (blue line) returned to pre-trade war levels of June 2018. China was the source of only 18 percent of total US goods imports in 2022, down from 22 percent at the beginning of the trade war.  Figure 8-1: Value of US goods imports from China and the rest of the world, 2016–2022 (June 2018 = 100)  Figure 8-2: Value of US imports from China and the rest of the world by trade war tariff list, 2018–2022 (June 2018 = 100) B.  The second Trump administration As of April 12, 2025, U.S. tariffs on Chinese goods are 145 percent, but this tariff rate is not sustainable over a long period of time because it is way too high and because U.S. President Donald Trump and Chinese leader Xi Jinping want to negotiate. In fact, Trump signalled on April 23 that he would cut his 145 percent tariff on Chinese goods substantially. Therefore, it is not reasonable to explore the effects of Trump’s tariffs of 145 percent. Last year, McKibbin, Hogan, and Noland at the Peterson Institute for International Economics (PIIE) examined the impact of now-President Trump’s proposed tariffs based on Trump’s campaign promises that would impose 60 percent additional tariffs on imports from China. They explored the impacts of a 60 percent additional tariff on China with and without other countries’ retaliating in kind by imposing steeper tariffs on imports from the United States. Figures 9 through 14 show the results from their analyses. Figure 9 shows that China experiences the most significant GDP losses (0.9% below baseline by 2026), while the U.S. also experiences a negative GDP growth rate (0.2% below baseline by 2027).  Figure 9: Projected change in real GDP of selected economies from an additional 60 percent increase in US tariffs on imports of goods from China, 2025-40 Figure 10 shows that the direct impact of the U.S. tariff of 60 percent on Chinese employment is initially negative (-2.25% in 2025), but a gradual decline in Chinese real wages eventually restores employment to the baseline after a decade. US employment will fall 0.23% below baseline by 2027.  Figure 10: Projected change in employment (hours worked) in selected economies from an additional 60 percent increase in US tariffs on imports of goods from China, 2025-40 Figure 11 shows that US inflation rises by 0.4% in 2025, with the higher cost of imports due to tariffs not offset by the stronger US dollar lowering prices of imports from other countries. The tariffs on US imports from China are mildly deflationary in other countries (see Figure 11).  Figure 11: Projected change in inflation in selected economies from an additional 60 percent increase in US tariffs on imports of goods from China, 2025-40 The slowdown in the Chinese economy causes capital to flow out of China and into other economies. This is initially a financial capital flow responding to a fall in financial rates of return in China and a rise in expected profits in countries like Canada and Mexico. That financial inflow becomes physical investment over time, which increases production capacity in these economies. Countries that receive the capital experience a trade deficit (see figure 12). This additional production enables the rise in exports to the US economy. While the US trade deficit with China shrinks, the overall US trade deficit increases (figure 12) as the partial relocation of production back into the US economy causes the dollar to appreciate.  Figure 12: Projected change in the trade balance of selected economies from an additional 60 percent increase in US tariffs on imports of goods from China, 2025-40 So far, figures have focused on the unilateral imposition of US tariffs on Chinese products. In figure 13, McKibbin, Hogan, and Noland compare projected changes in US GDP from the unilateral imposition of tariffs with a scenario where China retaliates by imposing a 60% tariff on US goods and services. By 2026, US GDP losses from Trump’s tariff policy more than double if China retaliates against the US (see Figure 13). The impact on US inflation in 2025 yields a similar result (see Figure 14). With Chinese retaliation, US inflation rises 0.7% above baseline compared with 0.4% without retaliation.  Figure 13: Projected change in US GDP from an additional 60 percent increase in US tariffs on imports of goods from China, with and without retaliation by China, 2025-40  Figure 14: Projected change in US inflation from an additional 60 percent increase in US tariffs on imports of goods from China, with and without retaliation by China, 2025-40 IV. Conclusion This paper showed that U.S. tariffs on Chinese goods imposed by the first Trump administration mainly had negative impacts on U.S. exports, although they reduced U.S. imports from China over a short period of time. The analysis by McKibbin, Hogan, Noland (2024) for the second Trump administration also shows that U.S. tariffs on Chinese goods will have negative impacts on US GDP, inflation, employment, and trade balance. This paper also showed that U.S. tariffs on Chinese goods will have larger negative impacts on U.S. GDP and inflation if China retaliates. Then a question arises: “Why does Trump attempt to impose extremely high tariffs on products from China?” Larisa Kapustina,  Ľudmila Lipková, Yakov Silin and Andrei Drevalev (2020) identify four main reasons that led the U.S. to the greatest trade war between the U.S. and China: a) to reduce the U.S. deficit of bilateral trade and increase the number of U.S. jobs; b) to limit access of Chinese companies to American technologies and prevent digital modernisation of the industry in China; c) to prevent the growth of China’s military strength; and d) to reduce the U.S. federal budget deficit. References Bown, Chad, “China bought none of the extra $200 billion of US exports in Trump's trade deal.” Peterson Institute for International Economics, Working Paper. July 19, 2022.Bown, Chad, “Four years into the trade war, are the US and China decoupling?” Peterson Institute for International Economics, Working Paper. October 20, 2022.Bown, Chad, “US imports from China are both decoupling and reaching new highs. Here's how.” Peterson Institute for International Economics, Working Paper. March 31, 2023. Kapustina, Larisa, Ľudmila Lipková, Yakov Silin and Andrei Drevalev, “US-China Trade War: Causes and Consequences.” SHS Web Conference. Volume 73, 2020: 1-13.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. 

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/

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском China is simultaneously the world's biggest polluter and the global leader in renewables This article was submitted as part of the Global Voices Climate Justice Fellowship, which pairs journalists from Sinophone and Global Majority countries to investigate the effects of Chinese development projects abroad. Kazakhstan’s transition to renewable energy (RE) has seen a significant surge in recent years. This rapidly growing green transition has allowed the country to meet its interim RE targets. By 2030, the country aims to generate 15 percent of its total energy output through renewables and increase this share to 50 percent by 2050. Moreover, Kazakhstan has committed to reaching carbon neutrality by 2060.  The biggest partner in this endeavor has been China, whose role in the RE transition has grown and diversified over the years. For Kazakhstan, the benefits of this partnership are clear: industrialization of its economy and, more importantly, decreasing carbon emissions and improving air quality and public health. For China, the benefits go beyond mere lucrative investments and exporting its RE technology and include gaining soft power and offsetting its environmentally destructive footprint in Kazakhstan.  Harnessing renewable energy to combat air pollution In addition to rich oil and gas resources, Kazakhstan has vast renewable energy potential, thanks to its large territory and abundance of wind and sunny days. It is the ninth largest country by area and holds 77 percent of Central Asia’s solar potential and 90 percent of the regional wind potential.   The presence of wind corridors in vast Kazakh steppes with wind speeds of more than five miles per second, which is present in all regions, makes Kazakhstan ideal for the operation of wind turbines. Additionally, at least 50 percent of Kazakhstan's territory is suitable for installing solar panels.  Most of the RE potential remains untapped, with Kazakhstan still relying on Soviet-era energy infrastructure built to utilize fossil fuels. In 2024, 66 percent of the country’s electricity was generated through coal, 21 percent via natural gas, 6.6 percent from hydroelectricity, and only 6.4 percent from renewables.  Air pollution is a nationwide problem in Kazakhstan. In 2025, 35 cities spread across the country faced significant air pollution, according to the National Hydrometeorological Service of Kazakhstan. A major source of this pollution pandemic is coal burned by thermal power plants, industrial complexes, and households.  The list of adverse effects of air pollution is long. According to Kazakhstani doctor Denis Vinnikov, who has researched air pollution’s effects on health, long-term exposure to polluted air increases the risk of developing cardiovascular and respiratory diseases, such as Chronic Obstructive Pulmonary Disease (COPD). In addition, air pollution increases the likelihood of almost all types of cancer and tumors. One of the most polluted cities in Kazakhstan, Almaty, is one of the national leaders with the highest cases of COPD.  Kazakhstan’s recognition of the adverse effects of its coal-intensive energy sector on the environment and public health has pushed the government to ramp up renewable energy production in the last decade. China’s multiple roles in renewables The Kazakh-Chinese green energy endeavors are part of China's wider bilateral cooperation, covering energy, agriculture, machinery, and mining, among other areas. China is one of Kazakhstan’s largest trade and investment partners. In 2022, the countries signed a permanent comprehensive strategic partnership. Between 2005 and 2023, China invested over USD 25 billion in Kazakhstan.  The two sides also work closely within the Belt and Road Initiative (BRI), China’s global connectivity project focusing on energy, trade, and transport infrastructure in global majority states. Between 2013 and 2020, China invested USD 18.5 billion in Kazakhstan within the BRI framework. China has participated in Kazakhstan’s green transition from the very beginning. In an interview with Global Voices, Yunis Sharifli, a non-resident fellow at the China Global South Project, described China as the “first-comer” to Kazakhstan’s RE sector. Yana Zabanova, a research associate at the Research Institute for Sustainability, said in an interview with Global Voices: China has been the main technology supplier to Kazakhstan's renewable energy sector, both in the solar PV and increasingly in the wind sector, and Chinese companies have also served as important investors and EPC [engineering, procurement, and constuction] contractors for renewable energy projects in the country. China’s role grew exponentially starting in 2018 when the government launched renewable energy auctions, which gifted government contracts to the lowest bidder. Since 2018, a single private Chinese company, Universal Energy, has built 10 RE plants, three solar and seven wind, with a total capacity of 630 Megawatts by winning government tenders.   Additionally, state-owned Chinese companies have secured contracts via intergovernmental negotiations. There are several examples of this, such as the Zhanatas and Shelek wind power plants (WPP), which are already operational, and five more RE plants in the development stage with a total capacity of 2.6 GW.   In an interview with Global Voices, Ainur Sospanova, the Chairperson of the Board of Directors of the Qazaq Green RES Association, provided her expert assessment of China’s share in Kazakhstan’s RE sector: In the solar energy sector, it is almost 100 percent because it is impossible to compete against Chinese solar panels. In the wind energy sector, it is at least 70 percent and continues to grow. Thus, since 2018, China has expanded its role to project developer and financier through loans issued by Chinese banks and equity financing.  China's share in Kazakhstan’s renewable projects is set to grow even more upon the completion of two Chinese plants that will localize the production of energy storage systems and components for WPP. Gaining soft power and improving its image Paradoxically, China is simultaneously the biggest polluter in the world and the global leader in renewables. While China is constructing two-thirds of the world's wind and solar projects, 93 percent of global construction from coal power took place in China in 2024. This paradox is also present in BRI projects, including those in Kazakhstan.  China frequently touts its solar and wind energy projects as part of the BRI. At the same time, one-fourth of coal-fired power generation in the world is financed through the BRI. Though China Power International Holding and Kazakhstani Samruk Energy have agreed on solar and wind projects to develop renewables, deals are also inked to develop oil, gas, coal, cement, and steel industries in Kazakhstan, which adversely affect the environment and the well-being of local communities. Sharifli explained: When we look at the global discontent with China’s presence, we see two worries: debt trap and environmental pollution. So renewable energy is very important in this context. China’s investments in renewables are aimed at tackling these worries by gaining soft power and improving its reputation. This benefits not only China but also the BRI. Chinese companies that have invested in RE in Kazakhstan, such as Risen Energy, Universal Energy, and Power China, put the BRI at the heart of how they frame their companies. Chinese think tanks also suggest that the Chinese government welcome RE development overseas despite concerns.   In contrast to the Chinese-built oil processing, steel, and cement plants in Kazakhstan, RE projects have thus caused no controversy and helped China improve its reputation in Central Asia. Sharifli noted that since 2021, public attitudes towards China in Kazakhstan have started becoming more positive, partially due to Chinese investments in RE, according to a survey conducted by the Central Asia Barometer.  “Renewable energy plants are usually located in the steppe, far away from the settlements, they don’t interfere with the daily lives of people and look idyllic. There is no trash, there is no pollution, there is no dirty water or soil,” said Zabanova, who has visited multiple RE plants in Kazakhstan as part of her research.  China’s investments in renewables in Kazakhstan serve as an example of how solar and wind energy projects are used in diplomacy. They not only allow Chinese companies to export their excess capacities to profitable foreign markets but also help China mask its environmental damage and create a favorable perception abroad.

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. 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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.

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.

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском Russia is a distinctly Nordic country. Its Arctic coastline stretches for twenty-four thousand kilometers, and almost two thirds of Russia’s territory is covered by permafrost. Among all Arctic states, Russia has by far the most numerous resident communities in the region in total exceeding two million people (approximately a half of the global Arctic population). All of the biggest cities to the North of the Arctic Circle—Murmansk, Vorkuta, Norilsk—are located in Russia. A very large part of Russia’s history for the last millennium has been included a relentless quest for fur, fish, timber, empty lands and new trading routes along the endless Arctic Ocean. Historians still debate whether this perpetual drive to the North has been a Russian blessing or a Russian curse. The expansion in the Northern direction offered the nation a variety of unique opportunities, but it also created numerous challenges that other Europeans never confronted. In any case, this movement had a critical formative impact on forging the Russian character and left a deep imprint on the national mentality. This heritage will undoubtedly stay with Russians in future, affecting their perceptions of themselves, the overall worldviews as well as many specific economic, social, military and other decisions. Economy Today, the Arctic region houses less than 1.3% of Russia’s population, but it accounts for some 12–15% of the national GDP and for 25% of all the exports. One fifth of all Russia’s oil and four fifth of natural gas are extracted here. The Arctic continental shelf, which remains not fully explored, contains even more hydrocarbons—at least 85 tln cubic meters of natural gas and 17.3 bln tons of oil. With many old easily accessible deposits of hydrocarbons on the continent being depleted, the only way for Russia to remain an energy superpower is by moving further North and by mustering its capacities of offshore drilling under quite harsh climate and weather conditions. Beyond oil and gas, Russia’s Arctic can offer such important minerals as nickel, copper, iron core, rare earth elements, platinum, palladium, etc. However, deep-water drilling not makes extracted hydrocarbons and other minerals quite expensive; for instance, most of sea-based oil repositories in the Arctic turn profitable with oil prices staying at USD 70–80 per barrel. With the global energy transition taking speed it is not clear whether international markets are likely to sustain long term demand for the expensive Russia’s Arctic fossil fuels. Besides, quite often this type of deep-water drilling requires a lot of state-of-the-art technologies that Russia does not always has at its disposal. For a long time, Moscow counted on its Western partners (US, Norway, Germany, UK) to get access to such technologies, but the geopolitical environment of today has made this cooperation impossible. Today, Russia counts mostly on China to replace its former partners from the West, but many China’s energy companies have to exercise caution and sometimes practice over-compliance with Western technology transfers restrictions fearing possible secondary US and EU sanctions. Another evident economic opportunity for Russia in the Arctic region is the Northern Sea Route (NSR)—a 5,600 km long transportation corridor that remains the shortest shipping route between Europe and the Asia-Pacific. With the Arctic ice melting and navigation seasons in the North getting longer due to global warming, NSR becomes commercially more attractive. Another assumed comparative NSR advantage is that it does not contain any security risks comparable to those existing today in the Red Sea or in the Gulf of Aden and has no physical restrictions that limit the cargo traffic through the Panama or Suez canals. Nonetheless, these are both technical and political obstacles on turning NSR into a major international transit route. The seas in the North of Eurasia are mostly very shallow and large modern deep draught container ships simply cannot use them without expensive dredging. Furthermore, the coastal infrastructure along NSR needs quite radical modernization and further maintenance. On top of these complications, today it is hard to imagine that EU states would accept NSR as a preferred transit corridor from the Asia-Pacific using Russia as the main link in this transit. This is why the odds are that in the nearest future NSR will be used mostly to serve Russia’s domestic cabotage needs as well as to ship Siberian oil, coal and LNG to China, India and other consumers in Asia. With due commitment, the annual size, which now amounts to almost 40 mln tons, can be doubled by 2030 and later on it can reach even 150 mln tons a year, but it will hardly ever successfully compete with the Suez Canal that can handle up to 150 mln tons of cargo in just one month. Security The security significance of the Arctic region for Russia has two distinctly different dimensions. First, such a long maritime border creates potential vulnerabilities and has to be protected against possible conventional encroachments (these might include not only actions taken by hostile states, but also by private poachers, human traffickers, etc.). Second, the Arctic region provides Russia with a unique unrestricted access to high seas for the national Strategic Naval Forces that are an organic part of the country’s nuclear triad; this access has to be preserved at any cost to maintain credible nuclear deterrence vis-a-vis the United States and its NATO allies. A conventional challenge to the Russian Arctic could theoretically emerge either in the East, with an adversary entering the region through the Bering Strait, or in the West, from the NATO bases in North Atlantic of from Norway. The ongoing climate change and the Arctic ice melting may further increase Russia’s security vulnerabilities, opening the Arctic waters for more intense military traffic. It seems that for the time being Moscow is not particularly concerned about security challenges coming from the Asia-Pacific, though the recent changes in the defense postures of Japan and South Korea and even of a more remote Australia are significant enough to keep a close eye on them. The NATO naval capabilities in the West arguably present a much more immediate security challenge to Russia, especially with Finland and Sweden having joined the Alliance and Norway having lifted some of its earlier limitations on NATO’s use of the Northern Norwegian coastline. Being a predominantly continental military power, Russia cannot hope to defeat NATO in a large-scale conventional naval war, but it can try to deny NATO forces access to the Russian Arctic while maintaining secure access to the Northern Atlantic for the Russian Navy. The nuclear dimension is different. The Russian Northern Fleet is the largest, the most advanced and the most strategically important fleet in the Russian Navy. Its missions are not limited to the Arctic region alone, but are explicitly global; the Northern Fleet should be in a position to operate in any remote corner of the planet deterring a nuclear attack on the Russian Federation. Some of the newest types of Ballistic Missile Submarines (Borei-class) and Nuclear Attack Submarines (Yasen-class) are operating from Arctic bases, as well as many surface battleships including the sole aircraft carrier that Russia has now (“Admiral Kuznetsov”). The choice of the Arctic region to host a critically important component of the national strategic deterrence force was to a degree involuntary—both the Black and the Baltic Seas are semi-enclosed and exits from them are easy to block, and the free access to the Pacific Ocean for Russia is restricted by the US military infrastructure in Japan, in South Korea and in Alaska. Today, Moscow invests a lot into enhancing and modernizing its military presence in the Arctic region including reopening some of the old Soviet installations that were put out of operation in 1990s and building new ones. These installations include search and rescue centers, deep-water ports, air bases and air-defense missile complexes. All these efforts notwithstanding, they clearly reflect defensive rather than offensive nature of Russia’s military posture in the Arctic region. The conventional Russia’s capacities in the region are not sufficient to confidently cut NATO communication lines in the Northern Atlantic and they can hardly justify an extended NATO forward naval deployment in the Arctic. Avoiding a self-destructive navel arms race in the Nigh North remains a critical challenge for both Russia and its Western adversaries. Environment and Social issues Russia’s Arctic region is warming at a rate that is three times faster than the global average. In some parts of this vast territory (e.g. the North-Eastern tip of the Eurasian continent) the speed of warning is even higher. There is a widely shared view that global warming might have a positive impact on the region opening new opportunities in agriculture, transportation, fisheries, offshore oil and gas drilling and so on. Indeed, some of these opportunities might prove to be very real. However, the likely negative repercussions of global warming for the Arctic should not be underestimated. These include an accelerated coastal erosion, increased frequency of floods and other natural disasters decay of local ecosystems. The most visible manifestation of global warming detrimental impact on the region is permafrost thawing, which is expected to affect at least two thirds of the infrastructure in the coming years, including houses, bridges, railroads, highways, sea and river ports, airports and so on. The likely accelerating rise of sea levels would also have profound implications for the region; the West Siberian Lowlands are particularly vulnerable and a part of this huge landmass might ultimately turn into a seabed. Since Russia cannot stop global warming on its own, it pursues policies of climate change adaptation, including enhanced permafrost monitoring, enforcing new construction standards, creating additional wildlife sanctuaries for endangered species and reducing black carbon emissions. On top of the growing climate change pressure, Russia has to face many social problems in its Arctic region. The overall Arctic population of the country is steadily declining all the time since the disintegration of the Soviet Union. Though the decline is not very steep—up to 20 thousand people a year,—for a rather modest Arctic community it is nevertheless quite significant. The Arctic salaries usually exceed Russia’s average, but the costs of living in the region are also higher than in the South. Long and dark winters, harsh cold winds and generally inhospitable environment do not provide incentives to settle in the region. The federal government is trying to cope with this problem by offering affordable housing loans, investing into public transportation and health systems, supporting local colleges and Universities and subsidizing social and cultural life in the region. A lot will depend on whether the Russian leadership has the needed resources to continue these initiatives for a long time and whether economic activities in the Arctic can go far beyond extracting mineral resources, fishing and transportation. Like many other Arctic countries, Russia faces many challenges related to indigenous communities residing in the North. Altogether these communities amount to approximately 250 thousand people belonging to at least forty different ethnic groups. Climate change is only one side of the problem that these groups face today though it contributes to shifting animal migration patterns, disrupting subsistence practices like reindeer herding and fishing, inundating villages and threatening traditional ways of life. However, even putting aside global warming one should confess that oil and gas exploration as well as other large-scale mineral resources extraction projects often lead to pollution and displacement of indigenous peoples from their ancestral lands. At the same time, being scattered along very large territories, indigenous peoples face difficulties in accessing healthcare, education, and legal services. It is not easy to combine traditional cultural and social practices with successful careers in modern business or in the rapidly changing public sector. There are no magic solutions to indigenous people’s problems. Yet, the existing Russian and foreign experience suggests that that the severity of these problems can be significantly reduced by implementing a broad range of economic, administrative, legal and social actions. These actions should include engaging representatives of indigenous population into bodies of local self-governance, shifting economic modernization plans from extensive growth to sustainable development, building resilient private-public partnership with local NGOs engaged, creating systems for assessing the impact of climate change on indigenous communities and involve them in environmental monitoring. First published in the Guancha.cn.

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском In the current global disorder, the countries that comprise Latin America are simultaneously emerging as key players in tipping the balance of global power and are courted by major powers seeking influence and access to their natural resources, infrastructure, and services. For a decade, China has been growing in importance in the region, driven by its interest in establishing itself there through the Belt and Road Initiative, loans, investment, and construction, challenging the United States for relevance on the continent as a preferred ally. Currently, another player of the magnitude of India is slowly but surely making inroads in Latin America in trade, financing, and political relations, and is being courted by many Latin American states as an alternative to the risks that staking everything on an alliance with China can entail. Brazil, the undisputed regional leader, maintains privileged relations with both Asian giants, and the three countries cooperate and share interests and forums, such as the BRICS+ and the G20+, where common projects are developed. Introduction: a relationship with historical background The end of the Cold War and the rise of globalization led to growing regional competition in Asia, focused on both political influence and economic dominance. One of the most significant developments in the aftermath of these transformations has been the consolidation of China as a regional and, subsequently, global power. In the current context, China, India, and other nations are seeking to expand their alliances and redefine their strategies, including their relationship with Latin America, a region that has experienced multiple phases of engagement with external actors throughout its history. During the 19th and 20th centuries, interaction was centered on Europe and the United States; however, since the 21st century, the dynamics have diversified and taken on a multipolar character. Today, Latin American countries are the object of interest of various powers, from China and Japan to India and Iran. While China's presence in Latin America is evident and significant, India has traditionally maintained a more distant stance, except for Brazil.1 For decades, the limited interaction between India and Latin America was mainly attributed to factors such as geographical remoteness and lack of strategic opportunities. However, this perception has changed since Prime Minister Narendra Modi came to power in 2014. In recent years, China has considerably expanded its influence in the region through various mechanisms, while India seeks first to integrate into this dynamic and, in the medium, to compete with China in certain areas. China has established itself as one of Latin America's main trading partners, as well as one of its largest global lenders and investors.2 Its influence does not currently compare with that of India, but rivals that of the United States, the only country that surpasses it in terms of exports and imports in the continent, and the European Union in multiple sectors. In the political and diplomatic sphere, China has made significant progress, such as persuading five Latin American countries - Costa Rica, the Dominican Republic, El Salvador, Nicaragua and Panama - to transfer their diplomatic recognition from Taiwan to the People's Republic of China, although Honduras, Guatemala and Paraguay are still doing so. It has also established alliances with countries sanctioned by the US - Cuba, Nicaragua, and Venezuela - which it has supported with loans, military cooperation, and investment. However, in a context of global uncertainty, several Latin American countries are seeking to diversify their strategic alliances and reduce the risks of excessive dependence on a single power. In this scenario, India emerges as a relevant actor, with the potential to balance China's presence in the medium term in key sectors such as trade, infrastructure, supply chains, technology and defence, where India still has ample room for growth in the continent. China in Latin America: economic and strategic expansion China has indisputably been the most influential actor in Latin America between the two Asian powers, especially in the economic sphere, standing out for its participation in infrastructure projects in the Southern Cone as part of the Belt and Road Initiative. Since the beginning of the 21st century, its presence in the region has grown rapidly, with Chinese state-owned companies consolidating themselves as key players in strategic sectors such as energy, infrastructure, and technology, surpassing in some areas even the United States, traditionally dominant in these areas. In addition, China has strengthened its influence through cultural and diplomatic mechanisms. The links between China and Latin America have historical roots dating back to the 16th century, when the Manila Galleon facilitated the exchange of goods such as porcelain, silk and spices between China and the Viceroyalty of New Spain. After the independence of Latin American countries in the 1840s, there was a major Chinese migration, with hundreds of thousands of workers employed on sugar plantations, in mines and as servants in countries such as Cuba and Peru, a phenomenon that persisted throughout the 19th century. Today, Brazil, Cuba, Paraguay, Peru, and Venezuela are home to the largest Chinese communities on the continent. Initially, most Latin American countries did not recognize Mao's government after the founding of the People's Republic in 1949; however, following US President Richard Nixon's visit to China in 1972, most Latin American states established diplomatic relations with Beijing, thus initiating a period of cooperation in the cultural, economic and political spheres. On the economic front, China has established itself as a major player. In 2000, the Chinese market represented less than 2 % of Latin American and Caribbean exports, but its demand, especially for raw materials, has grown exponentially.3 By 2024, China would absorb 17% of these exports, with a value of more than 500 billion dollars.4 The main products exported by the region include soybeans and other vegetables, copper, oil and other raw materials, while imports from China consist mainly of manufactured goods. In countries such as Brazil, Chile and Peru, China has become the main trading partner.5 The strengthening of economic ties has been formalized through comprehensive strategic partnerships with Argentina, Brazil, Chile, Ecuador, Mexico, Peru, and Venezuela. China has also signed free trade agreements with Chile - the first country in the region to do so in 2005 - Costa Rica, Ecuador, Nicaragua, and Peru, while negotiations with Uruguay remain stalled. Within the framework of the Belt and Road Initiative, twenty-two countries in Latin America and the Caribbean have signed agreements with China, which have facilitated investments and loans amounting to more than USD 9 billion, equivalent to 6 % of China's total investment abroad. These investments, managed through the China Development Bank and the Export-Import Bank, have largely gone to energy and infrastructure projects, in many cases in exchange for oil. Venezuela has been the main recipient, doubling the amount received by Brazil, the second largest recipient.6 China's impact in Latin America is manifested in infrastructure development and the energy sector. Chinese investments have financed the construction of refineries and processing plants in countries with coal, copper, natural gas, oil, and uranium deposits. In the case of copper, China is the main buyer of Chilean production, purchasing more than 40 % of the country's exports. China has also taken a special interest in lithium, with significant investments in Argentina, Bolivia and Chile, countries that make up the so-called 'Lithium Triangle' and account for approximately half of global lithium reserves, although the development of these projects has raised environmental concerns.7 At the same time, China has promoted the financing of renewable energies, with outstanding initiatives such as the largest solar plant in Latin America in Jujuy, Argentina, and the Punta Sierra wind farm in Coquimbo, Chile. Since former Chinese President Jiang Zemin's historic thirteen-day tour of Latin America in 2001, high-level political exchanges have intensified. President Xi Jinping has visited the region five times since coming to power in 2013, most recently in November 2024, when he reaffirmed the construction of major projects, including the port of Chancay in Peru.8 China has financed various infrastructure projects in Latin America, including airports, roads, ports and rail networks. Chinese companies control more than a hundred ports around the world, of which at least a dozen are in Latin America and the Caribbean.9 In terms of technology and communications, China has promoted projects in artificial intelligence, smart cities and 5G networks, with the participation of companies such as Huawei. Likewise, cooperation in space has become relevant, with the installation of the largest Chinese space base abroad in Argentine Patagonia and the construction of satellite ground stations in Bolivia, Brazil, Chile, and Venezuela.10 China has also consolidated its presence in Latin America through soft power strategies, strengthening cultural and educational ties through the Confucius Institute, student scholarships and the expansion of Spanish-language media, such as CGTN and Xinhua. Furthermore, it has reinforced its image as a supportive actor at the international level, which was evidenced during the COVID-19 pandemic with the supply of vaccines and medical equipment to governments in the region. In this context, China's influence in Latin America is projected as a long-term phenomenon, with implications that span the economic, political, and cultural spheres, in a scenario in which other powers, such as India, are also seeking a presence in the region. India's arrival and expansion in Latin America Historically, relations between India and Latin America have been limited due to geographical distance, the absence of common strategic interests and the lack of a consolidated bilateral agenda. Latin America occupied a marginal role in India's foreign policy, despite diplomatic visits such as Prime Minister Jawaharlal Nehru's 1961 visit to Mexico and Indira Gandhi's 1968 visit to eight countries in the region. A significant change occurred in the 1990s, when India signed trade agreements with seven Latin American countries and promoted the FOCUS LAC program (1997), designed to strengthen economic relations with the region.The turning point in India's perception of Latin America came in 2014, when the newly appointed prime minister, Narendra Modi, participated in the BRICS Summit in Brazil. The expansion of the India-Mercosur Preferential Trade Agreement, initially signed in 2004, but extended in 2016,11 evidenced India's commitment to strengthening its ties with the region. Bilateral trade between India and Latin America currently stands at USD 43 billion, with Brazil, Mexico, and Colombia as its main trading partners. Like China, India finds in Latin America a key source of mineral resources, such as copper, lithium, and iron ore, essential for its growing industrial demand. An example of this was the strategic partnership agreement signed in 2023 between India's Altmin Private Limited and Bolivia's state-owned lithium company. The region has also become an important partner in the supply of oil: in recent years, Venezuela, Mexico, and Brazil have accounted for 30 % of crude oil exports to India. In return, India exports products from strategic sectors such as information technology and pharmaceuticals to Latin America. India is also involved in infrastructure development in the region, investing in railways, roads, and energy supply systems.12 In 2022, India's foreign policy gave a new signal of rapprochement with Latin America by bringing the Latin American members of the G20 (Argentina, Brazil, and Mexico) under the jurisdiction of the foreign minister, rather than a junior minister. In April 2023, Foreign Minister Subrahmanyam Jaishankar made a historic visit to Guyana, Panama, Colombia, and the Dominican Republic, marking the first time an Indian foreign minister had visited these countries. This tour reflected the growing importance of Latin America on India's diplomatic agenda as the region with the second highest number of projects spearheaded after Asia: India currently has 181 projects in Asia, thirty-two in Latin America and the Caribbean, and three in Central Asia and Oceania. These initiatives have expanded qualitatively in recent years, especially in terms of the size of the credit lines and the complexity of the projects.13 While on 3 August 2023 and on the sidelines of the ninth meeting of the Confederation of India-Latin America and Caribbean Industry in New Delhi, Jaishankar advocated deepening India-Latin America engagements, especially in the areas of agriculture, supply chain diversification and mutual resource sharing partnership. Thus, while China has captured greater political and diplomatic attention in the region, India's presence has raised expectations.14 Unlike China, India is a democracy and faces similar challenges to many Latin American countries, which has facilitated its rapprochement with the region. Its economic growth has sparked interest in Latin America, leading several governments to prioritize relations with India in their foreign policy strategies. Although its expansion in the region responds in part to the intention of countering China's influence, India seeks to consolidate itself as an actor with a vision of strategic autonomy and a stance aligned with non-alignment, promoting relations based on cooperation and the diversification of partners. However, its presence still faces structural limitations, such as the lack of effective regional integration and its limited participation in key Latin American blocs such as the Central American Integration System (SICA), the Pacific Alliance, Mercosur or the Community of Latin American and Caribbean States (CELAC).15 At the G20 summit+, held in Rio de Janeiro on 18-19 November, Modi took the opportunity to hold bilateral meetings, apart from with Brazilian President Lula, with some of India's most important partners in the Latin American region, including Argentina and Chile, where a bilateral meeting with President Gabriel Boric marked the expansion of the India-Chile Preferential Trade Agreement, described by Chile as a genuine Comprehensive Economic Partnership Agreement on a par with those India has signed with the United Arab Emirates, South Korea or Japan, overcoming with Chile New Delhi's reluctance to corroborate these free trade agreements. India is aware that its influence in Latin America is minor compared to that of China, but it also recognizes its growth potential.16 One of its main resources to strengthen its presence in the region is soft power, especially through its cultural projection. Elements such as the Bollywood film industry, gastronomy, and traditional practices such as yoga have gained popularity in Latin America, facilitating the expansion of India's influence in the region and contributing to its positioning as an emerging global partner. Partners in BRICS+: China and India's influence on Brazil Both China and India have a special relationship with the Latin American giant, Brazil, as the three countries share several international forums, most notably BRICS+, of which Argentina - a candidate country and finally accepted as a member at the BRICS summit in Johannesburg in August 2023 - dropped out in early 2024, after Javier Milei's victory in the presidential elections. Brazil has been a key country in the expansion strategy of China, which has become the main trading partner and one of its main investors, and now of India in Latin America, especially due to the economic size, natural resources and regional leadership capacity of the Brazilian giant.17 All in all, China has a more dominant presence in the Brazilian economy, while India is gaining space in the technology, pharmaceutical and energy trade sectors. If the trend continues, India could strengthen its influence, but it is unlikely to overtake China in the short to medium term. Starting precisely with China, diplomatic relations with Brazil have evolved significantly in recent decades, consolidating into a strategic link in the commercial, investment and technological spheres, except during Jair Bolsonaro's term in office between 2019 and 2023, when even China expressed concern over the hostile statements of the then Brazilian president.18 During the last two years the relationship has been on the right track and even in 2024 the fiftieth anniversary of the establishment of official relations was celebrated. In March 2023, Lula visited China with the aim of strengthening trade and political ties between the two nations, which had deteriorated during Bolsonaro's term in office. During the visit, an agreement was announced to trade in yuan instead of dollars, reducing dependence on the US financial system and strengthening Brazil's financial autonomy in the international arena.19 Apart from politics, and although Brazil has never joined the Belt and Road Initiative, bilateral Sino-Brazilian trade has grown steadily since the mid-2000s, dominated by the export of raw materials, especially oil, and attracting important Chinese state-owned companies such as China National Offshore Oil Corporation, China Petrochemical Corporation (Sinopec in its acronym) and China National Petroleum Corporation. Subsequently, Chinese investment diversified into strategic sectors such as power generation and distribution, with the presence of conglomerates such as State Grid and China Three Gorges, manufacturing, with the arrival of Chinese companies from various sectors, These include BYD, TCL, Gree, Midea and Xuzhou Construction Machinery Group, the mining sector, and the agricultural sector, where Chinese firms such as COFCO and Long-Ping High-Tech have expanded their operations, from product marketing to the manufacture of chemical inputs for agribusiness. In infrastructure, Chinese participation has been significant with projects driven by China Communications Construction Company and China Merchants Port, which in 2018 acquired the Paranaguá Container Terminal. The future seems to point towards increased Chinese investment in new communications infrastructure, energy transition and technology. In 2021, despite Bolsonaro's criticism, Brazilian regulators reversed their decision to ban Huawei from developing the country's 5G networks, which came weeks after China provided Brazil with millions of doses of COVID-19 vaccine20 , while two years later, the two countries announced their participation in joint technological projects such as the China-Brazil Earth Resources Satellite (CBERS) for monitoring the Amazon.21 India has also had a strong influence on Brazil, at least culturally, since Gandhi's time, as his teachings on non-violence gave rise to social movements and partly shaped the two countries' non-aligned foreign policy. Economically, Brazil is one of India's most important partners in Latin America, being the largest importer (over 41 %) and exporter (over 29 %) to India, with significant investments in sectors such as information technology, energy, mining, and automobiles. Already in 2022, India's exports to Brazil exceeded those of Germany, Australia, South Korea, or Indonesia. Brazil is now among the top ten export destinations from India, spurred by a 295% increase in refined oil sales. India's imports from Brazil increased, driven by purchases of soybean oil. Relations between Brazil and India have never been particularly intense, but under Lula's third presidency this has also changed. In the political sphere, they share strategic objectives, such as the reform of the UN Security Council, where they aspire to obtain a permanent seat, as well as their collaboration in global initiatives, such as the IBSA Dialogue Forum, the aforementioned BRICS+ and the G20+ of emerging economies. In 2020, the 'Brazil-India Defence Dialogue' was established for the first time and agreements were signed to expand technological collaboration in the military field. Brazilian companies such as Taurus have entered into partnerships with Indian companies, such as Jindal, for the joint production of armaments. In addition, Brazil is exploring the export of military technology, including cargo and training aircraft, armored vehicles and submarines, to which China, a traditional supplier of aircraft and equipment to several countries on the continent, including Brazil, responded in January 2025 by offering the Brazilian government the acquisition of the fourth-generation Chengdu-10 fighter.22 Finally, both states wish to diversify their external relations. India, concerned about its geopolitical rivalry with China, seeks a pragmatic balance between close relations with the US and other regional actors, such as in the Quadrilateral Dialogue (QUAD), while maintaining its long-standing ties with Russia. Historically, Brazil has sought to mitigate US influence in South America, something that continues under President Lula's government. However, like other Latin American countries, it is also aware of its economic vulnerability stemming from its high dependence on commodity exports to China and its current dearth of foreign investment. Another forum shared by Brazil, China and India is the G20+. The rotating presidency in 2024 was held by Lula da Silva, who focused the organization’s objectives on three priorities, highlighted in the final declaration: social inclusion and the fight against hunger and poverty; sustainable development, with energy transition and the fight against climate change and, thirdly, the reform of global governance institutions, both from China and India not only ratified the declaration, but even Narendra Modi devoted special attention to Brazil's priorities, echoing New Delhi's common interests in renewable energy, the elimination of poverty and hunger, and focusing on nutrition and food security.23 Xi Jinping, also present at the summit and later on an official visit to Brasilia, expressed his support for President Lula's proposal to create the Global Alliance against Hunger and Poverty, underlining China's commitment to inclusive and equitable development, while signing 37 bilateral agreements between Brazil and China in various fields, such as trade, finance, infrastructure and environmental protection.24 Conclusion: Still unequal competition China and India have adopted different strategies in their relations with Latin America, strategies that have been marked by time in terms of their interest in being present in the continent. While China has established itself as a dominant player in recent times and in terms of investment and project financing in the main Latin American countries, India has awakened in the last decade after a historical lack of interest in this area and is beginning to focus an increasing presence on matters such as technological cooperation and trade in strategic sectors, especially the supply of crude oil. In fact, both China and India have realized that the South American region is a key partner for the supply of raw materials to economies in continuous expansion and, in terms of international politics, the consolidation of new alliances in the so-called global south. India is a potential competitor in several economic niches, and in some of them it is even a major player, such as in information technology, the pharmaceutical sector, where Indian companies have maintained a leading position in exporting products to Latin America, and the automotive industry, where sales are fairly balanced. However, they are the exception that proves the rule, since in general terms, China maintains a substantial advantage in trade and investment figures in Latin America, operating on a completely different scale to India and the result of its interest for much longer. Another difference between the two Asian giants in terms of their influence in Latin America is their involvement in treaties, agreements, and deeper bilateral relations with Latin American countries. Indeed, one of the main challenges for India lies in the lack of a stable institutional framework through which to strengthen its relationship with Latin American countries, unlike China, which has long established trade agreements and strategic initiatives with various countries and regional blocs, starting with the Belt and Road Initiative itself. India has not yet developed comprehensive free trade agreements, cooperation mechanisms similar to China's, or bilateral agreements with supranational groupings such as SICA, CELAC, Mercosur or the Pacific Alliance, which constrains the growth of its trade. On the other hand, India has an advantage over China, such as the prestige of its traditional non-alignment and its historical representativeness of developing countries. In a region like Latin America whose countries recurrent structural obstacles, such as inflation, social and political instability and chronic infrastructure deficits, the geopolitical context and the ideological leanings of the different governments make China's presence, its network of trade agreements and its diversified investment strategy stable... until now, as this may change in the future. Diversifying risks and investments with options such as India represents a positive factor for Latin American countries, as well as a significant challenge for India. The relationship between India, China and Latin America is beneficial for Latin American countries, which are expanding their possibilities for bilateral cooperation on issues such as trade, climate change and security, while increasing competitiveness between the two Asian giants in a scenario that has traditionally been geographically and culturally distant, but which is currently of unquestionable interest to them. So far, China's predominance in the region seems to remain unchanged and it has even overtaken the United States as the main trading partner and source of investment in most South American countries. Competing in this division could take India several years, although the Chinese example itself shows that the arrival of agreements, treaties, cooperation, and investment from India could exponentially increase its influence in the continent in a few years' time. In recent times, Latin America has diversified its economic and diplomatic relations, reducing its dependence on a single strategic partner, be it China or the United States, another major player in this game of competition in the region. Although the decline in the role of the United States is notorious, precisely because of the irruption of the Chinese presence,25 especially in the economy, many countries have continued to move towards greater autonomy and diversification of their international ties, a trend that seems to be consolidating, regardless of the changes in US policy with the beginning of Trump's second term in office in the United States and his policy towards Latin America. Both the desire to diversify relations beyond the China option and the possible US disinterest in the region may benefit India's interests, although it is clear that China will continue to be the dominant actor in the region. References 1 GANGOPADHYAY, Aparajita. "India-China Competitions in Latin America: Some Observations", Global & Strategis, Th. 8, No. 1. January-June, 2014. Available at: http://irgu.unigoa.ac.in/drs/bitstream/handle/unigoa/4110/Jurnal_Global_dan_Strategis_8%281%29_2014_1-13.pdf?sequence=1 (accessed 13/3/2025).2 SESHASAYEE, Hari. "India vs. China in Latin America: Competing Actors or in Separate Leagues?", The Diplomat. 19 May 2022. Available at: India vs. China in Latin America: Competing Actors or in Separate Leagues? - The Diplomat https://thediplomat.com/2022/05/india-vs-china-in-latin-america-competing-actors-or-in-separate-leagues/ (accessed 13/3/2025)3 DADUSH, Uri. 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Available at: International Trade Outlook for Latin America and the Caribbean, 2024 (accessed 13/3/2025).6 ROY, Diana. "China's Growing Influence in Latin America", Council of Foreign Relations. 10 January 2025. Available at: China's Growing Influence in Latin America | Council on Foreign Relations https://www.cfr.org/backgrounder/china-influence-latin-america-argentina-brazil-venezuela-security-energy-bri (accessed 13/3/2025).7 RADWIN, Maxwell. "Chinese investment continues to hurt Latin American ecosystems, report says", Mongabay. 28 February 2023. Available at: Chinese investment continues to hurt Latin American ecosystems, report says https://news.mongabay.com/2023/02/chinese-investment-plagues-latin-american-ecosystems-report-says/ (accessed 13/3/2025).8 BAÑOS, Jordi Joan. "Xi returns to Latin America to win it over", La Vanguardia. 16 November 2024. Available in: Xi vuelve a América Latina para ganársela https://www.lavanguardia.com/internacional/20241116/10111790/xi-vuelve-america-latina-ganarsela.html#foto-1 (accessed on 13/3/2025).9 LIU, Zongyuan Zoe. "Tracking China's Control of Overseas Ports", Council of Foreign Relations. 26 August 2024. Available at: Tracking China's Control of Overseas Ports | Council on Foreign Relations https://www.cfr.org/tracker/china-overseas-ports (accessed 13//2025).10 EVAN ELLIS, R. et al. "How are the United States and China intersecting in Latin America?" Brookings. 25 September 2024. Available at: How are the United States and China intersecting in Latin America? https://www.brookings.edu/articles/how-are-the-united-states-and-china-intersecting-in-latin-america/ (accessed 13/3/2025).11 "Mercosur-India talks expected to expand preferential trade agreement", mercopress.com. 15 August 2016. Available at: Mercosur-India talks expected to expand preferential trade agreement - MercoPress https://en.mercopress.com/2016/08/15/mercosur-india-talks-expected-to-expand-preferential-trade-agreement (accessed 13/3/2025).12 SESHASAYEE, Hari. "Latin America's tryst with the other Asian giant, India", Wilson Center. May 2022. Available in: Microsoft Word - LAP PUB Template.docx (accessed 13/3/2025).13 JAISHANKAR, Subrahmanyam. The Indian way. Strategies for an uncertain world. Harper Collins India, 2020, pp. 107-108.14 "Jaishankar bats for deeper India-Latin America engagement', The Hindu. 3 August 2023. Available at: Jaishankar bats for deeper India-Latin America engagement - The Hindu https://www.thehindu.com/news/national/jaishankar-bats-for-deeper-india-latin-america-engagement/article67153329.ece (accessed 13/3/2025).15 SESHASAYEE, Hari. "Redrawing India-Latin America Relations in the 21st Century," Observer Research Foundation, Issue Brief no. 634. April 2023. Available at: Redrawing India-Latin America Relations in the 21st Century https://www.orfonline.org/research/redrawing-india-latin-america-relations-in-the-21st-century (accessed 13/3/2025).16 SESHASAYEE, Hari. "The G20 turns New Delhi's eyes on Latin America", Observer Research Foundation. 10 December 2024. Available at: The G20 turns New Delhi's eyes on Latin America https://www.orfonline.org/expert-speak/the-g20-turns-new-delhi-s-eyes-on-latin-america (accessed 13/3/2025).17 BLASCO, Emili J. "Brasil: la persistente ambición de un país que se imagina a sí mismo como continente", Middle Powers: Transitando hacia un orden multipolar. IEEE Strategy Notebook, 225. June 2024. Available at: Ch. 5. Strategy Notebook 225.pdf (accessed 13/3/2025).18 SPRING, Jake. "Bolsonaro's anti-China rants have Beijing nervous about Brazil", Reuters. 26 October 2018. Available at: Bolsonaro's anti-China rants have Beijing nervous about Brazil | Reuters https://www.reuters.com/article/world/bolsonaros-anti-china-rants-have-beijing-nervous-about-brazil-idUSKCN1MZ0DR/ (accessed 13/3/2025).19 "Brazil and China agreed to trade in each other's currencies to bypass the dollar", Infobae. 30 March 2023. Available in: Brazil and China agreed to trade in their currencies to bypass the dollar - Infobae https://www.infobae.com/america/mundo/2023/03/29/brasil-y-china-acordaron-comerciar-en-sus-monedas-para-eludir-el-dolar/ (accessed 13/3/2025).20 RIVERA, Jhonnattan. "Brazil approves 5G spectrum auction rules, no ban on Huawei", Techbro. 1 March 2021. Available at: Brazil approves 5G spectrum auction rules, no ban on Huawei - TechBros https://somostechbros.com/2021/03/01/brasil-aprueba-reglas-de-subasta-del-espectro-5g-sin-prohibicion-a-huawei/ (accessed 13/3/2025).21 CARIELLO, Tulio. "50 years of Brazil-China relations: Solid foundations for a sustainable future", Red China & Latin America. 1 September 2024. Available at: 50 años de relaciones Brasil-China: Bases sólidas para un futuro sostenible / 50 anos de relações Brasil-China: Bases sólidas para um futuro sustentável - Red China y América Latina https://chinayamericalatina.com/50-anios-de-relaciones-brasil-china-bases-solidas-para-un-futuro-sostenible/ (accessed 13/3/2025).22 "China offers Brazil the Chengdu J-10 to fill fighter gap", Galaxia Militar. 9 January 2025. Available in: China offers Brazil Chengdu J-10 to fill fighter gap. - Galaxia Militar, https://galaxiamilitar.es/china-ofrece-a-brasil-el-chengdu-j-10-para-cubrir-la-brecha-de-aviones-de-combate/ (accessed 13/3/2025).23 "Prime Minister's Remarks at the G20 Session on "Social Inclusion and the Fight Against Hunger and Poverty", Prime Minister's Office. 18 November 2024. Available at: Press Release: Press Information Bureau, https://pib.gov.in/PressReleasePage.aspx?PRID=2074413 (accessed 13/3/2025).24 VILELA, Pedro Rafael. "Brazil and China sign 37 bilateral agreements", Agencia Brasil. November 21, 2024. Available at: Brasil y China firman 37 acuerdos bilaterales | Agência Brasil, https://agenciabrasil.ebc.com.br/es/politica/noticia/2024-11/brasil-y-china-firman-37-acuerdos-bilaterales (accessed 13/3/2025).25 RODRÍGUEZ GONZÁLEZ, María. "Iberoamérica ¿prefiere a mamá China o a papá Estados Unidos?", bie3: Boletín IEEE (Spanish Institute for Strategic Studies), 34. April-June, 2024, pp. 542-559. Available at: https://dialnet.unirioja.es/servlet/ejemplar?codigo=672227&info=open_link_ejemplar (accessed 13/3/2025).

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. 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