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Donald Trump's trade policies, characterized by the imposition of tariffs, are eliciting a significant and potentially transformative response from nations within the global south. The article draws a parallel with the historical example of Joseph Chamberlain, a British advocate of tariffs in the early 20th century, to highlight the contrasting approaches and outcomes. While Chamberlain envisioned tariffs as a means of strengthening the British Empire through preferential trade agreements, Trump has utilized them as a tool for asserting US economic dominance and redressing trade imbalances. This divergence in intent and application is proving to be a catalyst for a political realignment, as countries affected by Trump's tariffs are exploring alternative alliances and strategies to safeguard their economic sovereignty.
Initially, Trump's strategy of imposing tariffs on vulnerable, US-dependent economies appeared to be effective in forcing them to lower tariffs or make investment pledges. However, in recent months, a counter-reaction has emerged, with leaders from Brazil, Russia, India, and China (BRICS nations) demonstrating resistance to Trump's tactics. This resistance suggests that Trump's tariffs could ultimately backfire by creating an axis of resistance among nations seeking to bypass the economic power of the United States. The concern among these nations is that unchecked tariff diplomacy will not only weaken their economies but also undermine their sovereignty. The Chinese president, Xi Jinping, has emphasized the need to unite against unilateralism and protectionism, echoing the sentiments of other leaders such as Luiz Inácio Lula da Silva of Brazil, Narendra Modi of India, and Vladimir Putin of Russia, all of whom have been victims of Trump's trade policies.
The article highlights specific instances where Trump has used tariffs to exert political pressure on countries, unrelated to trade issues. Mexico, for example, has taken actions against organized crime in an attempt to avoid a threatened 30% tariff. India views the doubling of tariffs on its exports to the US as unfair punishment for increasing its purchase of discounted Russian oil. The Canadian prime minister's recognition of a Palestinian state was cited by Trump as making it difficult to reach a trade deal with Canada. In Brazil, Trump is attempting to halt the "witch-hunt" against his ally, former president Jair Bolsonaro, and challenging the Brazilian Supreme Court's authority. He has also sanctioned Supreme Court Justice Alexandre de Moraes and demanded the lifting of restrictions on US social media companies. These actions demonstrate Trump's willingness to use US economic leverage to advance not only US economic interests but also to interfere in the internal affairs of other nations.
The threat of being denied access to the American consumer market has become Trump's primary diplomatic weapon, wielded against recalcitrant foreign governments. However, the increasing demands and changing conditions are prompting victims of Trump's tariffs to consider collective protection, potentially through the BRICS alliance. The BRICS economies, representing over 55% of the global population and an estimated 37.3% of global gross domestic product based on purchasing power parity, offer a potential counterweight to the Western G7. The key question is whether tariffs and accompanying political demands will force a change in the bloc's character, transforming it into a more cohesive anti-Western alliance. This would be a significant shift, as the BRICS grouping has historically included countries with varying levels of alignment with the United States.
Lula's thinking appears to be evolving in response to Trump's actions, fueled by a wave of popular nationalism in Brazil. While he had hoped to maintain a neutral stance and avoid turning BRICS into an explicitly anti-Western alliance, Trump's demands have forced him to recalibrate. This recalibration includes a greater emphasis on diversifying trade partners, strengthening BRICS, and finding new friends. Brazil is also exploring the possibility of bypassing the US dollar in trade, a long-standing goal of China. Lula has argued that Brazil should not be obligated to purchase dollars for trade with other countries and that the BRICS group should explore the possibility of creating its own currency for trade.
While Brazil is currently in a relatively strong position to withstand Trump's tariffs, as the US absorbs only 12% of its total exports, certain industries such as coffee oil, seafood, textiles, footwear, and fruit will be negatively impacted. The government is offering emergency credit lines to firms seeking alternative markets. Analysts estimate that a significant portion of Brazilian exports to the US could be redirected, limiting the potential hit to economic growth. India, the fourth-largest economy in the world, is also facing pressure to choose a side. The Indian government insists that it has a large enough economy to defy Trump and protect its small farmers, who are the primary target of US trade negotiators. However, it is noteworthy that India now faces a higher US tariff rate than China, a country that successive US administrations had hoped India would help contain.
In a potentially significant development, India's government think tank has proposed easing foreign direct investment rules that require additional scrutiny for Chinese companies. Another key test will be whether China is allowed to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the successor to the Trans-Pacific Partnership (TPP), which was abandoned by Donald Trump in 2017. This week, China and India continued to strengthen ties, announcing that they would resume direct flights, facilitate visas, and step up trade. While Trump is currently hailing his victories with the EU, Japan, and South Korea and claiming that the US treasury is raising billions in extra revenue, the tariff war is a long-term process with battle lines only slowly being drawn up. It would be deeply ironic if this ultimately isolated America from the rest of the world by incentivizing other countries to trade with one another, achieving the polar opposite of what Chamberlain intended with imperial preference. Trump's actions are fundamentally altering the geopolitical landscape, compelling nations to reassess their alliances and strategies for economic survival in an increasingly uncertain world. The long-term consequences of this shift remain to be seen, but it is clear that Trump's tariff policies have triggered a profound and potentially irreversible realignment of global power dynamics. The global south is now compelled to more closely collaborate on matters of trade, security, and diplomacy.
Furthermore, the rise of new technologies such as blockchain and cryptocurrencies could provide countries with alternative methods of conducting trade and circumventing traditional financial institutions. These technologies could enable greater transparency, efficiency, and security in cross-border transactions, potentially reducing reliance on the US dollar and the traditional banking system. As countries seek to diversify their economic relationships and reduce their dependence on the United States, these alternative technologies could become increasingly important. The ongoing trade war is also accelerating the trend towards regionalization, as countries seek to strengthen economic ties with their neighbors and create regional trade blocs. This regionalization could lead to a more fragmented global economy, with different regions operating under different rules and standards. The future of the global economy will depend on the ability of countries to adapt to these changing circumstances and to find new ways to cooperate and compete. The trade war serves as a warning about the dangers of protectionism and unilateralism, and the importance of maintaining a rules-based international order. As the world becomes more interconnected and interdependent, the need for cooperation and dialogue will only increase. The next few years will be crucial in shaping the future of the global economy and determining whether the world can avoid a descent into protectionism and conflict. It is critical that policymakers take a long-term perspective and prioritize the needs of all countries, not just their own.
Source: Trump tariffs are reshaping old alliances as the global south plots its own path