Trump’s recent wave of tariffs, first announced in April, went into effect on August 2nd. By the deadline, many countries, including the UK, Japan and Indonesia, rushed to finalise trade deals with Washington. When the final list was revealed, some were relieved to face lower tariffs than expected, while others, like Brazil, were surprised with higher tariffs. This raised an important question: What does all of this tell us about the trade war era we are living in today, and what to expect next?
Making Sense of Tariffs Under Trade War
Tariffs are not inherently unlawful or economically problematic. However, they become illegal if they violate the rules of the General Agreement on Tariffs and Trade, for example, through different imposition practices on various nations, disregarding the most favoured nation principle. Moreover, they are economically problematic if they have inflationary effects. In this context, what makes the US tariffs particularly significant is that they are likely to create numerous challenges for businesses and raise serious questions on their lawfulness, especially under international law. Beyond that, the growing interplay between tariff policy and its implications for future geopolitics, especially regarding the US–China strategic rivalry, further amplifies their importance. With the tariff storm easing for now, it may be the right moment to pause, reflect, and analyse what has been happening and what lies ahead.
What Happened?
Bending Under Pressure, or Waiting for the Calm
Trump imposes tariffs, disregarding the rules of international trade law, much like a landlord increases rent, ignoring the provisions of the lease agreement. There is no guarantee for both to knock on the door again – the former for rising tariffs, and the latter for increasing the rent again, simply because they hold the power to do so.
Trade wars revealed that a few countries, like China, had the will to resist, at least for a while, to the unpredictable US policies. This will go beyond China’s capability; it reflects China’s clear understanding that it is the primary target of US economic policies. Consequently, China’s retaliation is a strategic move to determine the extent to which it can negotiate, out of necessity to challenge the US. In this light, China’s response is not only about its ability, but about the necessity to challenge the US.
What is surprising is that the second most capable of those with a retaliatory power, both in terms of its economic capacity and its tools at hand, opted not to retaliate, but instead rushed towards a deal. The outcome is a flat 15% US tariffs on most EU exports, higher than what the UK agreed with the US, and way higher than pre-Trump levels. Many, including the leadership of France and Germany, stated that von der Leyen may have used coercive tools, and as such, the EU’s Anti-Coercion Instrument could be used more effectively. This raises the question of what lies ahead in these times of war.
What Lies Ahead?
Tariffs as a Political Lever
The current situation proves that economic tools are increasingly used as a way of exerting power and openly directing states to act in a certain way. Similar to sanctions, they are less costly compared to a war and easier to justify. Trump’s imposition of sweeping 50% tariffs on Brazil over Trump’s political grievances, especially about the prosecution of Bolsonaro, is proof of that. In fact, this is not the first time Trump has imposed tariffs over a political concern. During his first term, Trump threatened to impose tariffs on Mexico in 2019 to pressure the Mexican government into taking stronger action on migration control at the border. This time, what is different is that Trump’s threats serve broader ambitions, in line with the self-image he seeks to assert. The imposition of tariffs on India over its trade with Russia is a result of his efforts to position himself as a “peacemaker” capable of ending the Russia-Ukraine war within 24 hours, though the deadline has already passed six months ago.
Both Brazil and India share some commonalities. Both are strong candidates in an increasingly multipolar world to create a pole of influence, maybe not as strong as China and the US. Moreover, both are expanding their influence in the global arena. That’s why the US use of tariffs against these two countries not only shows Trump’s concerns over his ally Bolsonaro, but also Trump’s efforts in silencing those who claim to rise in power and influence. India’s response in this regard is significant, as it has stated that it will continue its trade with Russia, not only out of solidarity with Russia, but also to gain leverage in shaping its stance against China. This indicates that economic tools will become increasingly central in the geopolitical game, and they will undoubtedly determine the rise and fall of geopolitical powers.
What to Do?
The US is breaking the rules it once helped shape, to remake them. Reversing the roles, China is now cast as the defender of multilateralism. The reasons for this are two-fold: one side believes that current rules no longer serve their interests and strives to create a more advantageous environment, while the other now knows how to benefit from the existing regulations and aims to secure a role in shaping the future global rule-making order.
In fact, rules are not written in stone. The GATT came into being just over 75 years ago. Before that, countries applied higher quotas and tariffs to others for several reasons, including to protect their industries and national security. However, the lowering of tariffs and the limitation of quotas were driven by the search for a recovering post-war economy, an increasing growth rate, and the rise of liberal economic policies. It seems that it once served its purpose as the “guardian” of the liberal order, but it no longer does. Therefore, it should come as no surprise to witness the emergence of a new framework for global trade governance.
The time has come to stop playing by yesterday’s rules. Every nation should claim its seat at the table in trade governance forums, not as a spectator but as a rule-maker. More importantly, no country should resign itself to orbiting either Washington or Beijing. True power lies in balance—leveraging both sides without being owned by either. That means seizing control of chokepoints, from shipping lanes to energy routes, and fast-tracking connectivity projects in trade, transport, and energy. Only then can nations negotiate on their own terms—when they want, how they want.
