The often-forgotten word ‘tariff’ is gaining newfound relevance, taking on a special meaning and significance. The groundwork for this renewal was laid during President Trump’s administration. We are likely only in the early stages of the ‘reincarnation of tariffs,’ and the ongoing discussion on the modern nature of trade wars offers much promise for both academic and practical circles interested in the issue.
Back to Tariffs
Once straightforward in its use and effect, tariff policy has become more nuanced, ambiguous, and multi-layered. To borrow from a famous work, the phenomenon of modern tariffs and related trade relations has developed its own range of complexities, akin to ‘Fifty Shades of Grey.’ This diversity is reflective of the specificity of our era and the increasing prevalence of certain phenomena in international ecopolitics, namely:
(1) Economic nationalism or autarky;
(2) The ‘weaponization’ of economic pressure tools;
(3) The use of trade instruments as coercion (some might even use the term ‘extortion’) to achieve external goals.
These and several other related economic ‘theoretical schools’ or ‘political handwritings’ are shaping the geo-economic system for the emerging geopolitically ‘disorderly order.’ In this environment, economics will increasingly serve the agenda of gaining global or regional dominance, and economically ‘defensive’ or ‘offensive’ wars could become the norm in the aforementioned ‘disorderly order.’
In short, the topic of a globally emerging (or transforming) economic system is certainly vast, and I have addressed several aspects of it in previous publications. This time, I will focus on the trade or ‘coercive’ side of tariff policy. To that end, I will discuss issues that will serve as a reminder for the informed reader and provide useful material for those now interested in the nuances of tariffs for further research.
As a preface, I will say…
We should not view the shift away from an integrated global economic system as Trump’s ‘exceptional sin.’ The process began much earlier, and its recent acceleration emerged from the search for ways to address economic inequality. The fundamental issue was understanding the proper balance between the pros and cons of a market economy. Relying solely on market instincts and blind faith in self-regulation has deepened social inequalities in developed countries, fueling the rise of various social vices. The stability of the middle class, along with the knowledge and skills it accumulated over the years, has been jeopardized.
Moreover, the competitiveness of advanced industrial systems was threatened as industrial capacity shifted to developing countries, drawn by cheap labor and minimal costs. Alongside economic factors, ‘undisclosed’ motivations for this relocation included the search for jurisdictions with more lenient regulatory standards (including labor rights).
The response to these trends is reflected in the new industrial policy legislation enacted in the U.S. and some Western countries. The goal was clear: protect the domestic market, implement protectionist measures, and stimulate national production through state subsidies and other programs.
Despite this reaction, the lost years have left a negative impact. The necessary balance between the state and powerful corporations, which should have served major purposes—such as national security, economic self-sufficiency, and social resilience—has been disturbed. As a result, additional measures became necessary, though these measures may have caused their initiators to lose sight of the appropriate scale and significance.
U.S. Tariff Policy on a Documentary Basis
The focus on contemporary U.S. tariff policy is understandable: the current White House administration is considered the primary architect of the 21st-century tariff vision.
I have already noted the plurality and nuances of this vision. However, for clarity in considering specific issues, it is important to address the documentary origin of this vision—the official source of its formal justification.
In January of this year, a document titled ‘America First Trade Policy’ was published on the White House website (America First Trade Policy).
The essence of the document was explained by the priorities outlined in this ‘policy paper,’ which included:
(1) The American economy;
(2) The American worker;
(3) America’s national security.
Based on these priorities, it was stated that trade policy is a critical component of national security and necessary for reducing dependence on other countries. It was also noted that to achieve these objectives, the U.S. would resort to ‘appropriate measures,’ with tariffs playing a particularly important role.
While other ‘measures’ or issues (trade agreements, exchange rates, intellectual property, etc.) are discussed in the aforementioned policy paper, tariffs remain a central focus. The administration directly addresses the role of tariffs in international negotiations and in correcting existing ‘inequalities.’
Two Different Versions of the ‘Trade War’
The trade confrontation during Donald Trump’s first presidency and the attempts to initiate a trade war during his second presidency illustrate the evolution of the U.S. approach to tariffs.
Notably, during the first presidency, the tariff issue primarily aimed at resolving trade differences. The agreement signed with China was intended to address the trade imbalance between the two countries and eliminate unacceptable practices by China.
However, Trump’s approach did not fully succeed. In the context of the trade imbalance, China partially (by 60 percent) fulfilled the promise of additional American product purchases (amounting to approximately $200 billion). As a result, the so-called first phase of the U.S.-China trade agreement was not followed up.
In contrast, starting January 20, 2025, tariff pressures have expanded beyond narrow trade issues and are now aligned with a foreign policy agenda. The connection of tariffs to non-economic issues, such as illegal immigration into the U.S. or the importation of illegal drugs, reflects the universalization of the tariff instrument. Returning to the America First Trade Policy document, tariff pressure, framed by economic nationalism, is now seen as part of U.S. geopolitical interests, which has reshaped the concept of tariffs into a tool with both economic and foreign policy components. This transformation signals a fundamental shift in tariff and trade relations that is likely to persist.
The Double Effect of Tariffs…
The tariff policy discussed here, along with its potential continuation, has faced intense criticism. Opponents widely highlight both the negative effects already observed and the expected consequences. In this article, I will focus on a few key aspects of the anti-tariff campaign.
(1) U.S.-China Geopolitical Rivalry: The primary geopolitical target of the tariff policy launched by Trump is China. However, opponents of raising tariffs against China argue that, if the tariff war yields any real results, they will mostly be negative.
In this environment, economics will increasingly serve the agenda of gaining global or regional dominance, and economically ‘defensive’ or ‘offensive’ wars could become the norm in the aforementioned ‘disorderly order’
A key economic concern is the interconnectedness of U.S. and Chinese export-import markets. Disrupting this interconnection would harm both the U.S. and China, as well as the global system. Furthermore, the tariff war may inadvertently help China enhance its reputation as a responsible, predictable player on the world stage. Amid current disinformation and propaganda, especially given the United States’ complicated relations with its allies, China will likely exploit this opportunity. In particular, China may work to deepen cracks in the system of alliances surrounding the U.S., weakening one of its major pillars—its alliances.
(2) Economic ‘Sub’-Text: With its tough tariff policy, the White House administration aligns itself with the trend of economic nationalism, responding to other countries with protectionist measures based on the principle of mutual benefit while trying to stimulate domestic production.
However, achieving these goals solely through tariff rates not only complicates the problem but could potentially exacerbate it. At first glance, while tariff increases boost budget revenues, they also burden American consumers. Higher tariff rates:
• will inevitably raise the prices of imported goods,
• affecting the average American’s budget (around $1,000 to $1,200 per year),
• which will contribute to inflation as excess money flows into the economy,
• raising the cost of U.S. products made from expensive raw materials, reducing their export competitiveness,
• and causing stock market declines due to negative consumer sentiment.
This economic chain reaction could ultimately lead to harmful consequences.
China, on the other hand, may not emerge with a ‘complete victory’ from the tariff war. The Chinese economy faces risks from debt burdens—essentially a ‘debt trap.’ Coupled with overheating in the real estate market, this creates high risk.
China must maintain high production levels, especially with its domestic consumer market on the brink. Thus, access to export markets remains crucial for Beijing. Restricting the U.S. market for Chinese goods due to tariff increases represents an economic, political, and social risk for the Chinese government.
(3) Institutional Procedures: Critics of the new tariff policy also point to institutional weaknesses in its implementation.
Although President Trump has the legal grounds to make unilateral decisions under the International Emergency Economic Powers Act (1977), the lack of proper consultation with the Cabinet and federal agencies could undermine the institutional framework of U.S. governance. This concern is especially relevant given the loyalty-driven formation of Trump’s administration, which fosters near-unconditional decision-making.
Less PR, More Results
Tariff policy, like sanctions policy, is as much an art as a science. Neither can magically produce results unless implemented within the right context, under the right conditions, and with careful management. Tariffs, in particular, resemble a scalpel—the improper use of which can be harmful.
I won’t delve into economic nationalism and protectionism (having addressed these topics in previous publications), but I will note that tariffs, when used to protect and stimulate national production, must be applied correctly and interact synchronously with other economic components.
To prevent unfair practices by global players, it is essential to strengthen alliances with global partners. However, we are now seeing a confusion of the concepts of ‘ally’ and ‘rival,’ which undermines the effectiveness of tariffs in trade confrontations with revisionist countries.
When discussing tariff management, I’d like to emphasize the importance of operational and technical issues. For instance, imposing higher tariffs on specific goods related to national security sectors—defense, energy, healthcare, etc.—may be necessary.
Additionally, in practice, production may shift from target countries to third countries (e.g., Mexico, Vietnam), which could enter U.S. or European markets at favorable tariffs. Here, a reasonable tariff policy should:
(a) Set tariffs based on the ‘Chinese content’ of products from third countries, and
(b) Clearly communicate to such countries that excessive foreign production and ‘content-based detachment’ jeopardize local industries and national security.
Finally, economists rightly point out that tax exemptions, an efficient procurement system, and government subsidies should complement reasonable tariff policies. What is most important, however, is strengthening global alliances and partnerships, especially with the United States. In this regard, the initiative for a trade defense system, similar to NATO, should remain relevant. By identifying common risks and threats, such a system should focus on:
(1) Technology export controls,
(2) Investment screening, and
(3) Procurement and supply of critical mineral resources.
“The Struggle to Consolidate Position”
I chose this subtitle intentionally, as it paraphrases the ‘struggle for survival.’ Rather than continuously questioning, ‘What will happen to us?’, our country should strive for development and consolidate its position in a ‘disorderly world’ with increasing competition. Therefore, the prevailing mood should be one of progress, active action driven by future agendas, and the pursuit of leapfrogging development.
The picture unfolding today reflects a highly uncertain and fragmented international system. We may be entering a ‘new normal’—one that demands much more from small countries in terms of competitiveness and resilience.
Given the processes described here, we can no longer fully rely on a ‘geopolitical nanny.’ It is neither promising nor advisable. It is far better to depend on our own resources and forge mutually beneficial relations with the outside world, taking into account the nuances of the modern geopolitical landscape. It is time for Georgia to adopt a policy grounded in realistic possibilities.
Analysis by Victor Kipiani, Chairperson of Geocase
