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The United States’ recent tariff offensive has left developing countries confronting a thorny dilemma. As Washington abandons the multilateral order in favor of unilateral economic measures, the Global South must grapple with the implications of this shift — not just in diplomatic terms but in terms of the shrinking space for independent economic policymaking.
The Trump administration — and increasingly, much of the US political mainstream — has portrayed tariffs as a tool to revive domestic industry and reassert national power. In advancing this agenda, the United States has discarded the foundational rules of the World Trade Organization and bypassed the very free-trade agreements that once promised developing countries a bulwark against economic unilateralism. In return for that supposed protection, these countries had already surrendered significant policy space in areas like intellectual property, capital controls, and foreign direct investment.
At first glance, this erosion of the multilateral trade order may appear to grant developing nations greater flexibility — an opening to pursue industrial and trade policies that had long been constrained by that very system. But before we celebrate a supposed broadening of policy space, it’s worth asking what exactly lies behind the Trump-era trade doctrine and, more important, what room it leaves to maneuver for Global South economies.
What does Donald Trump want? His tariff approach offers little in terms of stimulus to the US national market. Indeed, tariffs are not tailored to the needs of industrial firms. They are applied in a mostly uniform way, with flat additional rates on top of existing schedules. The major exception was announced on April 2, when phones, computers, semiconductors, and their components were exempted from additional tariffs. However, for all other industries it will be costly to source components, and these costs will be passed along to consumers. Final goods produced in the United States, in other words, would presumably be expensive, and might still be unable to compete with final goods entering from foreign markets. But also — and most importantly — tariffs are not accompanied by any of those other tools that encourage industrial development.
First, Trump has shown no intention of making it easier to raise finance for the real economy. There are no new tools for subsidizing industry; to the contrary, he has signaled his desire to put an end to the CHIPS Act, and the Small Business Innovation Research (SBIR) program could face funding challenges if the agencies that are supposed to contribute to it find their budgets cut. Second, Trump is dismantling the education, science, and innovation system that generates dynamic advantages. According to Science, the National Science Foundation has made 50 percent fewer grants since Trump took office, compared to the same period in 2024. Being close with Elon Musk, it turns out, hardly qualifies one to develop a plan to reindustrialize the country.
What, then, is the rationale behind Trump’s tariffs? These measures form part of a broader trade doctrine aimed at securing foreign markets and critical supply chains through unilateral pressure. Additionally, the strategy appears intended to induce currency appreciation in other countries (a “Mar-a-Lago accord”) while exploring the possibility of converting their holdings of US Treasuries into one-hundred-year bonds. Yet the likelihood of successfully forcing such a coordinated currency appreciation remains slim.
Trump’s goal is to ensure US companies have preferential world market access, no longer through the multilateral trade system but unilateral tariff threats. This has been explicitly suggested by Trump’s advisers. “This is not a negotiation,” Peter Navarro tells the world, declaring that the current international trade system is broken and needs to be remade by the United States. Stephen Miran holds that the United States’ structural trade deficit and overvalued currency can be overcome with, among other measures, unilateral tariffs that punish countries that impose any trade rules considered by the Trump administration as either protectionist, not aligned with the US security agenda, or not protecting US intellectual property and investments.
Currently, the United States is forcing countries to bilaterally negotiate new agreements with them to potentially remove unilateral tariff impositions and secure certain protections. Trump wants foreign leaders to bring to the table issues like intellectual property rights, immigrant detention, subsidies, privileged access to critical minerals, and trade reductions with China. These are part of an agenda to secure privileged market access and key asset provision, and they will come at the cost of developing countries’ already limited policy space. This tactic reached an apogee in the recent negotiations with President Volodymyr Zelensky, who signed a deal this month granting Washington access to the beleaguered nation’s mineral wealth.
Peripheral countries are thus being pushed into an arbitrary negotiation framework: either they further restrict their policy spaces — beyond what the WTO and the existing wave of free-trade agreements have already imposed — or the United States will enforce its tariff threats. Countries such as Chile are being pressured to implement foreign investment screening mechanisms in strategic sectors such as lithium and copper, where Chile ranks among the world’s top producers, with the implicit aim of using domestic regulatory frameworks to limit Chinese investment flows. Simultaneously, the United States Trade Representative has recently released the 2025 Special 301 Report on Intellectual Property Protection and Enforcement, once again listing Chile as a country that actively violates intellectual property rights, marking it as a target for coercive negotiations.
Will Trump’s strategy work? It is unclear how these disparate elements can work synergistically to boost US industry. Tariffs can create short-term rents in the hands of the private sector that could be utilized for new investments, boosting jobs. However, it is unlikely that this will happen without a broader set of public institutions that could convert short-term private rents into dynamic innovation. It is even less likely given Trump’s focus on cutting precisely this kind of bureaucratic capacity.
Moreover, beyond US borders, Trump’s actions are creating a world order in which US development, if it even occurs, comes explicitly at the expense of development everywhere else. Why should developing countries go back to being only suppliers of raw materials and markets for US products? The Trump doctrine hopes to weaponize economic interdependency, relying on the fallacy that US consumption power can get the whole world to submit and sustain American dominance. This is a highly risky strategy, and the possibility of backlash and fragmentation is big, jeopardizing the very stability for markets and supplies Trump is seeking.
The fact that the United States is unilaterally dismantling the global trade order presents two possible courses of action for the Global South. The first involves individual countries knocking on Trump’s door, seeking to negotiate under US-defined terms and conditions. The outcomes of such an approach are predictable: they would result in even further erosion of economic sovereignty for peripheral states.
The second approach would entail coordinated action by smaller peripheral countries — particularly those whose trade agreements have been violated by the United States — to raise a collective voice and jointly demand the withdrawal of the tariff threats, both at the regional and multilateral levels. Latin America, for instance, could leverage regional forums such as the Community of Latin American and Caribbean States (CELAC) to coordinate responses and enhance its relative bargaining power. This would not only serve to counteract current threats but also offer a critical opportunity to reclaim the policy space that was progressively surrendered under the now-crumbling neoliberal multilateral order.
Great Job José Miguel Ahumada & the Team @ Jacobin Source link for sharing this story.
