America’s Own Goal

Trump's tariffs are unintentionally helping the Global South stand on its own two feet.
Maha Ben Gadha (Rosa Luxemburg Foundation) 18 May 2025

When US President Donald Trump imposed supposedly "reciprocal" tariffs and staged the move as a "liberation day" for American workers, he inadvertently triggered something far greater. Although he claimed to want to "Make America Great Again"—by relocating manufacturing to the US, prioritizing American workers, and shifting the focus of trade with China—analysts described the economic consequences of this policy reversal as a "nuclear trade war" targeting not just China but the entire world, including US allies. In doing so, Trump has set in motion a chain reaction that could lead to the emancipation of the Global South from economic vassalage.

US markets reacted violently to Trump's announcement: The loss of nearly six trillion US dollars in market value – almost three times the value of the Federal Reserve's entire crisis response in 2008 and more than the coronavirus stimulus package in 2020 – provided a sobering demonstration of how much the US was damaging itself. The devastating consequences forced the administration to backtrack – not least after investors began dumping US Treasury bonds en masse . Trump then suspended tariffs exceeding 10 percent for all countries (except China) to gain negotiating leverage and limit the financial damage. However, the seemingly indiscriminate imposition and subsequent removal of tariffs could create a climate of profound uncertainty – with a chilling effect on investment in the US, as economist Paul Krugman has also noted . Added to this are disruptions in supply chains and framework conditions that could favor a global recession.

In the US, these measures are likely to further fuel inflation as consumers face rising import prices. Domestic producers that rely on Chinese intermediate goods are also facing growing uncertainty in their supply chains. Unlike in previous crises—such as the 2008 financial crisis or the COVID-19 pandemic—no monetary policy support is expected this time, as Republicans are focusing on fiscal discipline and austerity. This is why former Treasury Secretary Larry Summers called Trump's trade policy a "self-inflicted wound . "

China turns the tables
Instead of giving in to US threats, China turned these attempts at containment into a strategic opportunity, using its natural resources as a weapon while simultaneously courting the Global South to resist US attacks.

US efforts to curb China's growing influence are nothing new. Already during Trump's first term in office, the narrative of a new "Cold War" was fostered by accusations of unfair trade practices against China – such as intellectual property theft, currency manipulation, and subsidizing state-owned enterprises. In 2018, the Trump administration imposed the first punitive tariffs under Section 301 of the 1974 Trade Act . These tariffs remained in place under President Biden. In 2022, the Inflation Reduction Act (IRA) even expanded them to cover $18 billion of Chinese imports – including electric vehicles (which were subject to a 100 percent tariff), semiconductors, batteries, key minerals, steel, aluminum, solar components, and medical supplies. This demonstrates the bipartisan consensus in Washington to slow China's technological rise – even if doing so meant destabilizing the system the US helped create.

Ironically, Trump's erratic trade policy will strengthen cooperation and integration among countries in the Global South because it ignores the systemic factors driving the development of these attitudes. These attitudes are not just a reaction to Trump's tariffs, but an expression of long-standing frustration with a unipolar world order perceived as unequal and exploitative.

China responded with calculated and multi-layered resistance: US agricultural imports (chickens, wheat, soybeans) were subject to tariffs, WTO lawsuits were filed (a signal for multilateralism), and exports of important minerals such as tungsten and molybdenum were restricted.

But China's response went beyond the mere imposition of trade tariffs. President Xi Jinping immediately embarked on a tour of Southeast Asia , visiting Vietnam, Malaysia, and Cambodia. There, he proposed fast-tracking free trade agreements, green technologies, and infrastructure cooperation. At the same time, Kenyan President William Ruto secured Chinese investment for the expansion of the Naivasha-Malaba railway line near the border with Uganda during a state visit. The visit by the president of Azerbaijan —whose country plays a key role in the Middle East Corridor between China and Europe—underscored Beijing's goal of an unhindered trade route to Europe. China is also expected to expand cooperation with BRICS Plus countries, which now include Egypt, Ethiopia, Iran, and the United Arab Emirates (UAE), as well as with partners in the Belt and Road Initiative (BRI), to assert its position in the emerging new world order.

The global turning point of the 21st century
To understand the opportunities, challenges, and consequences of this global transformation, one must look back several decades. As Thomas Fazi notes , the roots of the US problems lie in the turn to financialization and dollar hegemony. This trend accelerated in the 1980s with the deregulation of the Reagan era, when American policymakers shifted from an industry-driven to a finance-driven growth model. Companies increasingly relocated their production facilities to low-wage countries – especially after China's accession to the World Trade Organization (WTO) in 2001. At the same time, the "exorbitantly privileged" status of the US dollar as the world's reserve currency enabled US governments to finance persistent trade deficits and stimulate consumption through cheap imports.

On the Global South, however, globalization had a very different impact. While many countries, shaped by colonial legacies and neoliberal structural reforms, remained dependent on the export of raw materials and labor, China took a different path. By maintaining state control over key industries and resisting neoliberal reforms, the country rose to become a technological and industrial power through targeted subsidies and research. In 2021, China controlled 80 percent of global solar production and 70 percent of wind turbine manufacturing . In the field of electric vehicles , China accounts for 60 percent of global production and 75 percent of batteries.

In contrast, many countries in the Global South were confronted with deindustrialization, continued dependence on raw materials, and a crushing debt burden resulting from structural adjustment programs of the International Monetary Fund (IMF) and the World Bank.

Sub-Saharan Africa has seen its manufacturing sector decline from 16.6 to 12.7 percent of gross domestic product (GDP) since the 1980s. Some examples: In Nigeria, the textile industry shrank from 150 factories in 1985 to a maximum of four today. 89 percent of African exports continue to consist of raw materials. When Zambia tried to mandate copper refining in 1995 , the IMF forced privatization. In Ghana, the debt service-to-government revenue ratio reached an astounding 127 percent in 2020.

While Saudi Arabia and other West Asian states profited from the commodity boom, the petrodollar system primarily served the military-industrial interests of the West by diverting dollar reserves into defense spending . [1] At the same time, China uses its own dollar surpluses (approximately $761 billion in US Treasury bonds alone) as geopolitical leverage.

These disparities mark a turning point: China's strategic expansion has accelerated the transition to a multipolar world order that challenges US dominance in trade, industry, governance, and security—and led to an escalation of threats.

But the tariffs also pose a dilemma for China – the US market is difficult to compensate for. Although Beijing has taken measures to strengthen domestic demand, the share of private consumption in GDP remains low at 38 percent compared to the US (68 percent). In 2023, 15 percent of Chinese exports went to the US – more than any other country. Diversification of sales markets is therefore urgently needed.

In addition, many countries in the Global South remain structurally dependent on the dollar – whether through energy imports, especially dollar-denominated oil and gas imports, through debt denominated in dollars and euros, or through the US-dominated financial system (SWIFT, IMF). This limits their willingness to accept China's offers – especially BRI loans or yuan-based trade deals – even if these are financially attractive. Only when important countries such as Saudi Arabia, Iraq, or Nigeria begin trading their oil exports in yuan, euros, or gold-backed currencies, or when heavily indebted countries such as Argentina, Egypt, or Pakistan preemptively declare insolvency (a politically risky but not impossible step), could the tide turn for the long term.

Fearing a possible realignment of the countries of the Global South, the USA is now trying to pressure key countries such as India , Saudi Arabia and the UAE to cooperate in order to secure its imperial geopolitical supremacy.

From rule taker to rule maker
The Global South is no longer a passive actor—it is in the process of becoming a co-shaper of the world order. This change is not solely driven by the US-China conflict; it is also an expression of a "new mood" and a growing self-confidence in the South. This "new mood" is driven by the rejection of a unipolar system that traditionally favored a small group of powerful nations.

Commodity-exporting countries are benefiting from China's demand and using their resources as bargaining chips. Although not without difficulties, they are beginning to develop new export strategies. Countries like Indonesia have banned the export of nickel and bauxite; Guinea plans to refine bauxite locally. In Africa, China's infrastructure projects and trade initiatives are creating opportunities for industrialization. The importance of the yuan as a means of payment is also increasing.

For dollar-dependent economies such as Pakistan, Saudi Arabia, and Egypt, the conflict between the United States and China poses acute dilemmas. Debt denominated in US dollars and the settlement of trade in dollars limit their ability to align themselves more closely with China. Even though a collapse of the petrodollar system is considered unlikely in the near future due to security and military interests and fears of US sanctions, many countries are already testing alternative paths. For example, Bangladesh has agreed to settle a Russian loan in yuan via China's Interbank Payment System (CIPS), while India is negotiating a trade with Iran in rupees. While the role of the yuan remains limited, it is used in strategic sectors: while it accounts for just 2.18 percent of global foreign exchange reserves, 15 percent of Chinese trade with partners in the Global South, such as Brazil and Pakistan, is now conducted through targeted yuan currency swap agreements totaling $586 billion.

The Global South is at a crucial turning point: It is increasingly becoming a key player in the reshaping of the international order. By deepening South-South cooperation – for example, within the framework of BRICS Plus or regional integration projects – developing countries can significantly expand their influence at the global level. Initiatives such as the formation of commodity cartels, default pools, or technology-oriented alliances are intended to strengthen the collective weight of the Global South. At the same time, many countries are pushing ahead with the introduction of alternative payment systems, digital and local currencies, to create trade structures that better serve their own interests.

However, in order for raw materials to no longer primarily enrich external actors as export hits, but to enable real economic growth and social progress, a strategic realignment is needed: Through clever negotiations within global supply chains and targeted national policies for local processing and value creation, the countries of the Global South can sustainably improve their position .

In its attempt to weaponize trade, the United States has accelerated the very consolidation of the Global South that it sought to prevent. However, the nations of the South are no longer passive observers; they are co-creators of a new, post-unipolar world order. Provided they continue to act with strategic foresight, they can play a decisive role in shaping a more inclusive world order.
https://www.rosalux.de/en/news/id/53394/americas-own-goal

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[1] For most West Asian countries, the United States and its NATO partners remain the main suppliers, importing over 80 percent of all weapons into the region.


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