Author: Ecaterina Cojuhari – 14/06/2025
Apéro Géopolitique: “Trade war: the new global confrontation?”
With the arrival of D.Trump, tariffs have returned to center stage. What this will lead to? New geopolitical tensions and trade blocs? This hot topic was discussed during Apéro Géopolitique: “Trade war: the new global confrontation?” with Ambassador Brunson McKinley – Diplomat at the State Department, Former U.S. Ambassador to Haiti, Former Director General of the International Organisation for Migration at the UN in Geneva and Hicheme Lehmici – a geopolitical analyst and a lecturer at the Swiss UMEF. The conference took place in cooperation with the Swiss UMEF University of Applied Sciences Institute in Château d’Aïre on May 28 in Geneva.
Bargaining leverage for negotiations
–Ambassador McKinley, you spent many years as a U.S. diplomat realizing U.S. foreign policy. May you help us understand the Trump tariff policy?
Brunson McKinley: In 1944 at the Bretton Woods conference, British economist John Maynard Keynes predicted that the major economic problem of the post-war world would be persistent trade imbalances, caused primarily by the fact that the US was the only country to emerge from the war with its industrial base intact. Keynes suggested an international mechanism to adjust surpluses and deficits and keep the international trading system on an even keel. The United States firmly rejected this proposal because it saw an opportunity for the dollar to replace sterling as the major trading currency and lock in the benefits of its victory in the war.
How things have changed! In the era of globalization, the US has suffered from chronic, growing trade deficits that it was only able to sustain by depreciating the dollar and allowing its competitors to accumulate massive holdings of American debt in the form of treasury bonds. At the same time, many traditional industries were offshored, to the detriment of the American working class. China emerged as an industrial nation to rival the United States and become the world’s leading exporter.
D. Trump was elected president for the second time in 2024 partly on the basis of the promise to redress the declining impact of America in the world economy. Central to Trump’s strategy is the imposition of protective tariffs. The main outlines of the strategy were spelled out in a document by Steven Morin published before the election last November. Morin is now the Chairman of Trump’s Council of Economic Advisers. The main objectives of the tariff strategy are:
1.To protect U.S. industries while they reestablish significant production at home and encourage foreign companies to invest in US plants. High tech, AI, space, shipbuilding and defence are critical, as are high-cost consumer items like cars.
2.To slow the growth of the Chinese export economy and thus hamper its ability to compete strategically and militarily with the US.
3.To redress the U.S. trade imbalance, especially withChina, the European Union, other Asians, Mexico and Canada, thus reducing pressure on the national debt.
4.To create bargaining leverage for negotiations – negotiations that will inevitably encompass broader strategic objectives, including greater burden-sharing for defense.
5.To lower the exchange rate of the dollar.
6.To negotiate a new multilateral agreement – the Mar-a-Lago Accord, that will prevent the dollar from rising and lock in the consequent advantages to American exporters.
7.To obtain revenue from tariffs that could allow a reduction on taxes paid by Americans, further stimulating the American economy.
Trump’s announcement of universal tariffs provoked an immediate outcry from proponents of free trade. America’s traditional allies were appalled to find themselves included on the same target list as the Chinese, though at lower levels. Trump quickly modified or delayed the most extreme measures, but kept the general framework intact. Many governments then entered negotiations for bilateral trade agreements, including China and its neighbors.
China, India and Russia responses
-Is economic pressure replacing military intervention as the dominant tool of global power? How China, Russia and India react on it?
– Hicheme Lehmici : Economic pressure is one of the main instruments of power in contemporary international relations. It is part of a broader framework than simply trade policy. American strategist Edward Luttwak theorized it in the 1990s under the name of geo-economics. In one of his articles, he explained that in the post-Cold War era conflicts would increasingly be played out on economic, rather than just military, terrain. From this perspective, the economy becomes a field of war, with its own strategies, targets, levers of coercion and collateral damage. This logic can be observed in contemporary conflicts.
The example of Iraq in the 1990s is emblematic. The economic sanctions imposed by the US and the UN after the invasion of Kuwait provoked a humanitarian catastrophe. A UNICEF report (1999) estimates that over 500,000 children died due to lack of medicine, food and access to health care. UN humanitarian coordinator Denis Halliday resigned, denouncing the unacceptable collective punishment.
This logic then extended: Iran, under sanctions since 1979, sees its GDP fall by 6% in 2018 after the US withdrawal from the JCPOA (source: IMF). Venezuela, hit by a banking and oil blockade, is experiencing hyperinflation exceeding 1,000,000% in 2019 (IMF). Russia and Belarus have been targeted by over 17,000 restrictive measures since 2022 (Statista).
The extraterritoriality of US law is another facet of this economic war. The United States imposes its legislation on foreign players via the dollar or American technologies. For example: BNP Paribas was fined $9 billion in 2014; Alstom, judicially weakened, was partially absorbed by General Electric in 2015. It’s all part of a silent, legal war, but one that’s frighteningly effective.
Today, it is the economy that is becoming this continuation, in a world where force no longer comes through weapons alone, but through sanctions, standards and currencies. In short, we don’t live in a world calmed by trade. Quite the contrary: trade, currency and law have become instruments of domination, at the heart of a geo-economic war that is redrawing the global balance of power.
At the same time, China, India, Russia daifferentiated responses to US economic warfare. China: countering a direct tariff offensive. Between 2018 and 2020, Donald Trump imposed tariffs on around $360 billion worth of Chinese products. China retaliated with $110 billion in U.S. imports. These measures particularly targeted the electronics, automotive and manufactured goods sectors. By 2023, Chinese exports to the USA amounted to $500 billion, for a PPP GDP of $30,327 billion (IMF), or around 1.65% of China’s PPP GDP. The bilateral trade balance remained very favorable to Beijing, with a surplus of $279 billion (source: U.S. Census Bureau, 2023). In response, China reinforced its dual circulation strategy, stimulated the development of the digital yuan, and accelerated the regionalization of its trade via RCEP and BRICS+.
India: strategic non-alignment and investment attraction. India has not suffered a direct trade war with the US under Trump, but has seen its preferential GSP status suspended in 2019. It launched the Atmanirbhar Bharat program to strengthen industrial autonomy and introduced tariffs on targeted products (electronics, pharma, textiles). By 2023, it had attracted $71 billion in FDI (source: UNCTAD), notably through the redeployment of value chains outside China (e.g. Apple, Foxconn).
Russia: resilience under sanctions and Eurasian refocusing. Since 2014, Russia has been subject to financial, energy and technological sanctions. The post-2022 tightening has amplified its redirection towards Asia. By 2023, Russian-Chinese trade had reached $240 billion, more than half of it non-dollar (in rubles or yuan). The dollar’s share of Russian reserves has fallen to less than 16%, in favor of gold and the yuan (Central Bank of Russia, World Gold Council). Russia now favors bilateral settlements with its strategic partners (India, Iran, Turkey) to bypass the dollar-dominated system.
Faced with the United States’ arsenal of tariffs and legal measures, China, India and Russia are reacting according to different logics, but converging towards the same desire for economic sovereignty. Each is seeking to break away from the dollar-dominated system, diversify its partners, and redefine its place in a multipolar, reshaping world.
Trump succeed or fail?
– Ambassador Brunson, will Trump succeed or fail? Are there linkages to other elements of the Trump foreign policy?
Brunson McKinley: It is much too early to know whether the American strategy will succeed or fail. Much depends on the reaction of other governments and of the market. Nevertheless, a preliminary analysis is already possible. Trump’s tariff policy is based on the assumption that the weight of the American economy – the world’s biggest consumer market – is sufficient to bring rival exporting nations around. The intent is to use access to the American market strategically.
The policy is in tune with the major priorities of the Administration’s foreign policy, itself based on a “realist” version of superpower competition. The main target of tariffs is China. Why? Because the US fears only China as a geopolitical and strategic “peer competitor”. It is no accident that serious tariff discussions have begun with countries surrounding China – Japan, Korea, Taiwan, India – for all of them, with Russia, are key to a strategy of containing China. With lessened access to the Western economies, China will undoubtedly be obliged to expand domestic consumption to keep its economy growing. Trump has discounted the possibility that the tariff shock will induce the BRICS nations to develop an alternative to the dollar-based trade system based, for example, on the Chinese yuan, a move that would divide the world into opposing trading blocks.
Europe is threatened with high tariffs partly as a signal that US priorities have changed and are moving toward the East. The European Union, in an awkward position between a hostile Russia and an increasingly disaffected USA, has begun to react by taking steps to strengthen its own defense capacity. The EU operates a healthy tariff regime itself, but without a reindustrialization strategy of its own the EU is inherently vulnerable to inroads, by China especially.
All that said, there is a strong dose of “gamesmanship” in the Trump tariff policy – keeping the competition off balance while driving hard bargains across the board.
For now, the world’s stock markets have absorbed the tariff shock, but the bond markets – that set the price that governments have to pay to borrow – have shown uncertainty about the future, as well they might. One element of Trump’s trade strategy is already working. The dollar is steadily weakening against other major currencies. To date we have heard little of Mar-a-Lago, that is, a formal agreement on a low dollar that remains the world trading currency. Will that stated objective reenter the negotiations on tariff equalization?
Most expert observers are skeptical about how much tax relief tariffs can buy. That point may be little more than a sugar coating for increased costs to American consumers. Bear in mind also that the tariff strategy is only one part of the plan to retool the American economy. Deregulation plays a big role. The renewal or enhancement of the 2017 tax regime – the big, beautiful bill now working its way through the Congress – is also meant to work in tandem with import duties to restart U.S. industry.
New geo-economic reality is underway
-What is your world economy forecast and what about dollar?
Hicheme Lehmici: For two decades, and even more so since the Ukrainian crisis, the United States has been using the dollar not only as a transaction currency, but as an instrument of geopolitical pressure. Control of SWIFT, secondary sanctions imposed on foreign entities, and the extraterritoriality of US law have transformed global finance into a space for economic warfare. Any entity using the dollar or the Western banking system can be cut off from the global circuit. This power of sanction is formidable… but it has the opposite effect in the long term. It is precisely this militarization of the dollar that is fuelling the desire for de-dollarization in the global South. Not only the BRICS countries, but also a growing number of G77 and non-aligned countries, understand that their economic sovereignty now depends on their ability to extricate themselves from the system controlled by Washington.
Today, around 58% of the world’s reserves are in dollars (IMF, April 2024), compared with 71% in 1999. In international payments, the dollar is still used in 87% of foreign exchange transactions (BIS, 2023), but its share of actual trade settlements has fallen to almost 50%. The yuan, for its part, now accounts for almost 5% of international settlements (SWIFT, 2024), and its use is accelerating in bilateral trade with Russia, Saudi Arabia, Argentina, Brazil and India. Russia, China and other BRICS members are already making massive use of their bilateral currencies: over 90% of Russian-Chinese trade is now conducted in rubles or yuan. India pays for part of its Russian oil imports in rupees or dirhams. Even some African countries are beginning to sign agreements in national currencies with China or Turkey.
We are not yet witnessing an abrupt end to the dollar, but a steady erosion of its monopoly. The aim of this movement is not to impose a new hegemonic currency, but to put an end to monetary unipolarity. It is the logic of a multipolar world, fragmented but more balanced, in which the global South gradually emancipates itself from dependence on the dollar, and imposes its own circuits, its own rules and its own instruments. De-dollarization is not a political slogan: it’s a geo-economic reality already underway. And it is the abuses of power linked to dollar domination that are the main driving force behind it.
