The Backfire Effect: Trump’s Tariffs and the Rise of the Global South
When President Trump imposed “reciprocal tariffs” on April 2nd, framed as a “liberation day” for American workers, he inadvertently launched something far bigger: the Global South’s emancipation from economic vassalage.
The self-inflicted wound
While Trump’s declared intention was to “make America great again ” by reshoring industry, prioritizing American labor, and rebalancing trade with China, the economic ramifications of this policy shift were immediately described by analysts as a nuclear trade war. It targeted not only China but the entire world, including U.S. allies.[i]
U.S. markets reacted sharply: nearly $6 trillion in market losses – almost triple the Fed′s entire 2008 crisis response and greater than 2020’s COVID stimulus–offered a sobering measure of U.S. self-harm. The staggering impact, forced the administration to backpedal, especially after a wave of Treasury bond sell-offs[ii]. He then paused the tariffs above 10% for all countries (except for China) in an attempt to gain leverage in negotiations and to mitigate financial repercussions[1]. However, the erratic imposition and removal of tariffs[2] may create an environment of destructive uncertainty that will discourage investment in the United States as noted by Paul Krugman[iii], supply chain disruptions,[iv] and conditions conducive to a potential global recession.[v]
In the U.S., these measures are expected to fuel inflation as consumers face higher prices for imports. Local producers, heavily reliant on Chinese inputs, will face heightened uncertainty about their supply chains. Unlike previous crises – such as the 2008 financial meltdown or the COVID-19 pandemic –monetary policy support is unlikely, given Republican preferences for austerity[3]. This is why former Treasury Secretary Larry Summers described Trump’s trade policies as a “self-inflicted wound”[vi].
The trap of China’s Containment strategy
Far from backing down, China turned efforts at containment into strategic opportunity, weaponizing its economic tools while courting the Global South.
The U.S. strategic aim of containing China’s expanding influence is not new. From the first Trump term, this new “cold war” was framed through accusations of unfair Chinese trade practices, including intellectual property theft, distorting exchange rates, and subsidizing state-owned enterprises (SOEs). In 2018, Trump’s administration initiated Section 301 tariffs[4] on Chinese goods, citing concerns over intellectual property practices that triggered major tariff increases from both sides. In 2022, the Inflation Reduction Act (IRA) included tax credits for electric vehicles, contingent on increasing North American battery component sourcing and prohibiting critical minerals from China[vii]. By 2024, the Biden administration retained Section 301 tariffs. It even expanded them, targeting $18 billion worth of Chinese imports, including EVs (electric vehicles) (with tariffs quadrupling to 100%), semiconductors, batteries, critical minerals, steel and aluminum, solar components, and medical supplies, indicating a bipartisan Washington consensus on curbing China’s technological ascent[viii], – even if that means disrupting or dismantling the very system it once helped to create. However, Trump’s erratic trade approach[5], will paradoxically accelerate cooperation and integration among Global South countries, because it overlooks the systemic factors driving the Global South’s evolving stance. It is not solely a reaction to Trump’s tariffs, rather it reflects the long-standing grievances with a unipolar world order perceived as inherently unequal and exploitative.
China launched a calculated, multilayered retaliation. It targeted U.S. agricultural exports (chicken, wheat, and soybeans), filed WTO complaints (reviving multilateralism), and restricted exports of key minerals like tungsten and molybdenum, essential for advanced manufacturing. Thus, China turned its resource dominance into a potent economic weapon.
China’s strategic response went beyond retaliatory tariffs. President Xi, immediately embarked on a tour of Southeast Asia, visiting Vietnam, Malaysia, and Cambodia. During his visits, he proposed accelerated free trade agreements, green technology, and infrastructure cooperation[ix]. Simultaneously, the visit of Kenyan president, William Ruto[x], strategically prioritizes securing Chinese funding for the Naivasha-Malaba railway project (close to the Ugandan border)[6], while the visit of the President of Azerbaijan[xi], a nation occupying a key position in the Middle Corridor linking China to Europe, highlights Beijing’s determination to secure unimpeded trade with Europe[7]. China is also likely to increase its coordination with BRICS+ nations (now including Egypt, Ethiopia, Iran, and UAE) as well as its Belt and Road Initiative (BRI) partners to assert its position in the Emerging New World Order.
The 21st century global shift
To understand the prospects of such global transformation, its challenges, and its implications, it is essential to look back decades, to trace the roots of this shift in global power dynamics.
As Thomas Fazi notes[xii], the roots of America’s current challenges lie in its transition toward financialization and dollar hegemony. These trends accelerated after the 1980s with Reagan-era deregulation, when American policymakers shifted from an industrial to a finance-driven growth model. This incentivized the U.S. companies to offshore their production lines to low wage economies, particularly to China after its 2001 WTO accession. Meanwhile, the dollar’s “exorbitant privilege” as the world’s reserve currency allowed the U.S. governments to run persistent trade deficits and fuel domestic consumption by relying on cheap imports.
However, globalization has clearly had a distinct impact on the Global South. While many countries, burdened by legacies of colonialism and embracing neoliberalism continued to depend on raw material and cheap labor exports, China stood as an exception. By maintaining control over key sectors and resisting neoliberal reforms, China climbed the value chain and emerged as a technological and industrial powerhouse. By 2021, it controlled 80% of global solar panel production and housed over 70% of the world’s wind turbine manufacturing capacity[xiii],[xiv] thanks to state-backed subsidies and relentless R&D. In the electric vehicle sector, China produces 60% of global EVs and controls 75% of battery production[xv].
In contrast, many Global South nations faced deindustrialization, persistent commodity dependence, and crippling debt burden imposed by IMF and World Bank-led structural adjustment programs.
Sub-Saharan Africa’s manufacturing share dropped from 16.6% to 12.7% of GDP since the 1980s[xvi], Nigeria’s textile mills fell from 150 in 1985 to fewer than 4 operational today [xvii] and 89% of Africa’s exports remain raw materials[xviii]. When Zambia tried mandating copper refining in 1995, the IMF forced privatization and subsidy cuts[xix]. Meanwhile, the debt service-to-revenue ratio for Ghana peaked at 127% in 2020[xx]. While Saudi Arabia and West Asian states profited from the commodity boom, the petrodollar system has primarily served Western military-industrial interests by recycling dollar reserves into arms purchases[8] [xxi], while China has strategically deployed its dollar surpluses (e.g., $761B in Treasuries) as a potential geopolitical lever.
These disparities mark a critical turning point: China’s strategic expansion has accelerated the shift toward a multipolar world order that increasingly challenged U.S. dominance in trade, industry, governance, and security —fueling the escalation of threats.
Nonetheless, U.S. tariffs pose a dilemma for China: It cannot easily replace U.S. markets with domestic consumption[9]. In 2023, the U.S. accounted for 15% of China’s total exports making it China’s single largest export market[xxii]. The urgency to diversify markets is thus acute.
A second geopolitical challenge stems from the fact that many Global South economies remain structurally dependent on the dollar, whether through energy imports, particularly oil and gas priced in dollars, or because they are heavily indebted in dollars and euros, or rely on US-dominated financial infrastructures (SWIFT, IMF). This restricts their willingness to fully embrace China’s offers of BRI loans, or yuan-based trade even if China’s offers are financially appealing.
This situation might only change if major oil exporters like Saudi Arabia, Iraq, or Nigeria start setting prices in yuan, euro, or gold-backed currencies—a move that would cause the petrodollar system to collapse. Alternatively, a significant shift could occur if highly indebted countries like Argentina, Egypt, and Pakistan decide to preemptively default on their current debts—a politically risky but not impossible move—potentially helping to reset the dollar dependency.
Fearing a possible realignment of the Global South countries, the USA is now attempting to convince or even coerce key partners for its strategic interests, such as India, Saudi Arabia, UAE, not to weaken its imperial position[10],[xxiii].
The Global South: From Rule takers to Rule-makers
The shift of the center of gravity in the first decades of the 21st Century, handed the Global South unprecedented advantage transforming them from rule-takers into rule-makers. This new role is not simply a product of the U.S.-China rivalry. It is also a manifestation of the Global South’s “new mood”[11] and growing assertiveness, driven by a rejection of a unipolar system that has often prioritized a small group of powerful nations.
Commodity-exporters for example have benefitted from China’s resource hunger and have turned commodities into bargaining chips. Not without difficulties, strategic industrial policies are emerging : Countries like Indonesia have banned nickel and bauxite exports. Guinea is trying to process alumina domestically[xxiv], Across Africa, China’s infrastructure investments and trade initiatives offer opportunities for industrialization and connectivity, backed by commodity agreements, and payments are increasingly being negotiated in yuan.
For dollar-dependent economies – like Pakistan, Saudi Arabia or Egypt – the U.S.-China clash poses acute dilemmas. Dollar-denominated debt and trade invoicing constrain their ability to pivot toward China, as explained earlier. Nevertheless, if the scenario of the collapse of the petrodollar system is unlikely to happen in the very near future, due to security and military interests, or the fear from US-sanctions, many are already testing workarounds: While Bangladesh has agreed upon repaying Russian loan in yuan using China’s Interbank Payment system (CIPS)[xxv], India is negotiating rupee trade with Iran[xxvi]. The yuan’s role remains limited but used for strategic sectors– while comprising just 2.18% of global reserves[12], it now facilitates 15% of China’s trade with Global South partners like Brazil and Pakistan via targeted currency swaps totaling $586 billion[13].
The Global South is currently facing at a pivotal moment, as it is a key driver in reshaping global rules. By deepening South-South cooperation (BRIC+, regional integration)—developing countries can amplify their global influence. This includes forming commodity cartels, default clubs, and South-South technology alliances to leverage their collective weight. Additionally, by adopting alternative currencies—such as alternative payment systems, digital and local currencies — they can create new trade frameworks that better serve their interests. Most importantly, to ensure their resources fuel genuine economic growth and improve the lives of their people, rather than being simply extracted as raw materials for export or enriching a cartel, these countries must strategically negotiate better terms. This can be achieved by capitalizing on their positions within global supply chain and prioritizing national policies for local processing and value addition. These nations are not merely passive participants – they are active architects of a post-unipolar world[xxvii].
In attempting to weaponize trade, the U.S. has accelerated the very consolidation of the Global South it hoped to prevent. The unipolar moment is coming to an end, and if Global South continues to act with strategic foresight and collective purpose, it will play a decisive role in shaping a more multipolar, inclusive global order.
References:
[1] Alongside the selling US of Treasury bonds, markets reacted by selling the dollar in favor of other currencies and gold, the value reached an all-time high with 3500$ per once, indicating a loss of confidence in the American economy.
[2] It began with the broad implementation of universal reciprocal tariffs, followed by an abrupt reduction to 10%. Tariffs specifically targeting Chinese goods have exhibited extreme volatility, undergoing a series of dramatic increases during one week, from an initial 50% to 90%, then escalating further to 104%, 125%, 145%. On the day of writing (18.04.2025), it reached 245%.
[3] See Nathan Tankus’s notes on the crises.
[4] Section 301 tariffs refer to trade penalties imposed by the United States under Section 301 of the Trade Act of 1974.
[5] This included the selective exemption of advanced electronics from tariffs, under pressure from tech CEOs, alongside allegations of insider trading See: Evidence Points to Insider Stock Trading Around Trump’s Tariff Announcements – Uprise RI.
[6] Completing this line to the Ugandan border would not only solidify Kenya’s integration into a China-backed East African rail network, significantly expanding Beijing’s BRI footprint, but also serve as a strategic gateway to Uganda, Rwanda, South Sudan, and the DRC.
[7] Also known as the Trans-Caspian International Transport Route, which is a key alternative to the Northern Corridor.
[8] For most West Asian countries, the US and its NATO partners remain the primary arm suppliers, with over 80% of all weapons delivered to the region.
[9] Although China has made efforts to boost its domestic demand, household consumption as a share of GDP (38%) is low compared to the U.S. (68%).
[10] As Vice President JD Vance completed a four-day trip to India, Trump plans a visit to the Middle East.
[11] See : The Bandung Spirit | Tricontinental: Institute for Social Research
[12] According to IMF data on Currency Composition of Official Foreign Exchange Reserves Q4 2024
[13] According to the People’s Bank of China (PBOC) report 2023.
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[xi] Anadolu Agency (2025Azerbaijani president begins state visit to China https://www.aa.com.tr/en/asia-pacific/azerbaijani-president-begins-state-visit-to-china/3545687.
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[xiv] GWEC (2023) Global Wind Energy Council-Global Wind Report 2023 https://www.connaissancedesenergies.org/sites/connaissancedesenergies.org/files/pdf-actualites/GWR-2023_interactive_v2_compressed.pdf
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[xviii] Voronoi. (2025). Raw materials and commodities dominate Africa’s exports. https://www.voronoi.com/africa-exports-raw-materials
[xix] Fraser, A., & Lungu, J. (2007). For whom the windfalls? Winners & losers in the privatisation of Zambia’s copper mines. https://www.sarpn.org/documents/d0002882/Fraser_Lungu_Zambia_Mines.pdf
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[xxii] Harvard Growth Lab. (2025). The Atlas of Economic Complexity. https://atlas.cid.harvard.edu/
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