Tariffs: Confrontation, Adaptation or Negotiation?

By: Ricardo Israel - 14/04/2025

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My recommendation is to negotiate. But there's a problem: few people will be able to reach Trump directly as the sole decision-maker, and no path or channel other than calling the White House has been made public, since no one has been empowered. However, since the U.S. remains a nation of laws, what can be done is to follow the path established for Commerce or the State Department, while the name of a person or institution is formally defined.

Of course, I don't like what has happened in global trade, but it is evident that behind the very different path taken by the superpower is the fact that in 1945 it was half of the global economy, and today, -depending on the study- it would be a third, but if you look at the World of Statistics, in many indicators where it was the undisputed number 1 today it sometimes doesn't even appear in the Top 10 or is in the middle, and it no longer feels that it is in its benefit to continue financing institutions like the UN or NATO.

In this regard, what can be said? The first duty is to try to understand the process we are experiencing instead of judging it, and advice can also be offered, even if no one has asked for it. The first, especially for weak countries like those in Latin America, is that their leaders should not even try to indulge themselves, as that can be very damaging to their countries. The Petro or Boric leaders should observe the care with which Mexico and Sheinbaum have acted, while still considering themselves progressive. She also demonstrated this in the swiftness with which she acknowledged that her country had failed to comply with the amount of water it was required to deliver to Texas according to the 1944 Treaty, and in the face of threats, she signaled her willingness to resolve the issue. One understands García Naranjo's lament, which Porfirio Díaz repeated: "Poor Mexico, so far from God and so close to the United States," but despite this, the responsibility of those in power can be compared. Second, one can also look for light at the end of the tunnel, so, in addition to complaining, authorities, business owners, and executives might ask themselves how one can see an opportunity.

Third, in addition to expressing annoyance, those with some power to influence this new reality should try to understand why what's happening is happening, which begins with a question: why has Trump done this? In this regard, a) Challenging the entire system is certainly a gamble, one that both he and the US could lose, and his worst defeat could be, for example, something as unexpected as a geopolitical rapprochement between Europe and China. b) However, what Trump is doing is in no way a surprise, as he repeatedly stated this during the election campaign. c) Try to understand how Trump's mind works, since sometimes the information received is useless, as he is rarely believed and greatly despised. Experience shows that we must believe him, observing the substance more than the form, since more than thinking what he says, his is spoken thought, and he is also always available to give his opinion.

It's a different matter whether one finds it good or bad, or whether one likes it or not. For a proper understanding, when reading, watching, or listening to what well-known journalists and reputable analysts interpret, they often react with their guts, in the sense that it reveals how much they dislike it or downright dislike it. At the same time, there is a situation where his own person undoubtedly contributes by saying things in a brusque and offensive manner, just as, for that matter, things are said to him. Although there is no doubt that both nationally and internationally, since he appeared in politics, he has achieved something as difficult as changing the conversation, in no small degree attributable to his direct style, so much so that everything becomes an opinion for or against him. And yet, now a good amount of communication is communicated daily not in person, but through Truth, the social network of which he is one of the owners, and which has made him richer than he was before.

In what has been said, the key is reciprocal tariffs, that is, how you treat me I will answer you, however, to several countries that have publicly proposed precisely that, he has taken the opportunity to ask them for something more, with which he immediately returns to the negotiating stage. In addition, it was Trump himself who put the negotiation on the table, since the day after his announcement on April 2, he said he would be willing to reduce tariffs if any affected country offers "something phenomenal in return."

According to the White House spokeswoman, 75 countries have already contacted the White House, but the most significant aspect is that China is not included, which counterattacked without fear of confrontation and acted like the superpower it is or aspires to be. Like a Western movie, the final duel that has been proposed foreshadows the future, not only of the two largest economies, but also of those vying for the position of leading power. For me, everything indicates that much will depend on whether the strength of the US dollar increases or decreases, currently one of the largest sources of power in the United States, if not the most relevant.

What is historically novel and defines China's strategy is that it presents itself as a force of stability in the world, something it had already been recognized as at the main globalist gathering in Davos, although it went relatively unnoticed there. What was significant was that, even in his first administration, but in a world experiencing a pandemic, Xi Jinping was presented as a champion of the international system, unlike Trump, who was already seen as a kind of black sheep of the West.

Of course, Trump could fail, starting with a rebellion from the Republicans themselves, whose fundamentalist Taliban could sacrifice themselves electorally in a fight of principle. However, and this shouldn't be forgotten, Trump could also do well, and just as happened in the last campaign that returned him to the White House, he could overcome his obstacles, which is no small feat, since what they are trying to change is nothing less than a creation of the United States itself: the multilateral world that is being questioned today, along with its operating rules, including the UN, today an example of irrelevance and obsolescence. Something that helps us grasp the scale of what is happening is that something like this didn't even occur with the disappearance of the USSR, as it was a marginal player in international trade. Therefore, the magnitude of the change it could bring to current globalization should always be considered.

What is the US looking for now?

In the context of its confrontation with China as its sole rival, it seeks a bilateral world, where it can impose even on China, the EU and neighboring countries, the weight of one to one, although it is undoubtedly proving difficult with China, since it can respond, as it has done with sanctions such as banning the export of rare earths, and it does not accept the application of the containment policy that was successful with the USSR.

The dispute was settled on the issue of tariffs, where after a Chinese escalation, the US set them at 145%, while the rest of the nations received a 90-day pause, although an exception was later announced for computers, smartphones, and other items. That is, either Washington gives in or, more likely for now, China does, agreeing to negotiations and a summit with Xi, as Trump has publicly requested.

Two statements coincide, not contradictory, but both true. The first is that the US remains the strongest country, militarily and economically, but the second is that, in recent decades, every single year, China has closed the gap. One of the elements that marks the difference today is that even under the previous Trump administration, tariff reductions were sought, something that has now abruptly changed. However, it must be kept in mind that before there was any sort of consensus on this matter, some countries broke with the existing system, which represented unilateral openings. This was the case of West Germany, which innovated in 1949, and in the Latin American case, the Pinochet dictatorship in 1975, both with shock treatment.

Despite some exaggerated opinions, we are not yet witnessing the end of the world, but rather a change of enormous magnitude, since not even the end of the Cold War produced that economic result, a radical challenge to the post-World War II structure. Therefore, it is not only the end of a known and predictable world, but it is also a paradigm shift, driven by Trump and reflected in various actions, first at the national level, and now at the international level. In the transition, those who best adapt will survive best, and as in any major change, those capable of innovation will do even better, something we have known since Darwin, who, in The Origin of Species, taught that those who best survive are not the strongest, but those with the greatest capacity to adapt.

Today, the US has also added an ideological element, which has transformed into a movement, which is the intention to confront wokeism internationally, especially in Europe, as Vice President J.D. Vance has made visible, using harsh words. Since the first day of the second Trump administration, it has been incorporated into Washington's foreign policy, something perhaps not seen since Carter did so with Human Rights in the 1970s, and Bush Jr. with the War on Terror in the 1990s. Both have endured, the former more than the latter, but for now, it does not seem that Trump's anti-woke crusade will outlast his administration.

However, this is just beginning, at least as far as the economy and trade are concerned. The negotiations will determine whether what has begun escalates into the largest trade war the world has ever known. In the meantime, it's reasonable to avoid hyperbole and exaggeration, as so many have already done, as have those who resort to psychology or psychiatry, calling Trump unstable or crazy. This is where we really don't make progress in understanding what's happening, but rather regress.

Therefore, let's turn to the data, which shows us that, for now, Trump's announcements cover more than 180 nations, and contain a component that shouldn't be forgotten: the idea that the rest of the world has abused and taken advantage of the US, but without providing evidence of this. Although for domestic consumption, he has always repeated that the worst thing for that empire without colonies would have been the betrayal it has suffered from its elites.

The negotiations have just begun, and since virtually no one will be able to afford not to be present in the US market, things will go better, according to Trump's The Art of the Deal, for those countries that negotiate by adapting, and worse for those who seek to repeat Petro's mistake of personalizing the offense. This is what could have happened to Boric, who had gone unnoticed and had less to fear than others, since Chile is an open economy with a trade balance favorable to the US. However, during his visit to India, he shot himself in the foot by personally offending Trump, with consequences that could start with the loss of the Visa Waiver program that Chile enjoys, and worse, he could end up with high tariffs on copper, which Chile relies on to a large extent, as the world's leading producer. This attitude could be affecting his Judeophobia, since he sees in Trump a very important supporter of Israel, as he stated in an interview on the occasion of the 2022 Summit of the Americas, long before the current war with Gaza and Iran. What could be helping him is that Chile is hardly relevant today, a situation that will last until the day someone tells Trump.

Meanwhile, countries are calling the White House, and it was probably the very worrying news that there was little interest in US Treasury bonds, a common refuge in times of turbulence, that precipitated the decision to announce the current 90-day pause in reciprocal tariffs. The fact that this has been done with all nations except China shows that it's not war yet, and if it were, it would be a ceasefire, and China could still be left out, not only because it is the main source of the US's problems, but also because it felt strong enough to escalate. The Treasury Secretary announced that the first tariff negotiations would be with Vietnam and Japan, and it was revealed that negotiations with Canada would begin immediately after the elections held on April 28.

On April 2, only a few countries were excluded from the tariff hike, including Russia, Cuba, North Korea, and Belarus, with the unconvincing explanation that the reason was that they were already subject to sanctions and they didn't want to fall into "redundancy." Among those caught out was Israel, and Netanyahu was again invited to discuss the issue with Trump at the White House, because they had recently spoken about Gaza and Iran. However, the Israeli returned without obtaining the desired tariff reduction from 17% to 10%. Now, according to reports, they are reading The Art of the Deal, now required reading for government leaders around the world, not because it's particularly good, but because it's essential to understanding Trump.

Personally, one last piece of advice: those who want to negotiate would be wise to abandon all moral superiority, which can only harm their countries as well as Trump, pointlessly disqualifying them. The truth is that no one should ignore that the US remains the world's leading superpower, regardless of who leads it, or at least the only one currently seeking a ceasefire in Ukraine or peace in the Middle East, however unattainable those two goals may seem. Therefore, it remains an essential power. Or, in more limited terms, economically, no one can afford to be left out of that market, which is equally important in the search for financing or investment.

Trump may fail, but his attempt has the potential to deliver the greatest economic transformation attempted in decades. A world where the cards are being (re)shuffled and the dice have been thrown in the air. No one wants to be left out, once it becomes clear how they landed, especially for those who believe they have comparative advantages. Surely, for now, everything seems chaotic, and few are convinced they understand what has happened, since various economic analysts, even those considered a kind of "guru," ignore or pay little attention to geopolitical considerations, which should be incorporated into any understanding, above all, the confrontation that will mark this 21st century: that of China versus the US, with Beijing trying to repeat what the US did to Britain in the 20th century.

In any case, the tariffs are not a story of good and bad. It's not just about pointing fingers, but about understanding what's happening, in something that is also a bonfire of vanities, where in the end many may emerge, if not scorched, at least stained. The stock markets are reacting to a gigantic change, but it's safe to assume they will eventually adapt, just like the rest of the economic players. The vast majority of opinions are negative and predict calamities, but what if Trump manages to get many companies to invest in the US, taking advantage of the new conditions? Or if, despite everything, what happens if the revenue from the tariff increase allows for tax cuts, without printing money?

Not only those, but there are also other questions for which we don't have adequate answers, such as, for example, what happens if there's a recession, or if US consumers can't find alternatives to the low prices offered by China, or what causes more volatility in the markets, whether tariffs or not understanding where Trump is going. Let's not forget that he changes his mind a lot, but this time it's going to cost him more than ever before, since he surely believes he's now made history. Although I'm convinced that, in his case, the decision will become clear the day we add up and subtract what the US economy gains and loses, for the simple reason that Trump has shown that what he hates most is failure, and hatred can sometimes be an even stronger emotion than love for a decision already made.

@israelzipper

Master's and PhD in Political Science (University of Essex), Bachelor of Laws (University of Barcelona), Lawyer (University of Chile), former presidential candidate, Chile (2013)

«The opinions published herein are the sole responsibility of its author».