As nations in the global south intensify their discussions on how to respond to Donald Trump’s trade war, the early 20th-century British advocate of tariffs Joseph Chamberlain may hold some lessons.
Like Trump, Chamberlain viewed tariffs as a cure-all and believed Imperial Preference – the system of preferential rates with the British Empire – could not only advance national self-interest but act as glue binding the British colonial alliance together.
Chamberlain’s brother Austen argued that through “this mutual trade we can strengthen our common interest, we can spin a web ever increasing in strength between every portion of the empire and we can make our interests so inseparable that when days of stress and trial come, no man can think of separation and no man can dream of breaking bonds so intimate and so advantageous to all whom it concerns”.
Trump, by contrast, did not initially seem to regard tariffs as a means to nurture any web or alliance. Quite the opposite – they became a raw reassertion of US economic dominance, designed to redress the US historic trade imbalances.
For the most part it appears to have worked – to the extent he has been able to pick off vulnerable US – dependent economies forcing them to lower their tariffs or make vague pledges to invest in the US economy.
But in the past few months Trump’s tactics are starting to produce a discernible political counter-reaction. It is premature to claim tariffs are leading to a full-scale political realignment, but the resistance shown in recent weeks by the leaders of Brazil, Russia, India and China, suggests how Trump’s tariffs might in the medium term backfire, creating an axis of resistance based on the belief that it is possible bypass the power the America’s economy gives the president.
Otherwise left unchecked, Trump’s tariff diplomacy will not just weaken their economies, but destroy their sovereignty.
The Chinese president, Xi Jinping, said as much following a recent phone call with his Brazilian counterpart, Luiz Inácio Lula da Silva, whose country is under full-scale attack facing 50% tariffs on a range of goods as part of a wide-ranging attack on Brazil that conflates issues of trade, politics and even personal revenge.
“We must unite and take a clear stand against unilateralism and protectionism,” Xi said.
Lula has also been on the phone with other victims of Trump’s wrath, Narendra Modi and Vladimir Putin. Modi, once seen as Trump’s great security ally, is also now facing 50% tariffs on exports to the US. He is set to visit China next month for the first time in seven years, with talks on restoring flights and boosting trade after years of tensions.
Lula summed up the new pragmatism. “We will continue to sell [our products] … If the United States doesn’t want to buy [from us], we will find new partners,” he said. “The world is big, and it’s eager to do business with Brazil.”
The global south’s rift with Trump is deepening because US tariffs – all implemented by a presidential executive order of highly questionable legal authority – are now being used by Trump not just to “rebalance” the $1.18tn US current account trade deficit, or to demand countries provide funds for Trump to invest in the US.
Trump is now using tariffs to impose his political will on issues wholly unrelated to trade. Although President Claudia Sheinbaum denied any link between the two issues, Mexico has undertaken a string of actions against organized crime as it attempts to fight off a threatened 30% tariff. India sees the doubling of tariffs to 50% as an unfair punishment for increasing its purchase of discounted Russian oil. The decision by the Canadian prime minister, Mark Carney, to recognise a Palestinian state was cited by Trump as making it “very hard” to reach a trade deal with Canada.
In Brazil, Trump is trying to stop the “witch-hunt” against Trump’s ally the former president Jair Bolsonaro, so challenging the right of the Brazilian supreme court to determine whether Bolsonaro had attempted to mount a coup at the end of his term. As part of the campaign he has also sanctioned the supreme court justice Alexandre de Moraes and demanded that planned restrictions on US social media companies be lifted.
So in multiple cases Trump is trying to use his US economic leverage not just to advance US economic interests but to trample over national sovereignty.
The threat of a denial of access to the great American consumer has become his diplomatic weapon of choice, wielded repeatedly like a sword of Damocles over the head of any recalcitrant foreign government.
But increasingly victims of Trump’s ever escalating and changing demands are discussing whether it is sensible to continue to sue for peace – at the risk of being picked off one by one – or whether they can somehow collectively protect themselves, probably through the shelter of Brics, the 10-nation alliance forged as a counterweight to the western G7.
After all the Brics economies are now home to roughly 4.5 billion people – over 55% of the global population. The Brics grouping also accounts for an estimated 37.3% of global gross domestic product based on purchasing power parity.
The key question is whether tariffs and political demands that accompany them will force a change to the bloc’s character – until now an ideologically incoherent group containing countries deeply hostile to America such as China and countries traditionally friendly to the US such as India and Brazil.
Lula’s thinking seems to be evolving, finding himself riding a domestic wave of popular nationalism, fuelled by anger at Trump’s multiple interferences.
Until recently, Lula had been hoping Brazil’s special brand of multi-alignment could fly under Trump’s radar, said Oliver Stuenkel, associate professor at the school of international relations in São Paulo. Moreover, Lula for all his leftwing politics had been reluctant to allow China to turn Brics into an explicitly anti-western alliance, opposing the group’s expansion to include countries such as Iran.
But faced by Trump’s demands, Lula is having to recalibrate. “It has made Brazil more convinced of the need to diversify, to have Brics. It reinforces the need to find new friends and to have as many friends as possible,” Stuenkel said.
“Politically, diplomatically, I think the Chinese are big winners of these tariffs,” said Matias Spektor, professor of politics and international relations at Fundação Getulio Vargas in Brazil.
Lula has also taken up the cause of bypassing the dollar, a longstanding goal of China that in practice has achieved little in the past two decades. “Brazil cannot depend on the dollar and the Brics group needed to test whether it can have a currency for trade,” he said earlier this month.
“I am not obliged to purchase dollars to trade with countries like Venezuela, Bolivia, Chile, Sweden, the European Union, or China. We can use our own currencies. Why should I be tied to the dollar, a currency I do not control? It’s the United States that prints dollars,” Lula said.
For the moment, Brazil is reasonably placed to hold out against Trump’s tariffs. The US absorbs only 12% of Brazil’s total exports, down from 24% in 2000. China has been Brazil’s biggest market, taking $94bn of products including iron ore, soybeans and beef last year.
But Brazilian industries such as coffee oil, seafood, textiles, footwear and fruit will take a hit, and firms are being offered emergency government credit lines as they seek alternative markets.
UBS BB analysts reckon it is even possible that three-quarters of Brazilian exports to the US could be redirected, an estimate that suggests the potential hit to economic growth will only be a maximum 0.6%.
India, the fourth largest economy in the world is also facing pressure to pick a side.
It insists it has a big enough economy to defy Trump, while Modi even in his third term feels he has no choice but to hold out to protect the produce of its small farmers, the chief target of US trade negotiators. Yet it is an extraordinary turnaround that India finds itself dealing with a higher US tariff rate than even China, the country that, at least until recently, successive US administrations wanted New Delhi to help contain.
In a potential straw in the wind India’s government think tank NITI Aayog has proposed easing foreign direct investment rules that require additional scrutiny for Chinese companies.
Another key test will be whether China is allowed to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the successor to the Trans-Pacific Partnership (TPP), which was abandoned by Donald Trump in 2017. Beijing applied to join in 2021 but was prevented from doing so by firm opposition from Tokyo and other members keen to avoid addressing the issue of Taiwan, which submitted its application at the same time.
This week, the two countries continued to strengthen ties, announcing that they would resume direct flights, facilitate visas and step up trade, as the Chinese foreign minister, Wang Yi, visited New Delhi.
Doubtless the Trump tariff war will go in phases. For the moment Trump is hailing his victories with the EU, Japan and South Korea, adding that the US treasury is raising billions in extra revenue. Nor has inflation taken off in the way some predicted, but this is a long war, in which the battle lines are only slowly being drawn up. It will be deeply ironic if liberation day ends up isolating America from the rest of the world by incentivising all other countries to trade with one another.
As such it will be the polar opposite of what Chamberlain intended with imperial preference.