In Trump’s thinking, imposing tariffs is more than a means to reduce the trade deficit. It is a strategic gambit to remake the global trade system, as the system no longer serves American interests to the extent it once did.
The resulting shift in U.S. trade policy marks more than a policy tweak—it is the beginning of a new rule-making period. During that period, while major powers jostled for a firm position, developing economies were being pushed to the margins.
Developing economies might feel that they have no choice but to conform to the new order. However, they should be more active in shaping the global transformation despite the political, economic and institutional structural limitations. In overcoming such limitations and influencing the transformation, it is essential to increase strategic literacy, multifaceted cooperation, and structural reforms, all while benefitting from AI and technology are essential.
Tariffs as a Means of Reshaping Global Trade Rules, Not Just for Economic Purposes
Trump’s tariffs have many objectives, including improving negotiations with other nations to address the U.S. trade deficit. But beyond that, an important objective is crafting a global trade system that better serves U.S. interests.
For decades, the U.S. upheld a trade order it helped build. However, as others, especially China, began to benefit disproportionately from the rules the U.S. pioneered, frustration started to grow. Such dissatisfaction, combined with Washington’s growing dissatisfaction with the World Trade Organisation (WTO), is a sentiment that did not begin with Trump.
Beginning with the Obama administration, the U.S. grew increasingly critical of the WTO’s alleged judicial activism, which it argued played a significant role in facilitating China’s rise within the global trading system. Ironically, the U.S. once championed China’s accession into the WTO — a move rooted in the belief that economic integration would lead to liberal reform. Two decades later, that gamble is widely seen in Washington as a miscalculation, with Nancy Pelosi, the former Speaker of the U.S. House of Representatives, reframing Chinese accession as “an economic failure for our workers and a moral failure for our [the U.S.] values”.
That shows what it is about—once the U.S. becomes less capable of extracting the benefits it once did from global trade rules, those rules should be disregarded and remade.
While Major Economies Manoeuvre, Developing Economies Caught in the Crossfire
As tariff imposition increasingly becomes a means of remaking global rules, others have two options: retaliation or negotiation. Retaliation is a costly option, even for China—the world’s second-biggest economy—while negotiation is meaningful only when there is sufficient bargaining power. Although major economies can afford to negotiate from a position of strength, negotiation is often not a viable option for developing economies, as the power imbalance is stark.
As a result, developing economies not only have to manage the short-term economic pain inflicted on them. There’s a real risk that these countries will find themselves locked into a new system of global rules they had no part in shaping. The relative gains they secured under the old order — hard-won preferences, flexibilities, and access — could vanish in a flash.
Lessons From the Past and Why They May Not Work Today
Developing economies have been there before. During the WTO negotiations, they asserted themselves despite limited power. Through coalitions and strategic diplomacy, they extracted concessions and shaped some of the system’s more inclusive features. For instance, from the Uruguay Round onwards, by actively involving themselves in a broader range of issues through coalitions, developing economies were able to secure more inclusive and development-friendly provisions.
But times have changed. The multilateral spirit that once enabled the gains made by developing economies has faded. Today, countries are less willing to commit to universal rules. Instead, bilateral deals — where power imbalances are most acute — are becoming the norm. In these one-on-one negotiations, developing economies have much weaker bargaining positions.
Given that and structural limitations, developing economies may currently find themselves in a passive position, but they cannot afford to stay there because waiting for the dust to settle risks cementing a new order in which their needs and perspectives are sidelined.
Solution: Gaining Leverage
Where retaliation is not the most feasible option for developing economies, having better leverage in negotiations becomes the most essential option. To gain that leverage, some developing economies may attempt to signal closer ties with China as a bargaining chip. But few want to be seen as fully aligned with Beijing, especially given the geopolitical tensions such a move could provoke – for example, alienating them from the U.S. Ultimately, most developing countries prefer to have options rather than being forced into a binary choice between Washington and Beijing.
As the global economic order shifts, developing economies should adopt a strategic approach, leveraging economic literacy, coalitions, and diversification. By strengthening regional and bilateral ties and embracing AI and digitalisation, they can offset the risks of exclusion and inequality. These strategies, despite structural limitations, will help these countries better navigate global shocks and maintain negotiation leverage, reducing pressure to align with any superpower. Without such measures, they risk becoming marginalised and locked into the emerging rules that they were not included in formation.
The Stakes Are High
A world where developing economies remain passive in the face of global rule-making or where their voices are disregarded by major economies would be the greatest loss for all. The exclusion of these economies undermines the potential for a more equitable and inclusive global order, limiting innovation, growth, and stability. Therefore, it is essential to ensure their active participation in shaping the future economic framework, which benefits not only developing nations but the world as a whole.
