USA Ending Its Own Hegemony. Tariffs Are HUGE Gift To China And BRICS | Dr. Warwick Powell

The United States’ sudden imposition of sweeping tariffs has done more than rattle markets for a few days: it risks accelerating a structural shift in the world economy that the U.S. had long managed to postpone. What at first looks like a blunt instrument to correct trade imbalances is revealing a deeper strategic gamble — one that splinters supply chains, forces painful domestic adjustments, and hands economic leverage to rivals who have incentives and capacity to reshape markets and monetary arrangements. The recent conversation with Dr. Warwick Powell crystallizes how these measures are calculated, how they will play out in firms’ decision-making, and why their geopolitical consequences may be far more consequential than their immediate revenue effects. ## Methodology and the Myth of Reciprocity One of the most striking revelations of the exchange is how little the announced tariffs have to do with genuine reciprocity. Dr. Powell details that the administration’s formula — reverse-engineered quickly by analysts — effectively takes the bilateral trade deficit with each country, divides it by U.S. imports from that country, and then halves the resulting figure. The political theatre of presenting tariffs as “reciprocal” hides this econometric simplicity and, crucially, its biases. This approach sweeps in countries with trade surpluses for reasons unrelated to protectionism — low-income economies exporting raw materials or labor-intensive manufactures sold in U.S. markets, often produced in factories owned by American multinationals. It also ignores services, where the United States typically runs surpluses, and collapses complex trade relationships into a single headline number. In short, reciprocity here is a fig leaf for a method that primarily targets merchandise balances and treats very different economic partners with the same blunt metric. ## Tariffs' Practicalities and Supply-chain Realities Beyond calculation lies the knotty business of implementation. As Dr. Powell notes, tariffs will be levied on the landed value of goods, a seemingly straightforward point that belies how entangled modern production is. Many goods entering the United States are the product of global value chains: design in one country, components from several more, assembly in another. The landed value captures the final product, but it obscures where costs and margins arise and who absorbs them. American multinationals with overseas plants face a stark choice: swallow tariffs and accept slimmer margins (with shareholders likely to notice), or pass the increased costs onto U.S. consumers and risk demand destruction. Either path runs counter to the political narrative that these measures will neatly revive domestic industry without domestic pain. Further, administrating tariffs across complex inputs and differentiated rules of origin will be an administrative headache and a legal minefield, inviting disputes and games of regulatory arbitrage. ## The Costs and Limits of Re-shoring Manufacturing A central justification for the tariff policy is re-shoring — using higher border costs to make onshore production comparatively more attractive. But as the conversation emphasizes, “manufacturing” today is not the low-skilled, labor-intensive sector of mid-20th-century imagination. Modern manufacturing is capital- and skill-intensive: advanced machinery, robotics, semiconductors, and precision tooling dominate value creation. Much of that capital equipment itself is produced in China, Germany, Japan, and Korea. Reconstituting those supply chains in the United States means importing capital goods, building new supplier ecosystems for intermediate inputs, and investing heavily in energy, telecommunications (notably 5G), and workforce education. These are long-lead investments; they raise unit costs; and they require a political and fiscal commitment that reaches far beyond a tariff schedule. The result, if achieved, may be an American manufacturing sector that is technologically advanced but significantly more expensive — with implications for consumer prices, export competitiveness, and inequality. ## Currency, Consumption and Market Limits Even if onshoring were mechanically possible, it would bump against macroeconomic realities. Re-shored production that boosts costs needs demand to absorb higher prices. If the U.S. dollar retains its strength, American-made goods become even more expensive to foreign buyers, undermining export objectives. A weaker dollar could help domestic exporters, but it runs against the United States’ simultaneous interest in maintaining the dollar’s global reserve status. Dr. Powell highlights the contradictions: the administration may want a cheaper dollar to make exports competitive while also seeking to preserve dollar hegemony. Furthermore, many of the countries targeted are simply not large markets for U.S. manufactured goods — not because of tariffs, but because of income levels and consumption patterns. For them, sourcing substitutes from European, South American, African, or intra-Asian producers will be more attractive than paying higher prices for U.S. goods. Thus, tariffs may shrink U.S. market share abroad even as they raise American consumer prices at home. ## A Strategic Gift to China and BRICS Perhaps the most consequential insight in the discussion is the strategic upside these tariffs present to China and a broader coalition of producers: an opportunity to accelerate market diversification and erode the dollar-centric trade architecture. China’s swift, multi-pronged response — matching tariffs at roughly 34% on U.S. goods, restricting U.S. investment ties in certain sectors, launching anti-dumping probes, and tightening export controls on critical minerals and rare earths — reframes U.S. measures as an opening salvo in a broader contest rather than an isolated policy. These Chinese measures do more than retaliate; they create space for other exporters to fill the vacuum in China’s markets. European, Latin American, African, and intra-Asian exporters can gain share as Chinese buyers pivot away from U.S. suppliers. At the same time, export controls and investment restrictions provide Beijing leverage over critical inputs and technologies. From Beijing’s vantage, the tariffs are a gift horse: a sudden reorientation of global demand and supply that facilitates long-standing efforts to internationalize alternative currencies and deepen commercial ties with partners outside the U.S. orbit. ## Geopolitical Consequences and the Decentering of Trade The tariffs’ ripple effects reach into geopolitics. The conversation points to a fast-unfolding reality: large parts of the world are no longer economically anchored to the United States in the way they once were. The U.S. market now represents under 15% of global imports — still significant but far from dominant. When a major buyer makes itself less attractive, sellers reorganize toward other buyers and payment systems. This decentering opens the door to broader moves toward currency multipolarity and alternative trade arrangements. BRICS economies and other middle powers can leverage this moment to deepen bilateral trade in local currencies, expand regional value chains, and promote institutions that reduce dependence on dollar-dominated finance. The result is not simply bilateral tit-for-tat but a structural reshuffling that, over time, can weaken the U.S. ability to unilaterally enforce economic outcomes through trade policy. ## Conclusion: Navigating a Fragmenting Trade Order Tariffs dressed up as negotiation tactics have become a force multiplier for economic realignment. What began as a domestic argument about trade deficits and manufacturing revitalization now risks doing the opposite: diminishing U.S. influence, increasing costs at home, fragmenting global production networks, and empowering rivals with both market access and leverage over critical inputs. Dr. Warwick Powell’s com

USA Tariffs Are HUGE Gift To China And BRICS | Dr. Warwick Powell Donald Trump has slapped massive tariffs on almost all countries that have trade with the USA and the Stockmarket has fallen into an abyss over the past 2 days. What the heck is this about and is the US digging its own grave or is this a brilliant Trumpian Masterplan? To discuss this I’m talking today with my colleague and friend, Dr. Warwick Powell who is an Adjunct Professor at Queensland University of Technology and a Senior Fellow at the Taihe Institute. Part 1 of Essay: https://open. substack.com/pub/warwickpowell/p/never-look-a-gift-horse-in-the-mouth Part 2 of Essay: https://news.cgtn.com/news/2025-04-05/America-the-vandal-Time-for-multipolarity-to-move- forward-1Ckc4KC6yhG/p.html #M3 The longstanding critique of the liberal international order, of course, has been that the United States can exempt itself from the rules that it imposes on everyone else and can act capriciously. And it is showing just that. So the facade of liberal benevolence has given way to what is, in effect, an exceptionalist narcissism. And the true colors have been revealed. I think that the Prime Minister of Singapore, for example, earlier today or overnight, gave a speech in which he basically declared the end of America's role as the central figure in multilateral trade institutions and the culture of multilateral trade that has been part and parcel of the world for the last 50 or 60 years. #M2 So, Donald Trump has slapped massive tariffs on almost all countries that have trade relations with the United States, and the stock market has fallen into an abyss over the past two days. What the hell is this all about? Is the US digging its own grave, or is this some strange Trumpian master plan to create a new world order? To discuss this, I'm talking today again with my colleague and friend, Dr. Warwick Powell, who's an adjunct professor at Queensland University of Technology and a senior fellow at the Taihe Institute. Warwick, welcome back. #M3 Great to see you again, Pascal. #M2 Warwick, you wrote this fantastic article on Substack, and there's a second piece coming out tomorrow or the day after in which you analyze how Trump came up with these calculations. You -- 1 of 15 -- actually put things into perspective and make the argument that this is not going to be pretty, first and foremost for the US. But can you walk us through it? Maybe start by telling us how Trump comes up with these weird numbers, like saying Switzerland is slapping tariffs on the United States, Japan is slapping tariffs on the United States. These are really strange numbers that we haven't seen before. #M3 Yeah, look, the methodology that underpinned the tariff numbers announced a couple of days ago was ultimately deconstructed and reverse-engineered by numerous people on social media within a very short space of time. What they discovered was that, contrary to the promise that these were going to be reciprocal tariffs—meaning they would be calculated based on what the individual nation- by-nation tariff and probably non-tariff barriers are estimated to be—we actually had something quite different. And what we had was essentially a methodology that took America's trade balance with a given country and divided it by the amount of imports it took from that country. And for good measure, mainly a marketing measure, it then divided that number by two, and that became the tariff number. I think the division by two was really a way of saying, well, look, it could have been a lot worse, but look how generous we are. We're cutting it in half, and you should be grateful for that. So that's roughly how the numbers were arrived at. And so this idea of reciprocity really is not part and parcel of the calculations at all. The objective is to radically tackle what Trump sees as a significant problem, which is the merchandise trade deficit that the United States has with a whole bunch of countries. And in the hopes of ultimately rejuvenating manufacturing, no doubt we'll talk a lot more about those as we proceed. The other interesting thing to note, and this probably goes to the heart of why these tariffs aren't reciprocal at all, is that countries that actually have trade deficits with the United States and don't have tariffs in place at all have also been hit with tariffs. And Australia is a classic case in point, where Australia runs a trade deficit with the United States, has zero tariffs with the US, and nonetheless has been pinged with the default 10%. So there's the default 10%, and then there's the nation-by-nation calculation. The other thing that is probably worth noting in all of this, Pascal, is that there is a sort of inbuilt bias in this particular methodology that can sweep up all sorts of nations that have a trade surplus with the United States for actually quite basic and fundamental or natural reasons that have nothing to do with trade barriers, whether or not they exist. And I'm talking in particular about low-income countries that often have trade surpluses with the United States because they sell a lot of raw materials, for example, or they sell a lot of low labor cost manufacturers to the United States, often out of factories owned by American multinational corporations. And they don't buy a lot from the United States for a pretty simple reason. -- 2 of 15 -- The things that the United States makes and exports tend to be too expensive for these countries. So on all three of those fronts, I think it's fair to conclude that these tariffs actually aren't about reciprocity. And there's certainly a wider concern, if you will, about America's trade balance. The last thing I'll say at the outset, just to sort of paint the picture, is that the trade balance question that sits at the heart of all of this concerns merchandise trade. It doesn't concern trade in services, whether that's in software services, streaming videos, computer games, software licensing, or, of course, tourism and education. And on both of those fronts, the United States actually runs a substantial surplus. So it's a very narrow-cast view of the world. But nonetheless, this is what it is. #M2 I guess it's pretty fair to say at this point that this is a fig leaf, right? The reciprocity issue. And maybe one that actually starts building up negotiation leverage for Donald Trump in order to coerce states to change trade practices with the US, the way Washington or Donald Trump imagines those. But the nature now of these tariffs, do we know how they're going to work, actually? I mean, there are these strange numbers, 20, 30, 40 percent. I think Vietnam was slapped with over 40 percent, right? And on what? On all the goods that are called made in Vietnam? I mean, a lot of these goods are actually produced by U.S. companies who produce them in Vietnam, right? And re-import. I mean, these are entire value chains and production chains that are now going to be... this is going to be a huge headache even to know how to implement those tariffs because as far as I understand, we don't exactly know how this is going to work. #M3 The administration of it will be governed by the value of the goods as they land, and the tariff will be calculated on that basis. There are some exemptions, and there's a bunch of fine print in the documents that came out of the White House and the U.S. Trade Representative's Office. But in essence, the tariff is levied on the landed cost. And as you say, there are going to be significant complexities insofar as how these tariffs affect individual enterprises because many of the enterprises that will be swept up by these tariffs are actually American-owned multinationals that have factories located in different parts of the world, sending products back to the United States and ultimately earning profits out of the sales price in the United States that get repatriated back to shareholders, most of whom are American shareholders. So the distributional effect of these particular tariffs on companies that operate like that is likely to see them having to make a pretty important decision. And that is whether the company itself absorbs the additional price impact or ultimately passes on the cost to end consumers. In the process of making that calculation, Pascal, this will go to the heart of shareholder returns. The benefit that these companies get is that they are able to produce things in other countries at relatively low cost, sell into America at relatively high cost, and have large profit margins that then -- 3 of 15 -- become distributed to American shareholders. I suspect that this set of tariffs was not designed with the intent of significantly disadvantaging the American rentier class, but that's one of the things that's going to happen. #M2 Let's say a product like the iPhone, which is substantially made in China, designed in California, and yet Apple is now opening different production plants around the world, also in India. But India has also been struck by these tariffs. Is this the whip that Donald Trump is trying to use in order to coerce the manufacturing back into the US, come what may? And if it breaks a couple of necks, it breaks a couple of necks? #M3 Well, look, that's certainly, I think, part of the theory behind all of this. So the idea of radically changing the relative cost structure is to compel firms that are currently producing outside of the United States to relocate back into the United States. Now, that's all well and good in simplistic goods, but when you've got complex supply chains, that is actually far more difficult to achieve and to achieve successfully. So the challenge for many companies such as these is that they're actually securing input goods from many countries. So even if they located assembly factories back in the United States itself, they've got to bring in a whole bunch of imported products so that they can assemble them, and all of those will be caught up in the tariff net. The other point to remember is that for factories to be created in the United States, particularly ones that reflect the nature of modern manufacturing, we're talking about manufacturing that is not at all like the imaginary vision that I think drives a lot of the discourse. Namely, this notion of a factory with a whole bunch of workers interacting with machines and materials with dirty hands and those sorts of things. That's actually not modern manufacturing. Modern manufacturing requires significant fixed capital investments, and much of that machinery actually needs to come from China. If it doesn't come from China, it's going to come from Germany, Japan, or the Republic of Korea, typically. So the United States will need to increase its imports of capital goods substantially should it seek to move down the path of this so-called rejuvenation of manufacturing. The other thing that the United States will need to do to accomplish this is to radically alter the supply chains for intermediate goods, the input goods that these manufacturing processes need. Many of these intermediate goods, in fact, most of these intermediate goods for the kind of manufacturing we're talking about, do not come from the United States in the first place. So that's another bundle of things that will need to be imported or developed through local supply chains, which will take a long time and will be quite expensive. -- 4 of 15 -- The third thing the US will need to do for this kind of modern manufacturing, Pascal, is come to grips with the need for stable energy at low cost and stable, high-quality 5G telecommunications infrastructure to drive robotics and AI. Now, both of these elements, the United States is not particularly well placed today to deliver, and it will also need substantial investment from a capital goods point of view. And last, and certainly not least, is that there will be a demand for a new type of labor force, and that is a labor force that is relatively h