When President Trump imposed “reciprocal tariffs” on most US trading partners, declaring “liberation day” for American workers, he inadvertently launched something far bigger. While Trump’s declared intention was to “make America great again” by reshoring industry, prioritizing American labour and rebalancing trade with China, the economic ramifications of this policy shift were immediately described by analysts as a nuclear trade war targeting not only China but the entire world, including US allies. Instead, he has set off a chain reaction that could result in the Global South’s emancipation from economic vassalage.
Maha Ben Gadha is a senior researcher and programme manager at the Rosa Luxemburg Foundation’s Tunis Office.
US markets reacted to Trump’s announcement sharply: nearly 6 trillion US dollars in market losses — almost triple the Fed’s entire 2008 crisis response and greater than the 2020 COVID stimulus — offered a sobering measure of US self-harm. The staggering impact forced the administration to backpedal, especially after a wave of Treasury bond sell-offs. He then paused tariffs above 10 percent for all countries (except China) in an attempt to gain leverage in negotiations and to mitigate financial repercussions. However, the erratic imposition and removal of tariffs may create an environment of destructive uncertainty that will discourage investment in the US, trigger supply chain disruptions, and foster conditions conducive to a potential global recession.
These measures are expected to fuel inflation in the US, 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 Republicans’ inclinations towards austerity. This is why former Treasury Secretary Larry Summers described Trump’s trade policies as a “self-inflicted wound”.
China Turns the Tables
Far from backing down in the face of US threats, China turned efforts at containment into a strategic opportunity, weaponizing its resource dominance while courting the Global South to oppose what it views as bullying tactics on the part of the White House.
The US strategic aim of containing China’s expanding influence is not new. During the first Trump term, this new “Cold War” was fuelled by accusations of unfair Chinese trade practices including intellectual property theft, distorting exchange rates, and subsidies for state-owned enterprises (SOEs). In 2018, the Trump administration initiated Section 301 tariffs on Chinese goods, citing concerns over intellectual property rights that triggered major tariff increases from both sides.[1] 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. Having retained Section 301 tariffs, the Biden administration even expanded them in 2024, targeting 18 billion dollars’ worth of Chinese imports, including EVs (with tariffs quadrupling to 100 percent), semiconductors, batteries, critical minerals, steel and aluminium, solar components, and medical supplies — illustrating the bipartisan “Washington consensus” on curbing China's technological rise, even if it means disrupting or dismantling the very system it once helped to create.
In attempting to weaponize trade, the US has accelerated the very consolidation of the Global South it hoped to prevent.
Trump’s erratic trade approach will paradoxically accelerate cooperation and integration among Global South countries because it overlooks the systemic factors driving the Global South’s evolving stance. The latter is not solely a reaction to Trump’s tariffs, but rather reflects long-standing grievances with a unipolar world order perceived as inherently unequal and exploitative.
China launched a calculated, multi-layered retaliation, targeting US agricultural exports (chicken, wheat, and soybeans), filing WTO complaints (reviving multilateralism), and restricting exports of key minerals essential for advanced manufacturing like tungsten and molybdenum.
But the 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. Simultaneously, Kenyan president William Ruto’s visit to China prioritized securing Chinese funding for the Naivasha–Malaba railway project close to the Ugandan border, while the visit of the President of Azerbaijan, a nation occupying a key position in the Middle Corridor linking China to Europe, highlights Beijing’s determination to secure unimpeded trade with Europe. 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 Shifting Twenty-First Century
To understand the prospects of such global transformation, its challenges, and its implications, it is essential to look back several decades.
As Thomas Fazi notes, the roots of the United States’ current challenges lie in the shift towards financialization and dollar hegemony. These trends accelerated in the 1980s with Reagan-era deregulation, when American policymakers shifted from an industrial- to a finance-driven growth model. The latter incentivized US companies to offshore their production lines to low-wage economies, particularly China following its 2001 WTO accession. Meanwhile, the dollar’s “exorbitant privilege” as the world’s reserve currency allowed successive US governments to run persistent trade deficits and fuel domestic consumption by relying on cheap imports.
Globalization, however, also had major implications for the Global South. While many countries, burdened by the legacy of colonialism and embracing neoliberalism as seemingly the only pathway to economic growth, continued to depend on raw material and cheap labour exports, China stood out as an exception. By maintaining control over key sectors and resisting neoliberal reforms, China climbed its way up the value chain and emerged as a technological and industrial powerhouse. Thanks to state subsidies and relentless public and private R&D, by 2021, China controlled 80 percent of global solar panel production and housed over 70 percent of the world’s wind turbine manufacturing capacity. China produces 60 percent of EVs globally and is responsible for 75 percent of battery production.
Many Global South nations, by contrast, faced deindustrialization, persistent commodity dependence, and crippling debt burdens imposed by IMF and World Bank-led structural adjustment programs. Sub-Saharan Africa’s manufacturing share has dropped from 16.6 to 12.7 percent of GDP since the 1980s, Nigeria’s textile mills declined from 150 in 1985 to fewer than four operational today, while 89 percent of Africa’s exports remain raw materials. Zambia, which has some of the largest copper reserves in the world, was compelled by the IMF to privatize the industry in the mid-1990s. Meanwhile, the debt service-to-revenue ratio for Ghana peaked at 127 percent in 2020. While Saudi Arabia and West Asian states profited from the commodity boom in the 2000s, the petrodollar system has primarily served Western military-industrial interests by recycling dollar reserves into arms purchases,[2] while China has strategically deployed its dollar surpluses (some 761 billion in Treasuries alone) as a potential geopolitical lever.
These disparities signal a critical turning point: China’s strategic expansion has accelerated the shift towards a multipolar world order that increasingly challenges US dominance in trade, industry, governance, and security — fuelling the escalation of threats. Nonetheless, US tariffs pose a dilemma for China, as it cannot easily replace US markets with domestic consumption — although China has made efforts to boost its domestic demand, household consumption as a share of GDP (38 percent) is low compared to the US. Indeed, in 2023, the US accounted for 15 percent of China’s total exports, making it the latter’s single largest export market. The need 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, because they are heavily indebted in dollars and euro, or rely on US-dominated financial infrastructures like SWIFT and the IMF. That dependence restricts their willingness to fully embrace China’s offers of BRI loans or yuan-based trade, even if they are financially appealing.
This situation could 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 pre-emptively default on their current debts — a politically risky but not impossible move that could potentially help to reset dollar dependency. Fearing a possible realignment of the Global South countries, the US is now attempting to convince or even coerce key strategic partners such as India, Saudi Arabia, and the UAE to help bolster its imperial position.
From Rule-Takers to Rule-Makers
The shifting centre of gravity in the first decades of the twenty-first century has handed the countries of the Global South unprecedented advantages, transforming them from “rule-takers” into “rule-makers”. This new role is not simply a product of the US-China rivalry, but also a manifestation of the Global South’s “new mood” and growing assertiveness driven by a rejection of a unipolar system that often prioritizes a small group of powerful nations.
Commodity exporters, for example, have benefitted from China’s resource hunger and turned commodities into bargaining chips. Not without difficulties, clear industrial policies are also now emerging: countries like Indonesia have banned nickel and bauxite exports, and Guinea is moving to process aluminium domestically. Across Africa, China’s infrastructure investments and trade initiatives offer opportunities for industrialization and connectivity backed by commodity agreements, while payments are increasingly being negotiated in yuan.
The Global South is at a pivotal moment, as it is a key driver in reshaping global rules.
For dollar-dependent economies like Pakistan, Saudi Arabia, or Egypt, the US-China confrontation poses acute dilemmas. Dollar-denominated debt and trade invoicing constrains their ability to pivot towards China. Nevertheless, even if the collapse of the petrodollar system is unlikely to happen in the very near future due to security and military interests or the fear of US sanctions, many are already testing workarounds. While Bangladesh has agreed to repay Russian loans in yuan using China’s Interbank Payment System (CIPS), India is negotiating trade in rupees with Iran. The yuan’s role remains limited, but is used for strategic sectors: while comprising just 2.18 percent of global reserves, it now facilitates 15 percent of China’s trade with Global South partners like Brazil and Pakistan via targeted currency swaps totalling 586 billion US dollars.
The Global South is at a pivotal moment, as it is a key driver in reshaping global rules. By deepening South-South cooperation (BRICS+, 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 simply be 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.
In attempting to weaponize trade, the US has accelerated the very consolidation of the Global South it hoped to prevent. The nations of the Global South are not merely passive participants — they are now active architects of a post-unipolar world. If they continue to act with strategic foresight and collective purpose, they can play a decisive role in shaping a more inclusive global order.