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Why Trump’s tariffs could weaken U.S. influence in the world

- March 12, 2018
A container area at the Yangshan port, part of the Shanghai Free-Trade Zone, on Sept. 24, 2016. China is a leading U.S. trade partner and a frequent target of U.S. trade complaints. (Aly Song/Reuters)

On March 8, President Trump clarified his plan to enact new tariffs on steel and aluminum imports, citing a rarely used national security clause. It’s a risky move — it may fulfill a campaign promise in an attempt to boost growth in sectors and regions hurt most by globalization, but also kick off a massive trade war with U.S. allies and adversaries.

Our research looks at geopolitical risks associated with trade conflict as well as the wider effect of trade on countries’ global influence. In this light, U.S. trade protectionism — and the threat of trade wars — hurts global commerce, but also potentially reduces U.S. foreign policy influence.

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There are economic trade-offs to consider

Trade protectionism has distinct economic and political effects. Within countries, protecting an economic sector from foreign competition can increase domestic demand and theoretically grow jobs within the protected sector. But there are trade-offs, as protectionism increases costs for other sectors and leads to a decrease in hiring elsewhere.

At the national level, trade protectionism reduces long-term economic growth, increases prices and inflation (harming domestic investment), and potentially drives up the value of the dollar (hurting U.S. exports).

Internationally, protectionist policies trigger a variety of responses. When Trump announced the new tariffs a week ago, the European Union reacted caustically, Canada expressed surprise and China voiced concern.

And many analysts argued that U.S. protectionism ultimately lets China, a global trade giant, expand its influence. Many analysts agreed that the U.S. withdrawal from the Transpacific Partnership led to a diminution of broader U.S. foreign policy influence. Yet much of the discussion about the relationship between shifts in international trade and influence is anecdotal.

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There’s a new way to measure U.S. influence abroad

Our research provides new assessments of such shifts in influence. First, a new report published by the Atlantic Council, Pardee Center for International Futures and the Hague Center for Strategic Studies has introduced a new measure called the Formal Bilateral Influence Capacity (FBIC).

The FBIC attempts to capture the relational bandwidth and dependence across all pairs of countries across time. We measure the level and relative balance of economic, political and security interactions. For example, if a country like Israel is highly dependent on U.S. military sales for its security infrastructure, the United States is able to exert influence. Or if trade from China represents a large portion of another country’s economic activities — say Burma — China can exert influence.

This new approach can’t measure the actual influence of one country on another — that would be impossible to capture systematically. Instead, the FBIC research creates a replicable framework for thinking about how one country can leverage its economic, political and security relationships to influence behavior in another.


The data show a decline in U.S. global reach

A second study has used these data to model the geopolitical risks of increased protectionism. This research shows dramatic changes to the international system since the end of the Cold War, with the Chinese network of influence increasing to include many countries in East and Southeast Asia as well as in Africa.

The U.S.-led networks of influence remain primarily in the Western hemisphere and include strategic allies in both the Middle East — think Saudi Arabia and Israel — and East and Southeast Asia — such as Japan and South Korea.

The FBIC show that in 2015, the United States had more influence over 115 countries compared with China, which had more influence over 71 countries. This is simply a direct comparison of the influence of China and the United States and not a statement of whether either was the largest foreign influence in a specific country.

What happens when we project these numbers into the future? In a baseline scenario to 2025 that assumes moderate increases in international trade, China’s sphere of influence expands to include more countries in Asia and Africa. While the United States retains much of its network of influence, including countries in East and Southeast Asia, it is projected to lose its edge over China in terms of bilateral influence in five countries by 2025.

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However, in a scenario in which the United States imposes tariffs on incoming goods and services (a broader protectionist scenario than the one being enacted by Trump, but one that could arise if trade conflicts escalate), the future sphere of U.S. influence in Asia diminishes much more rapidly. In a scenario with increasing U.S. economic protectionism, China surpasses U.S. influence in an additional 22 countries. There is an added concern as this list includes Indonesia, Nigeria, Pakistan and Thailand — countries that are strategically important to the United States.

In short, while the United States is gradually losing international political ground to China, the pace of shifting international influence will depend in part on U.S. trade policy. In this light, Trump’s tariffs risk trading away U.S. influence faster than it might otherwise diminish.

Jonathan D. Moyer is assistant professor at the Josef Korbel School of International Studies at the University of Denver and director of the Frederick S. Pardee Center for International Futures. You can follow him @moyerjonathan.

David K. Bohl is a research associate at the Frederick S. Pardee Center for International Futures at the Josef Korbel School of International Studies at the University of Denver. You can follow him @dkbohl.