Tariffs make bad neighbors
How Trump's Tariffs Are Reshaping the Global Order
The Trump administration's recent imposition of sweeping tariffs was intended to put "America First," forcing trading partners to acquiesce to more favorable terms for the United States. Yet what we're witnessing instead may be the first steps toward "America Isolated": a profound restructuring of the global economic order where regional powers forge new alliances that bypass the United States entirely. The unprecedented cooperation between China, Japan, and South Korea, three nations with complex historical tensions, demonstrates how external pressure from Washington is catalyzing new economic architectures that may ultimately diminish American influence rather than enhance it.
The Trilateral Response: Necessity Creates Strange Bedfellows
On March 30, 2025, just days before Trump declared a "national economic emergency" and imposed extensive "reciprocal tariffs," the economic ministers of China, Japan, and South Korea convened in Seoul. This meeting marked their first high-level economic dialogue in five years, resulting in commitments that would have seemed improbable just months earlier.
The timing was no coincidence. As rumors of impending American tariffs circulated through diplomatic channels, these three economic powerhouses – representing 24% of the global economy and 19% of global merchandise trade – recognized their shared vulnerability. The tariff rates announced on April 2 confirmed their worst fears: China (34%), Japan (24%), and South Korea (25-26%) were among the hardest hit economies.
What makes this trilateral response particularly significant is the historical context. These are not natural allies. Territorial disputes, controversies over Japan's wartime actions, and competition for regional influence have long complicated relations between these nations. Yet facing American economic pressure, they have found common cause in strengthening regional economic integration.
The meeting produced several concrete outcomes:
Acceleration of negotiations for a comprehensive trilateral free trade agreement
Commitment to strengthening implementation of the Regional Comprehensive Economic Partnership (RCEP)
Pledge to create "a predictable trade and investment environment"
Framework for joint responses to "shared global challenges"
While their public positions varied – with China's state media claiming they would "jointly respond to U.S. tariffs" while South Korea characterized this as "somewhat exaggerated" – their actions speak louder than words. The very fact of their coordination represents a significant shift in regional dynamics, one that potentially undermines decades of American strategy aimed at maintaining primacy in East Asia.
Semiconductor Cooperation: The Strategic Realignment
I think that the semiconductor industry is an especially relevant case study for these times. Semiconductors are critical to nearly every technology used today and underpin everything from smartphones to advanced weapons systems. To give an example of how the cutting edge of technology might adapt to new economic realities, we can look at how East Asian trilateral response has taken advantage of these times of tariff to create a a sophisticated resource exchange framework that leverages each country's strengths:
Japan and South Korea are exploring sourcing semiconductor raw materials from China, including rare earth elements like gallium and germanium (where China controls 80% of global supply) and polysilicon (where China controls 79% of global raw silicon).
China is purchasing advanced DRAM and logic chips from Japan and South Korea, particularly high-bandwidth memory (HBM) from SK Hynix and advanced node technologies – technologies critical to AI development and next-generation computing.
This cooperation occurs despite continued participation in U.S.-led initiatives like the "Chip 4" alliance that have been created to stymie Chinese access to the world’s most advance chip technology. However, the semiconductor production industry is extremely complex and remarkably non-American, even if the US likes to control it as best as it can. This shows multilayered nature of this strategic realignment as competitors become collaborators and, as always, people try to make good deals for themselves.
This is also not even considering how Southeast Asia, a long time critical link in the semiconductor supply chain, has further strengthened its regional semiconductor ecosystem. The region handles a significant portion of assembly, testing, and packaging operations. Countries like Malaysia, Singapore, and Vietnam have developed specialized roles that complement the capabilities of China, Japan, and South Korea. This creates a robust regional network that could potentially function with decreasing dependence on U.S. technology and markets, especially as trade barriers push these nations to deepen their integration.
Beyond East Asia: Ripple Effects Across the Global Order
This East Asian cooperation is not just an isolated incident of neighbors turning to each other. The world, more or less, has lost trust in the United States.
European nations, already unsettled by the Trump administration's explicit criticism and threats since taking office, are responding with increased integration and self-sufficiency efforts. The French nuclear umbrella proposal, expanded European weapons production, and accelerated rearmament all speak to a continent preparing for a world where American security guarantees carry less weight. European defense procurement is likely to shift away from American products, both as a response to tariffs and as a hedge against diplomatic uncertainty.
Meanwhile, ASEAN nations are working to coordinate regional responses to U.S. tariffs, with Malaysia taking a leadership role as current ASEAN Chair. While these nations have traditionally relied on the U.S. market, they are increasingly looking toward integration with the China-Japan-South Korea axis as an alternative growth engine.
The strategic implications of these shifts extend beyond economics. As nations reduce dependence on American markets and technology, U.S. leverage in shaping global norms and rules diminishes proportionally. When countries can access critical technologies, capital, and markets through alternative channels, American policy tools like sanctions and export controls lose effectiveness.
The Paradox of Protectionism: Walling America In
The fundamental paradox of the Trump administration's approach is that tariffs designed to protect American interests may ultimately achieve the opposite. By erecting barriers around the U.S. economy, the administration assumes that the world has no choice but to accept American terms. Yet the evidence suggests that instead of forcing compliance, these barriers might be accelerating the development of alternative economic architectures that function without significant American involvement - though it's still too early to know with certainty how these complex dynamics will unfold, or if the world can indeed work well without American capital.
Again, the semiconductor industry will be a litmus test for this question. China's drive for self-sufficiency in chip production was already underway before the latest tariffs, but new partnerships with Japan and South Korea could accelerate this process. SMIC, China's leading chipmaker, has already achieved 7nm node production despite export controls. While this technology lags behind industry leaders, continued cooperation with regional partners could close these gaps more quickly than anticipated, especially if China is able to use or apply EUV lithography to make 3nm chips.
And regardless of how it affects people in Asia, the costs of this tariff conflict are immediate and tangible for every single American. Higher prices for imported goods, any American goods with foreign parts, disrupted supply chains, and potential retaliation against U.S. exports all create economic headwinds. But the long-term strategic costs may prove even more significant – a gradual erosion of U.S. influence over the rules and norms that govern global commerce.
The administration's fixation on bilateral trade deficits reflects a 20th-century understanding of economic power that misses how integrated global supply chains and knowledge economies have transformed international leverage. In focusing on direct resource control and trade balances, it risks undermining the innovation ecosystems and financial networks that define modern economic power.
Looking Ahead: Three Potential Futures
As these dynamics unfold, three potential futures emerge for the global economic order:
Scenario 1: Fragmented Regional Blocs
In this scenario, regional economic blocs solidify around natural geographic and economic alignments. East Asia coalesces around the China-Japan-South Korea axis, with ASEAN as an integrated production hub. Europe accelerates its own integration, with increased defense cooperation under France's leadership and potential nuclear umbrella.
We're already seeing early signs of this fragmentation. European rearmament and weapons production are increasing as trust in American security guarantees wavers. Meanwhile, East Asian cooperation on semiconductors suggests a path toward technological self-sufficiency that could fundamentally alter the strategic calculus around Taiwan. If China develops alternative semiconductor partnerships that reduce Taiwan's unique leverage, what happens if Taiwann becomes more of American weakness than a useful asset?
Under this scenario, global supply chains reconfigure along regional lines, trade flows increasingly occur within rather than between blocs, and technology standards diverge. The costs of economic activity across bloc boundaries rise substantially, reinforcing the separation.
Scenario 2: US Course Correction and Reintegration
Domestic economic pressures could force a recalibration of current policies. The stock market declines since the tariff announcements have been more severe than the administration anticipated, affecting wealthy elites who form a key constituency. The question becomes: how long will these groups tolerate economic pain and uncertainty?
If the promised benefits of tariff protection fail to materialize before the midterm elections, political pressure for adjustment could mount. American businesses facing higher input costs and retaliatory measures might lobby for policy changes. Republicans in Congress, fearing electoral consequences, could push for moderation.
Under this scenario, the administration pivots toward negotiated solutions, claiming victories while quietly backing away from the most disruptive policies. Regional realignments slow as uncertainty about American intentions decreases, and the existing global economic architecture adapts rather than transforms.
Scenario 3: A New Multilateral Order with Diminished US Centrality
Perhaps the most likely outcome falls between these extremes – a gradual rebalancing of global economic power away from American centrality toward a more multipolar system. China, Japan, and South Korea form one center of gravity, Europe another, with ASEAN and potentially other regional groupings playing increasingly independent roles.
Interestingly, this scenario might see China stepping into the role of defender of the established international order. While the U.S. violates WTO rules with unilateral tariffs, China could position itself as the champion of multilateralism and trade liberalization – a remarkable role reversal from just a decade ago.
Existing international institutions might continue functioning but with diminished American influence and increased representation from emerging powers. New institutions and frameworks emerge to address gaps, creating an overlapping, sometimes competing institutional landscape.
Conclusion: Watching the Walls Rise
We find ourselves in uncharted territory. Unlike previous periods of protectionism, today's situation unfolds in a uniquely integrated global economy with no clear historical parallels. This represents the first major shift in the post-Cold War international system, testing what happens when the United States actively generates ill will toward the rest of the world rather than working to maintain its position through cooperation and leadership.
In the coming months, several key indicators will signal which scenario is unfolding:
Tariff Escalation - The recent increase in tariffs on Chinese goods to 104% suggests a continued commitment to confrontation rather than negotiation. Further escalation would indicate movement toward regional fragmentation.
Congressional Republican Positioning - If Republican lawmakers begin distancing themselves from the administration's trade policies, it could signal growing domestic pressure for course correction.
Business Leadership Response - Major corporations and industry groups have thus far been cautious in their criticism. More vocal opposition would indicate mounting pressure for policy adjustments.
Meaningful Deals - The administration touts any concession as a victory, but substantive agreements have been elusive. Vietnam dropping tariffs on American goods, for instance, doesn't meaningfully alter trade flows. Moreover, the obsession with bilateral trade deficits reflects a fundamental misunderstanding - these imbalances result from structural economic factors and consumer preferences, not simply "unfair" trade practices that can be corrected through tariffs.
The fundamental question remains: Is America building walls to keep others out, or walls that will ultimately contain itself? As regional powers forge new relationships and reduce dependence on American markets and technology, the answer increasingly appears to be the latter. The US seems to believe it deserves better deals than what the world has been offering - but that doesn't mean the rest of the world agrees with this assessment. Rather than capitulating to American demands, nations are exploring alternatives that diminish the need for American participation altogether.
For all the rhetoric about "America First," the Trump administration's approach to international trade may ultimately leave America isolated – watching from behind self-imposed barriers as the rest of the world builds a new economic order without American leadership at its center.