Latest / C-Suite Perspectives / Why Tariffs and Protectionism Are Here to Stay+ 4 Other Certainties

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Why Tariffs and Protectionism Are Here to Stay+ 4 Other Certainties · C-Suite Perspectives

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  But there's the fracturing of the global economy, which really is happening
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  along these geopolitical fault lines.
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  It's a trend that the IMF has recognized and the IMF has warned
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  about in terms of slow global growth.
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  And I think underpinning all of this is that these geopolitical tensions are
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  really driving this geoeconomic fracture.
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  Joining me today is Dr. Lori Esposito Murray.
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  Lori is a longtime friend of The Conference Board, former CEO of the
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  Committee for Economic Development, and now a global affairs consultant.
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  Lori, welcome.
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  Thank you, Steve.
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  Very pleased to be joining you today on this very important topic.
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  Yeah, so Lori, you've just written a great article entitled The New
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  World Order: Five Certainties Amid Uncertainty, and it's part of a book.
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  Maybe you could just describe the book and where people can find it.
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  So the book is Navigating an Age of Uncertainty, and it's put out
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  by the Foreign Policy Association.
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  It's a series of articles by outstanding political leaders, academics, analysts,
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  and it really does encapsulate most of the major areas in terms
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  of navigating this new world order.
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  This article is part of it, and it will serve as the basis for the Foreign Policy
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  Association's national discussions, their Great Decisions discussions,
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  which take place all around the country.
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  This is the book that will serve as the basis for those discussions this year.
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  If any of our listeners are interested, they can find the copy
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  of the book for purchase at fpa.org.
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  Yeah.
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  The New World Order: Five Certainties Amid Uncertainty is the name of your
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  section of the book, and playing here prominently is the term uncertainty, and
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  you hear ambiguity but this really does describe the state of the world today.
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  So it is the most widely used terms-- uncertainty, ambiguity-- but I
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  would argue that it's distracting both business leaders and political
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  leaders from identifying what are the certainties that we can identify that
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  are clear, actionable, irreversible-- particularly in the foreseeable future--
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  and to focus on these certainties in terms of helping us to make decisions
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  and to craft a new world order.
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  This will also help us not only to manage but to actually optimize
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  the historic change underway.
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  And it is historic, transformational change.
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  Focusing on five key certainties-- the indisputable rise of China, the fracturing
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  of the global economy, protectionism and tariffs, technology revolution, and the
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  end of Pax Americana-- that can help us make decisions about how to move forward.
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  I would also argue, Steve, that these did not begin in 2025.
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  They're not gonna go away with the next election.
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  These are certainties that have been underway, trends that have been
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  underway for at least the past 20 years.
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  Yeah, that's a really important distinction between what you read
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  in the newspapers every day and what you're talking about here.
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  Your hypothesis or your thesis, I should say, is that you've got these
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  five long-term, deeply entrenched trends which are certainties.
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  They're not uncertainties, they're certainties.
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  These things are happening.
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  They've been happening for a long time.
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  You could see them coming, and you can feel the results today.
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  And so national leaders, civic leaders, business leaders should
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  be thinking about where they need to lead their organizations in the
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  context of these certainties, right?
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  And as I said, it helps you to not only manage but actually optimize
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  policies going forward in terms of how to deal with this historic
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  transformation period that we're in.
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  Yeah.
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  It is a unique way to come at it, and we're gonna go through
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  each one of these in a second.
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  All that you read about is uncertainty, and it has sort of
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  frozen business leaders today.
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  We don't know where things are going, so therefore we cannot, rather than saying,
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  "Here are the things that we know, and therefore we can do X, Y, and Z."
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  And the problem with freezing is it freezes your company.
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  You don't move ahead.
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  You're not helping your customers out.
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  Everybody's sitting in neutral.
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  It's not helping your employees.
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  You're not making the investment.
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  So really you're not positioning your organization for the long term.
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  So this Is really a refreshing way to think about it because you should
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  manage what you can manage and deal with what you can deal and the
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  certainties that you have, right?
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  'Cause there's always the future is uncertain.
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  Nobody knows it, so therefore by definition you never will and there
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  always will be that out there.
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  Yes, and if you look back, Steve, post-World War II, we have
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  been through major uncertainty.
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  The discovery and the use of nuclear weapons totally upended the world order,
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  totally upended everyone's future.
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  Everyone's future was completely uncertain.
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  And what business leaders and policy leaders did was they came together.
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  They came together and they established rules of the road.
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  They established international rules for an orderly future based on what
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  they knew, what was certain, and what type of structure, what type
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  of approach they needed to take in order to deal with what's uncertain.
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  You look at the development of nuclear energy, which was transformational,
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  similar to what we're going through in terms of technology today,
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  if not even more existential.
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  You look at what happened with globalization and the
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  collapse of the Soviet Union.
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  These were really uncertain times.
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  And so to focus on uncertainty is only to paralyze decision-making.
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  I was in a session a year ago at the Council on Foreign Relations,
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  Chatham House Rules, and a senior policy advisor in the administration
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  basically said to answer the question about how are we supposed to move
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  forward if there's so much uncertainty economically, geopolitically?
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  And the answer was, "You will provide the certainty because
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  you have to make decisions." So how do you make those decisions?
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  Identify these macro trends, recognize what the larger framework is for
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  the world that we are traversing, and make decisions on what we know
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  in order to basically position us to deal with the uncertainty that's
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  going to unfold-- and always unfolds.
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  Okay, so let's focus on each of the certainties one at a time.
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  First, you talk about the indisputable rise of China.
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  Talk about that.
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  So this, the indisputable rise of China, the debate is over as to whether China
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  is rising, whether China has risen.
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  This is really the primary driver of this new era, this powerful
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  China, economically, geopolitically, with the help of Russia.
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  This is an absolute certainty.
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  Yes, they have headwinds in their economy, but the reason why it is really frames and
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  the primary driver of this whole new era is because China has rapid development.
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  It has created an advanced technology.
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  It has built modern infrastructure based on advanced technology.
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  It has really established itself and the mechanisms it needs and the structures
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  it needs to pursue technology on a very competitive basis with the US.
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  It has used all of the tools available-- economic, military, and
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  diplomatic-- in terms of building an extremely effective defense
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  capability based on advanced technology.
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  Largest military in the world, but also, as I said, very much with an
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  infrastructure in advanced technology.
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  It has also very methodically established diplomatic relationships
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  and organizations that are developing further and further in terms of how
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  their agenda is increasing and becoming much more geopolitically focused.
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  And I say that about the BRICS.
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  The BRICS are expanding.
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  The Shanghai Cooperation Organization, which was basically a security
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  organization, now is actually looking at the full host of geo-economic
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  issues and expanding as well.
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  And particularly a very close relationship between Xi and Putin.
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  But also bringing the two, what were pariahs-- Iran and North Korea-- out of
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  the shadows and actually opening their presence and their capabilities into
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  the international arena through the partnerships and the defense agreements
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  that both China and Russia have been establishing with those two nations.
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  And so you see a very solid foundation for China, even though, as I
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  said, it faces economic headwinds.
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  It has, as of 2022 in terms of its applications for patents,
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  has exceeded the US, South Korea, Japan, and the EU combined.
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  So you have a very solid, established economy using all the tools.
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  And the shock here is that has all happened without the move towards
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  democracy, and that you've actually seen the Communist Party really
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  establish itself and embed itself even more strongly into Chinese
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  leadership and Chinese society.
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  So Lori, does the rise of China necessarily mean the demise of the US?
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  It is a major challenge, and it's a very open challenge on the
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  part of China to US leadership.
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  China has clearly and openly over the years said that the
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  international order needs to change.
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  The international order needs to recognize the role of China and
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  its allies, but particularly the role of China vis-a-vis the West.
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  This is an open competitive basis of the entire Chinese growth, that it
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  really needs to challenge US and West dominance of geopolitics, of the economy.
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  It's a real challenge to the US dollar, and you see this in the
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  institutions that China has set up and also the rise in the use of the yuan
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  in terms of transactions and trade.
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  But so much of it is, this aggressiveness on the part of China, is also in terms
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  of challenging the international order.
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  It's a challenge against the trade order through dumping, through
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  stealing IP, that the international community and even US sanctions.
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  If you look at Huawei, we were unable to stop the growth of Huawei, which
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  is now the largest telecommunications manufacturer in the world.
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  The inability to maintain the rules of the road of the international order in
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  terms of trade, in terms of security.
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  China has been ignoring international assessments that its claims on the
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  South China Sea are not legal claims.
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  The Hague made that assessment in 2016, and China just ignored it.
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  And so you see China chipping away at the current international
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  institutions, the rule of law and also the economic rules of the road.
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  But it's interesting.
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  When the US kind of steps near the line or sometimes over the line or on the
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  line, you get a hue and cry from nations around the world, including US allies.
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  But it does seem to be that China just doesn't get the criticism from any corner.
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  Is that because all other countries fear them, and that they view
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  this rise as so indisputable that they can't possibly criticize?
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  Part of it is fear.
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  But part of it, Steve, is a growing or tapping a global sense, particularly
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  in the Global South, against US and West dominance, hegemony, prominence.
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  Particularly in terms of the role of the dollar in the US economy and the ability
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  of the US and the West-- we've seen this with the Iran issue over the years-- to
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  be able to use the international economy and the power over the international
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  economy in terms of sanctions to actually try and control other nations' behavior.
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  And this is something that has become very dominant during the period of
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  globalization as the economy really did become a global economy with
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  the collapse of the Soviet Union.
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  The dominance of the US and the West economically being leveraged in
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  order to achieve geopolitical goals.
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  It's interesting, you mentioned the close ties with Russia, of course, and
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  then you have North Korea and Iran.
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  You also have India in there as a bit of a wild card.
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  So there's this bloc which is a massive amount of population and economic force.
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  You would think that would cause the rest of the world, so to speak, to come
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  closer together, and yet your certainty number two is that there's actually
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  a fracturing of the global economy.
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  I would just add in terms of China and how other nations
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  respond, we had mentioned fear.
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  I just talked about philosophically attitudes towards the US
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  and the West and dominance, particularly in the Global South.
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  But there's also economic dependency now with China, which is really key.
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  There's a Pew poll that came out this year showing that China is seen
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  more favorably than the US globally.
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  But there's the fracturing of the global economy, which really is happening
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  along these geopolitical fault lines.
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  It's a trend that the IMF has recognized and the IMF has warned
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  about in terms of slow global growth.
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  And I think underpinning all of this is that these geopolitical tensions are
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  really driving this geoeconomic fracture.
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  And it's important for business leaders and policy leaders to
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  recognize that this is a certainty.
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  This is not something that is going away.
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  And the reason why I say that is because if you watch the trends that have
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  happened, and I think Ukraine is so essential here, you had China that was
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  really establishing alternative systems.
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  It had its cross-border interbank payment system.
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  Its Asia Development Bank.
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  It was developing these economic systems that really complemented its
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  relationships with the Global South, but also was creating alternative
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  international systems to the current international institutions that existed
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  that it saw as dominated by the West.
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  And as I said, they're very transparent about this.
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  The fracture was basically put on steroids by the invasion of Ukraine.
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  And you see this first with the annexation of Crimea in 2014, when
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  both Russia and China started to work very hard to make sure that
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  they were sanction-proofing their economy after what we consider minimal
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  sanctions put on Russia after Ukraine.
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  It was really viewed both by Russia and China as a trigger point to sanction-proof
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  their economy in the best ways possible, in terms of their foreign deposits
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  and how they use their currencies.
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  That really began then.
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  It went on steroids with Russia's invasion in February 2022 and the US and the West
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  sanctions that really accelerated this divide, particularly with kicking Russia
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  out of dollar exchange programs and both China and Russia actually moving towards
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  using their own currencies in terms of trade to evade sanctions, as well as
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  the use of what we see in Iran, the use of cryptocurrencies to evade sanctions.
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  Right now, China settles more than 50% of its cross-border receipts
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  in its own currency, which is up from less than 1% in 2010.
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  Really critical.
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  The yuan, it's only 4% of international payments by value.
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  The US is 50% but the share of international payments
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  has doubled since 2022.
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  And so you see this divide happening particularly in terms of to be able
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  to evade sanctions, where currencies, China set up its cross-border interbank
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  payment system, which, you know, as I said has rose in volume 43% since 2024.
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  These are all minimal compared to where SWIFT is and compared to the US dollar,
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  but the growth rate in terms of how these are being used has really accelerated.
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  Basically an economic world that is dividing.
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  We're not at the extent that we were in the Cold War with two economic systems,
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  but it's a challenge to the US, it's a challenge to US economic leadership,
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  it's a challenge to particularly the dominance and the role of the
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  dollar, which is completely connected, straight line to US national security
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  interests and US ability to actually leverage that strength in order to help
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  maintain an international rule of law.
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  The downside is now you see less transparency.
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  The black fleets that are transporting Russian oil are a perfect example
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  where they turn off their transponders.
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  You saw this again or it is happening in the Strait of Hormuz,
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  where ships are going through by turning off their transponders.
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  You don't know where they're moving.
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  Tracking the pace of and the commerce of oil is much more difficult.
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  Iran using cryptocurrency in order to evade sanctions.
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  This was a model developed and used by North Korea for years.
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  And you have less transparency, less rule of law, and more corruption.
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  It's critical that business leadership and policy leaders work together in
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  the US and in the West to try and make sure that there are rules of the road
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  in these areas so that we can regain this transparency and this confidence
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  in the global economy and really curtail the growth of corruption.
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  Related to the fracturing of the global economy is your third certainty,
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  which is protectionism and tariffs.
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  Talk about the interrelationship.
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  So again, this is a macro trend that has been happening for
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  at least the past 20 years.
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  A really interesting statistic on industrial policy actions: they
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  have nearly quadrupled since 2017.
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  The reason why I say this is a certainty to recognize that
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  protectionism tariffs are here to stay.
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  They won't go away with the next presidential election.
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  It's a long-standing trend, protectionism, in part because China as a model for
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  state capitalism, particularly after the Great Recession in 2008, China capitalized
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  on actually, on that recession, that economic crisis, to actually
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  promote its state capitalism model.
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  That was part of it.
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  Critical was the COVID-19 pandemic.
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  That really woke up the world to this efficiency first globalization economic
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  model, both here at home but also abroad.
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  The US recognized that this efficiency first supply chain left us very
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  vulnerable to critical supplies, pharmaceuticals, as a major example.
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  It was not just us.
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  It was the world recognized how dependent we were on this globalized
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  economy and on this supply chain, and the need for more resilience,
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  the need for more protectionism.
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  It compounded also what I think was this third reason why there was an appetite
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  for more protectionism, was really a loss of faith in global trade agreements.
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  And this had been happening for at least two decades.
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  This loss of faith in global trade, which was partly due to the loss of faith in
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  international organizations to address what were China's trade distortions.
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  The inability-
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  And this is particularly true of the WTO, and you know, when they
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  let China in, and then China didn't follow any of it, but was allowed
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  to trade, and WTO didn't enforce it.
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  And so you had the rulings.
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  You had the right rulings.
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  You had China being told that they're breaking the trade rules
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  but China didn't enforce it.
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  It ignored it.
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  US unilateral sanctions also didn't work in terms of curtailing or allowing us to
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  pursue our national security interests.
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  Huawei is a perfect example of that.
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  You have this protectionism trend that's off and running, as I said,
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  fueled by these major reasons.
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  And then you have tariffs as the preferred tool now in terms of pursuing
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  US economic or national security goals.
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  There's a permanency to tariffs for a number of reasons.
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  This will not go away with the next election.
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  We saw the reverse trend happening during the Biden administration
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  where President Trump in his first administration had put tariffs on China.
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  President Biden actually had to review, there was a timeline review on those
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  tariffs and was looking at whether to lift them or not lift them, and
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  in fact, put more tariffs on China.
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  And the reason why it's a preferred tool actually in terms of geopolitics and
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  geoeconomics is that unlike sanctions, where you really are required to
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  build international coalitions-- and we saw this with Russia's invasion
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  of Ukraine, the work that the US put into building coalitions of nations
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  that would support these sanctions, otherwise they're not viable.
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  You don't need to do that with tariffs.
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  Tariffs are a unilateral decision.
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  According to US law that have been passed over a number of years, the president
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  has much more authority over tariffs that was given to him by Congress.
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  It gave him much more authority over time.
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  And so it's become a preferred tool.
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  And then the final reason why it's a certainty and businesses, particularly
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  business leaders shouldn't expect these to go away, is the revenue that's
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  gained from them is really linked to this outsized US debt we have.
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  And it's gonna be very hard for, I think, any future president to actually
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  walk away from that type of revenue.
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  So for a number of very important reasons, protectionism and tariffs, and as I said,
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  accelerated by the shock of COVID-19, both within the US and globally, will remain
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  a critical part of policy, unless we can come up with alternative policies and
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  tools to push us away from these policies.
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  The fifth and final macro trend or certainty as you
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  call them is Pax Americana.
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  Is it really over?
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  Pax Americana is definitely over.
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  That has been a longstanding policy, and I think 2026 has been
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  a critical year in turning the corner away from Pax Americana.
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  Pax Americana is what evolved out of the post-World War II global politics
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  where the US, the most important economy, 50% of the global economy, the most
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  powerful military, advanced technology.
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  The US, Europe, Japan, Asia, our allies in Asia all developed
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  economically as China became much stronger and became a real challenge
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  geopolitically and geo-economically.
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  So it became very expensive to actually be able to compete against China.
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  Burden sharing is an absolute essential, and we have been very successful
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  in terms of waking up our allies as far as needing to contribute more.
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  You have the 5% agreement in Europe.
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  You have in Asia, Japan, South Korea, Taiwan, all increasing
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  exponentially their defense spending.
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  So very successful, absolutely necessary, very successful.
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  Pax Americana is over.
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  The problem is, though, that the iron hand that we have used has actually,
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  in terms of moving the world away from Pax Americana and recognizing the
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  need for burden-sharing, particularly to deal with the outsized challenge
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  that an economic and military powerhouse that China has become.
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  That's the plus side.
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  The downside is that with burden-sharing, you have regional powers.
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  You're really developing regional military powers.
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  And the downside of that is-- and I think the Middle East and the
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  Iran war is an example of this.
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  You see an ally, a very powerful ally of the US pursuing its national
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  security goals and the US not the leader in that policy, but
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  becoming a co-leader of that policy.
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  It wasn't the US that went to Israel or our allies in the regions and said, "We
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  need to deal with Iran right now." It was actually our ally in the region coming
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  to us, supported by other allies in the region, apparently or reportedly coming
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  to us and saying, "We need to take care of the threat that Iran is presenting."
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  And you see the US becoming not a leader, but a co-leader or a partner that
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  regional powers see as in their interests.
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  That could be very dangerous unless the US recognizes that with burden-sharing,
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  it also really needs to take on the responsibility of being the lead
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  manager of national security and military engagements and policy and
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  global security around the world
• 24:55
  So five trends that are macro trends or certainties.
• 24:59
  They are the indisputable rise of China, the fracturing of the global
• 25:02
  economy, protectionism and tariffs, technology revolution, and the end of Pax
• 25:07
  Americana, all really interrelated but distinct trends that are decades long.
• 25:13
  Lori, great discussion.
• 25:14
  Any final thoughts?
• 25:15
  Yeah, I just would say on the technology revolution in terms of how important it
• 25:20
  is and in terms of what we need to do-- and business is absolutely critical here,
• 25:24
  and collaboration between business and policy leaders, absolutely critical.
• 25:29
  It's really needing the US to prepare the rules of the road globally, just
• 25:36
  as we did with the development of nuclear energy, nuclear weapons.
• 25:43
  The US led in terms of setting those rules internationally.
• 25:47
  This is critical in terms of US technology actually being the
• 25:52
  technology that the rules are based around helping to set those standards.
• 25:55
  And I'm really talking about not only rules of the road in terms of guideposts.
• 26:00
  I'm talking about actually the standards that the international
• 26:03
  community develops around technology, and we need to be active, proactive,
• 26:08
  and collaborative with our business leadership as the AI leads, particularly
• 26:13
  in frontier models on the international scene in setting those standards.
• 26:18
  Okay, we're gonna leave it there.
• 26:20
  Dr. Lori Esposito Murray, thanks for being with us today.
• 26:24
  Oh, thank you, Steve.