Anya Shapina

US Tariff Theory: It’s Working. At first, sweeping US tariffs suggest a dramatic shift toward protectionism and decoupling from China. Zoom out, and they resemble a far more calculated strategy: less about isolation, more about rebalancing and a potential grand bargain. The result? Expect a lot of deals to be made with the US over the coming week(s). 1. Tactical Leverage, Not Endgame Policy The immediate objective isn’t necessarily to sever ties with China but rather to gain negotiating leverage bilaterally and across the geopolitical chessboard. By nudging allies into tariff-based trade negotiations, the US is engineering a form of “soft decoupling” that strengthens its hand with Beijing while unlocking side benefits in the process: trade concessions, regional shifts, supply chain reconfiguration, and greater clarity on which nations are aligned with US strategic goals, etc. 2. Financial Tightening Without the Fed Tariffs also function as a macroeconomic tool. By inflating import costs, they cool domestic demand and introduce disinflationary pressure, effectively tightening conditions without direct Fed action. Markets, sensing slower growth, adjust by lowering yield expectations. This downward pressure weakens the dollar, boosts export competitiveness, and, more importantly, reduces the cost of refinancing America’s ballooning debt. At a moment when trillions in US debt must roll over, this side effect feels anything but accidental. 3. Reshoring, Automation, and Taiwan Covid exposed the fragility of global supply chains, an issue that is only amplified when considering that ~70% of the world’s semiconductors are made in Asia, much of it in Taiwan. That’s not just a supply risk; it’s a systemic vulnerability. Interestingly, tariffs coincide with advances in robotics and automation that are making reshoring more viable. It won’t be easy or fast, but each step toward diversification reduces the stakes of a Taiwan conflict. 4. Two Americas While tariffs may serve strategic aims abroad, they also land on a fractured domestic landscape. In 2024, Americans took more European vacations than ever, while food bank visits also hit record highs. The top 10% hold 88% of equities; the bottom 50% don’t own stock; they carry debt. They rent, rely on credit cards, and manage auto loans. Decades of offshoring gutted the industrial base that once supported a broad middle class. Tariffs alone won’t fix that, but paired with smart industrial policy, they can help catalyze a rebuild. 5. The Optionality of Reversibility A key feature of this strategy is its built-in optionality. If tariffs were lifted tomorrow, the US would be in a stronger position than before: reduced tariff exposure (Vietnam, Cambodia, UK, etc.) without conceding ground. Any diplomatic fallout would likely be outweighed by the tangible gains secured through negotiation. In this light, tariffs are a reversible instrument that can deliver strategic gains even if the broader diplomatic aims are not met. 6. High-Stakes, High-Reward Success hinges on execution: whether the concessions gained, the macroeconomic benefits realized, and the geopolitical leverage accrued can outweigh the risks of backlash, inflation, and long-term reputational harm. But the core reality remains: tariffs can be scaled, reversed, or repurposed just as quickly as they’re imposed. In the end, this is either brilliant multidimensional chess or a reckless exercise in alienation. Time will tell, but the louder the outcry, the more it feels like we may be onto something.