Was 2025 the year protectionism won?

Editor's note: As the year 2025 comes to an end, CGTN has launched a special series "Flashback 2025." It offers a year-end review of the major developments in 2025 that reshaped geopolitics, geostrategy and geoeconomics across key regions and the wider international system. The first article examines the escalation of protectionism and its implications for global trade, supply chains and strategic economic decoupling. Yasir Masood (PhD) is a Pakistani political and security analyst, academic, and broadcast journalist specializing in strategic communication. The article reflects the author's opinions and not necessarily the views of CGTN.

In 2025, America's economic policy underwent a marked shift, with protectionism emerging as a central strategic orientation. This review, based on my interviews with a renowned economist and geopolitical analysts, examines the implications of sweeping U.S. tariffs, some reaching 145 percent, and how they forced countries to recalibrate their strategic thinking amid disruptions to global trade and supply chains, especially in the developing world.

The U.S. decision to expand tariff measures was rooted in an economic nationalism fueled by the America First doctrine. In a conversation with him, American economist Jeffrey Sachs called this a "very misguided, improper part of U.S. statecraft." He warned it risked a repeat of the 1931 Smoot-Hawley tariffs, which triggered a cascade of global protectionism, collapsed trade and undermined the fragile peace that preceded World War II.

My analysis in an op-ed highlighted that the Trump-Biden tariffs (2018–2024) had already cost U.S. consumers over $233 billion, with $144 billion under the Biden administration alone, and the 2025 tariff measures have continued to raise costs for U.S. households, with recent estimates showing tariffs this year have added about $1,200 to the average household's costs and amounted to nearly $159 billion in consumer expenses through November 2025.

However, as a strategic tool to rebalance economic power, the policy led to a miscalculation. The most visible outcome was a cooling in U.S.-China trade, with the American deficit shrinking from $375 billion in 2018 to about $160 billion through the first nine months of 2025, although the full-year 2025 figure remains projected below the 2024 level of roughly $295 billion.

These policy choices were made against a fragile financial backdrop. Mike Billington, an American geopolitical analyst, noted that the Western financial system was already burdened by about $2 quadrillion in derivatives, a scale of derivatives exposure widely seen as a source of financial vulnerability.

The U.S. tariff escalation sent a message beyond bilateral tensions. Michael Dunford, a British professor, argued that the U.S., accustomed to acting as a global hegemon, was acting in ways widely perceived as disruptive to the current international economic system, drawing a parallel to former U.S. President Richard Nixon's 1971 decision to dismantle the Bretton Woods system, a move that significantly reshaped global monetary relations and strained ties with allies.

The post-1971 order allowed the U.S. to run large deficits, financed by other nations' dollar surpluses. At the same time, many economies in the Global South faced persistent debt vulnerabilities, intensified by the Volcker Shock of the 1980s, which stifled development for a generation. Dunford argued the 2025 tariffs may signal a critical inflection point for this system. Facing unmanageably large deficits and $8.66 trillion in short-term debt, the U.S. turned to increasingly assertive policy measures, contributing to pressures for currency realignments to reduce its debt burden and encourage investment relocation.

The reaction amounted to a pragmatic global response. Europe, as Sachs and Billington observed, began improving relations with Beijing, recognizing it was also affected by the evolving trade environment. Southeast Asian nations resisted binary choices and strengthened regional frameworks like the Regional Comprehensive Economic Partnership (RCEP).

Dunford argued that developing economies interpreted U.S. trade assertiveness as a signal to diversify toward alternatives exemplified by China: Belt and Road Initiative (BRI) infrastructure, RCEP integration and de-dollarizing trade settlements within BRICS, aligned with a vision emphasizing the diffusion of development and the spread of technologies.

This geopolitical and economic fragmentation coincided with a risky strategic posture. Billington warned that China's Taiwan region was being positioned as a potential catalyst for heightened tensions. This mix of economic and military pressure highlighted a choice between two paths: one of division, volatility and conflict, and another, championed at forums like the Boao Forum for Asia, built on teamwork over unilateralism. It called for a new cooperative architecture, a modern Bretton Woods system where nations could address shared crises based on sovereign respect and mutual benefit, drawing on aspects of China's development model.

Meanwhile, China turned tariff pressure into an advantage through technological self-reliance and channeling resources into advanced technologies, investing $15 billion in quantum computing and advancing 7-nanometer semiconductor design and production.

This strength is clear in China's lead across the industries of the future, driven by a domestic workforce of 220 million university-educated professionals and control of 63.5 percent of global electric vehicle (EV) battery production. In 2025, BYD's exports jumped 71.86 percent and are projected to capture 58 percent of global EV sales. China produces more than 80 percent of the world's solar panels and has set a target of expanding its nuclear power fleet to 70 gigawatts.

Despite growing external pressure, China met its 2024 growth target of 5 percent. The economy was supported by a $1 trillion trade surplus, a 21 percent increase from the previous year, and a green technology sector that contributed 40 percent of GDP. To lower dependence on any single market, Beijing expanded partnerships across the Global South through the BRI, which has financed $1.175 trillion in infrastructure since 2013, and through the RCEP. Sachs described RCEP as the most dynamic free trade area in the world, a statement supported by its $13.06 trillion in trade among members during the first three quarters of 2024.

Together, these frameworks are creating alternative supply chains, with local impact exemplified by African farmers whose incomes increased owing to the BRI-built rail and power infrastructure connecting them to new markets.

Ultimately, the tariff measures of 2025 fell short of their strategic objectives and exposed the limits of coercive economic statecraft. Reflecting this, Sachs, in his own words, epitomized the enduring value of cooperation over confrontation, noting that the U.S. economy has historically been a major beneficiary of China's economic rise.

Regardless of what 2026 entails for diplomatic relations, 2025 leaves a stark reminder that both personal and international relations demand collective engagement if we are to place our bets on an inclusive, multipolar world.

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