Trade and economic policy, in the global context, is more than just numbers. I would argue that it is more about power. International trade, investment, and monetary dominance form the backbone of geopolitical influence. For decades, the United States has leveraged its economic leadership to underwrite its global role, shaping rules of commerce, building alliances, and deterring rivals. But the resurgence of tariffs - extending well beyond China to nearly 90 countries - has introduced profound geopolitical risks.

Protectionism, far from shoring up America’s standing, may be weakening its global leadership. By disrupting supply chains, fragmenting markets, and alienating partners, the U.S. risks ceding strategic space to rising powers and accelerating a global drift towards multipolarity. The economic costs of tariffs are severe, but their geopolitical consequences may prove even more enduring. The history of protectionism shows that it always offers short-term relief but long-term complications, straining alliances and emboldening rivals.

To placate its industries, the US imposed tariffs and restrictions in the 1980s on Japan. But it had the opposite effect, creating tensions with an ally that resulted in Japanese firms climbing the value chain and investing in higher quality products.

One of the under-appreciated risks of tariffs is their impact on the global financial system. The U.S. dollar’s dominance comes not only from the economic size but also from trust in the openness and predictability of U.S. markets. As tariffs proliferate, so does the temptation of other nations to insulate themselves from U.S. leverage by reducing dependence on the USD.

Already, China, India and Russia are settling more trade in Yuan, Rupees and Rubles, while Gulf states are experimenting with non-dollar oil contracts. Tariffs have provided fuel for the creation of parallel payment systems which will slowly reduce the dollar’s share of global reserves. Even a modest impact on dollar dominance would raise borrowing costs for the U.S. and reduce its ability to impose financial sanctions - a key tool of geopolitical influence.

Deploying tariffs as an instrument of foreign policy has created economic tensions that are spilling over into diplomatic rifts and have the potential to cause conflicts. Many leaders remain baffled by the logic of how Washington computed tariff rates.

Brazil, for instance, runs a substantial trade deficit with the U.S., yet faces a punitive 50%. Canada, whose economy is deeply intertwined with America’s in energy, auto, and agriculture sectors, is facing its most serious downslide in relations with the US. India, touted as a strategic partner, has been hit with 50% tariffs simply because it purchases crude oil from Russia - oil that is later refined and sold back into Western markets, including the United States. But the same logic does not apply to China who buys more oil from Russia.

Data published by the US Bureau of Economic Analysis (BEA) and Census Bureau show that last year, the US itself imported $3 billion worth of goods from Russia.

It is worth noting here that it took the US and India over two decades of painstaking diplomatic efforts to enhance and upgrade relations to create an Indo-Pacific grouping as a bulwark against a rising China. In one stroke, these punitive measures may have brought to naught the strategic relationship. The damages, from an unforgiving India’s perspective, may be irreversible.

The recent meeting of the Foreign Ministers of India and China in New Delhi hints at the formation of new a bloc that will likely be inimical to US policy to contain China. It will also be interesting to see how the QUAD meeting in New Delhi later this year goes.

Across the Atlantic, the European Union (EU) has been a strategic partner of the US since its creation. Yet, tariffs have torn the veil of diplomacy and spats are in the public domain. The EU imported goods worth $41.9 billion (36 billion Euros) from Russia in 2024. (EU bloc’s statistics agency). It can be argued that EU’s lack of support for Trump’s peace efforts in the Russia-Ukraine war can be partly attributed to the trade tensions.

Reports suggest Russia, China, and India may be exploring closer coordination in response to U.S. unilateralism. While no public announcement has been made yet, this development cannot be ignored.

What is most worrisome is that the United States has now opened multiple fronts - against both friends and adversaries - at a time when it faces mounting domestic strains. Federal deficits, volatile stock markets, rising unemployment, and the widely anticipated inflationary pressures add mounting burden on the Trump administration.

To compound matters, tensions with the Federal Reserve over monetary policy have exposed deep fissures in Washington’s economic stewardship. The question is whether America can weather this polycrisis without sustaining irreparable geopolitical, geoeconomic, and geostrategic damage.

Many countries appear to be following a wait and watch strategy to handle the tensions. But they are, it appears, at the tactical level, willing to continue to negotiate a deal in the hope that the Trump administration may change its mind and restore status quo.  In the worst-case scenario, they would endure the higher tariffs for the next three years and begin renegotiations with the new incoming administration.

America’s leadership was built on openness, cooperation, and the ability to set the global agenda - not on exclusion or confrontation. Tariffs, intended as a show of strength, could signal weakness: a retreat from engagement, a loss of confidence in America’s ability to compete on open terms. In an era defined by complexity and interdependence, building walls may offer the illusion of control, but it comes at the expense of credibility, trust, and partnerships that drive true power.

Success will depend on choosing engagement over estrangement, bridge-building over fragmentation, and a willingness to lead by example in setting fair, predictable rules for the world. The path forward is not through isolation, but through renewing the promise of shared prosperity and principled leadership in a rapidly changing global order. America certainly is at the crossroads, and any false step could mean decline over the long term.