Why don’t more countries impose retaliatory tariffs?

To answer this question, a political science analysis from two perspectives is a good starting point. One perspective is associated with the school of thought known as ‘realism’. This focuses on power, ‘rational’ or national self-interest, and pragmatism. The other perspective falls under ‘idealism’; this focuses more on political reason, diplomacy and the common good.

1. Realism

In terms of power politics, every country affected by US tariffs must ask itself what it can set against the global power that is the USA. Although we in Switzerland were taken by surprise by the 39 per cent tariff, the unilateral nature of the move is easily explained. The stronger party does what it does because it can. The weaker party must comply. This logic also explains why China is so far the only country to have imposed and maintained retaliatory tariffs. China can do this because it has the strength (economically and militarily) to do so. The economist Mathias Binswanger takes a ‘realistic’ view when he says, he finds the new US policy under Donald Trump ‘honest’ in a sense (Blick, 5 April 25):

‘We should stop pretending that trade is always governed solely by rational, economic considerations. Trade policy is always, in part, a matter of power politics. We have long ignored this. Even before Trump, the US flouted various international obligations, including in the area of trade. Trump is now doing so with a newfound brazenness”.

Switzerland therefore finds itself in a position of weakness. Up to now, it has tried to deal with the stronger party in such a way as to minimise the damage (concessions, reciprocal measures, attempts to convince the other side of win-win opportunities). The alternative is to forge stronger alliances with others. The obvious course of action is to deepen cooperation with the EU after all, even though Europe is weaker than the US. China, currently the only power capable of standing up to the US, has so far not been an option for many due to ideological differences.

2. Idealism

Switzerland’s (so far) decision not to impose retaliatory tariffs may also be justified in terms of the (global) common good. What is currently being widely criticised is the looming relapse into an old ‘mercantilist’ model of the global economy, based on the ‘zero-sum game’: what one gains, the other loses. There are fears that this could spell the end of globalisation and free trade, which are based on the idea of win-win situations: both, or indeed all, parties can benefit.

The OECD, EU, EFTA, BRICS, ASEAN and so on represent international or supranational economic agreements that remove trade barriers in order to promote general economic prosperity. This is often linked to the idea that economic cooperation leads to further political cooperation (spillover effects) and thus promotes international peace. Some people presumably do not wish to further damage free trade through retaliatory tariffs; refraining from such measures has a de-escalating and conflict-mitigating effect. This stance carries ethical weight, but is not necessarily always the best political option (cf. the policy of appeasement towards Hitler during the Second World War).

Last but not least, it should also be borne in mind that tariffs can harm one’s own country. Consumers would have to pay more for products subject to tariffs. This inflicts further damage on the national common good. The fact that Donald Trump, for his part, shows no regard for the harm he is inflicting on his own population is due to the aforementioned ‘new brazenness’ of his behaviour. This irrationality, which also characterises his supporters, can ultimately only be understood in psychological terms. I recommend reading Stephan Marks’ work on psychology of shame (2024).

3. Nation vs. State: Can there be a world state?

The economist Hans Christoph Binswanger (1939–2018), father of the aforementioned Mathias Binswanger, offered important insights into the future of international politics. Today’s nation-state appears to be a hybrid between old, group-egoistic tribal thinking (nation) and new, community-oriented political reason (state). Where tribal thinking prevails, close-knit communities of shared values are potentially hostile towards one another. Modern statehood, on the other hand, introduces laws for the sake of peace that appear generally acceptable and useful. Thus, the logic of peace drives the move towards a world state with a global domestic policy. This is supported by market logic, which is a logic of profit maximisation. It strives for the abolition of national currencies and the removal of trade barriers (customs duties).

However, there are a number of obstacles to the logic of a world state. The democratic legitimacy of such a world state is virtually impossible to achieve. A functioning world parliament would mean that its members would each represent millions of people. Nevertheless, a world state with a federal structure – comprising a world government, a world parliament and a world court – is conceivable. How such a state would be put into operation is not (yet) foreseeable.

A more obvious scenario is the imperial establishment of a world state by a world power. Here, Hans Christoph Binswanger identifies two candidates with different approaches. What Binswanger wrote back then was already true before 2016:

‘When we follow the news today, it becomes clearly apparent that the USA already regards its foreign policy, to a certain extent, as global domestic policy; that is to say, it regards its legislation as taking precedence over the legislation of other countries and, so to speak, anticipates the world state.’ (p. 174)

At least today, the US appears to be moving away from the idea of a world state to some extent and sees itself more as a nation than as a state. Moreover, it is now confronted with the Chinese concept of a world state:

“China has always regarded itself as the ‘Middle Kingdom’ and, in principle, all people in the world as members of this kingdom. People who did not recognise this status were regarded either as those who do not (yet) know this, or as those who oppose it – in other words, as rebels.” (ibid.)

What will result from this tension remains to be seen.

4. Reasonable restrictions in the interests of the environment

And to return to the opening question: one might be glad if retaliatory tariffs are avoided and conflicts are resolved. In the wake of the tariff dispute, but also the wars in the Middle East and Ukraine, many are likely to be inclined towards idealism: diplomacy, the resolution of trade disputes, international agreements and further steps towards a (federal) world state seem to be the order of the day.

However, the aspiration for boundlessness also has natural – that is, ecological – limits. Free trade and market expansion are inevitably linked to economic growth (the imperative of growth). This, however, comes at the expense of the environment, which is being exploited to an ever-greater extent. When we complain about friction in the global economic machinery caused by tariffs, we must bear in mind that a frictionless global economy is leading us further towards ecological collapse. In this vein, Mathias Binswanger also pointed to sensible trade restrictions and tariffs in the aforementioned *Blick* interview. Global free trade in agricultural products, for example, promotes industrial agriculture and stands in the way of ecological, locally oriented farming. Such protectionism would then serve not so much to maximise profits, but rather to safeguard the environment and food security. (See also M. Binswanger 2008)

In other words: we have no choice but to differentiate. This is also meant as an apology for the fact that the answer to this short question has turned out to be somewhat longer than expected.

Sources:

Binswanger, Hans Christoph (2016): Reality as a Challenge. An Economist’s Journey Across Boundaries. Murmann, Hamburg. Link

Binswanger, Mathias (2008): Globalisation and Agriculture. Greater prosperity through less free trade. Discussion paper. FHNW School of Business. Link

Blick, 5 April 2025: ‘Trump’s strategy is likely to pay off in the short term’. Interview with Mathias Binswanger by Lino Schaeren. Link

Marks, Stephan (2024): Shame. A Taboo Emotion, 2nd, completely revised new edition, Patmos, Ostfildern.