Geopolitics and Market Protectionism

A container can cross an ocean and remain stranded for want of a certificate. A factory can have orders without obtaining the component needed to fulfil them. A state can attract billions in investment without acquiring the technology on which its production depends. Economic geopolitics increasingly operates in these gaps between physical circulation, legal permission and industrial control. Markets remain open, but access becomes conditional.

This report argues that contemporary protectionism selects which interdependencies governments are willing to accept. States seek to preserve the benefits of exchange while reducing particular vulnerabilities, attracting investment and retaining capabilities considered strategic. These objectives can reinforce or undermine one another. Taxing a metal protects domestic production but raises the cost of machinery using it. Subsidising batteries can accelerate the energy transition while triggering expensive competition between public budgets. Restricting a technology slows a rival but strengthens its incentive to develop an independent solution.

The research cut-off is 7 October 2026. The most recent publications actually located are used with their own dates: a 2025 figure is not presented as an observation for October 2026. Annual forecasts, policy targets and educational simulations are explicitly distinguished. References [S01] to [S48] identify the linked bibliography. Interpretations, comparisons and scenarios represent Atlas Limits analysis of this evidence, rather than conclusions attributed to the institutions cited.

The report covers the major regions, principal instruments and decisive industrial chains. It is neither a universal customs tariff nor transaction-specific legal advice. Establishing the duty on a shipment requires its tariff classification, origin, entry date, exporter, exclusions and stacking rules. The tables provide a framework for analysis; they do not replace regulatory annexes. This limitation matters particularly when a measure announced months earlier may have been amended, suspended or replaced.

The central conclusion is demanding for intermediate economies. Their lasting advantage does not lie merely in receiving relocated factories. It depends on demonstrating product origin, supplying competitive energy, financing local suppliers and retaining a growing share of design, skills and value added.

01 World trade grows under constraint

Trade does not disappear when borders become more restrictive. UNCTAD estimates that global trade in goods and services reached approximately USD 35 trillion in 2025, up about 7.5%, or USD 2.5 trillion. This is a nominal value affected by prices and exchange rates, not a volume index. On 31 July 2026, the WTO reported that merchandise trade volume had increased by 3.2% year on year in the first quarter; it recalled its March forecast of 1.9% growth for the year. These measures are not interchangeable. [S01, S02]

Record trade can coexist with deteriorating efficiency. Importers bring orders forward before tariffs take effect. Goods pass through more intermediaries. Companies duplicate inventories and factories. Invoice values rise, but so do the resources required to deliver the same service. Growth in trade flows must therefore be distinguished from productive integration and welfare gains.

In its July outlook, the IMF projected global growth of 3.0% in 2026 and 3.4% in 2027. This trajectory relied in part on assumptions about a gradual normalisation of Middle Eastern disruptions; it is not evidence that the crisis had been resolved by 7 October. Technology investment supports some markets while energy, financing costs and uncertainty burden others. [S03]

Fragmentation is consequently uneven. A supplier of data-centre components may benefit from sustained demand; a producer of ordinary consumer goods may face tariffs, higher transport costs and weaker consumption simultaneously. The global aggregate conceals this redistribution. It also conceals the difference between a price increase that benefits a resource exporter and the same increase destroying an industrial importer's margin.

Three sets of indicators must be read together: physical volumes, unit values and the ultimate origin of value added. A decline in direct imports from a country does not prove reduced dependence on its industry. Its inputs may continue arriving through another assembly platform. Statistical decoupling can precede, or merely obscure, continuing productive dependence.

02 Why states protect markets

The oldest justification is the infant-industry argument. An activity may initially cost more than foreign competitors and become competitive after learning, skills accumulation and the development of suppliers. Protection buys time. It becomes counterproductive when that time delivers no improvement and protected firms repeatedly secure an extension of their privileges.

A second rationale is security. Some failures cannot be repaired by paying more several weeks later: a missing essential medicine, ammunition, electricity-grid component or access to digital infrastructure. The objective is no longer simply the lowest price but availability under adverse conditions. This insurance has a cost that should be made explicit and compared with inventories, diversification and mutual-support arrangements.

A third rationale is distributional. The benefits of cheaper imports are dispersed across many consumers; factory closures concentrate losses on particular communities, families and local authorities. This asymmetry helps explain the political strength of protectionist demands. It does not establish their economic effectiveness: a measure can preserve one workshop while destroying more jobs among users of its products.

Finally, market access becomes a bargaining asset. A large economy can trade access to consumers for investment, purchases, security cooperation or regulatory change. A tariff then becomes more than a tax: it is a revocable threat. For businesses, uncertainty about its duration can matter as much as its level. A high but predictable rate permits calculation; repeated ultimatums can postpone an investment profitable under almost every ordinary scenario.

These motives should be separated. A defensive measure based on an investigation, a targeted military restriction and a broad tariff negotiated bilaterally have different purposes and conditions of legitimacy. Grouping them indiscriminately prevents a distinction between correcting a distortion and creating an economic rent.

03 Instruments and economic transmission

The importer legally responsible pays the duty at the border; the economic burden depends on bargaining power, exchange rates and substitution possibilities. Suppliers may lower prices, distributors absorb margin losses and consumers pay more. Saying that a foreign country pays confuses tax collection with the final distribution of its burden.

Quotas add another effect: scarce permission creates a rent. Depending on allocation, that rent can accrue to an importer, exporter or government. A tariff rate quota combines lower-duty access up to a specified volume with a higher duty beyond it. Arrival dates and remaining quota become competitive variables.

Standards have a dual nature. They can correct genuine harm or ensure product safety; they can also impose more expensive procedures than necessary. A compliance cost alone does not make a rule protectionist. Assessment requires proportionality, treatment of domestic producers, recognition of equivalent controls and a realistic opportunity for foreign suppliers to comply.

Instruments interact. A subsidy finances capacity, procurement preferences secure demand and a technology restriction constrains competitors. Assessing each separately understates the package. The real unit of analysis is the chain of incentives connecting public spending to investment, competition and final prices.

04 Calculations hidden by tariff announcements

Consider an imported product with a customs value of 100 monetary units. A 20% duty adds 20. If the supplier lowers its price by 5%, the value becomes 95 and the duty-inclusive cost 114: the concession does not cancel the tax. If currency depreciation also lowers the buyer-currency price, the effect depends on invoicing currency and the seller's decision to pass through that advantage. Every calculation in this chapter is illustrative and does not reproduce a particular national regime.

Effective protection concerns value added rather than the finished product alone. A business sells a product for 100, uses imported inputs costing 60 and creates value added of 40. If protection raises the finished-product price by 10% and taxes inputs at 5%, theoretical value added becomes 110 minus 63, or 47: effective support is 17.5%. If inputs are taxed at 25%, value added falls to 35, giving negative effective protection of 12.5%. These results assume full pass-through and fixed production coefficients.

Market-access cost extends beyond duties. Certification costing 100,000 units spread over 10,000 products adds 10 per product; spread over one million it adds only 0.10. A formally identical rule can favour large firms. Fixed costs can concentrate markets without explicit nationality-based discrimination.

Working capital is the final layer. With annual purchases of 36.5 million, ten extra inventory days tie up one million. At an 8% annual financing cost, this costs 80,000 a year before insurance, storage and obsolescence. A longer route or documentary inspection can therefore resemble a small permanent tax. Competitiveness should be measured at the delivered, financed and compliant cost, rather than the factory-gate price alone.

05 The United States and the power of demand

US policy combines the depth of the domestic market, technological control and leverage over partners. Yet April 2025 reciprocal-tariff tables should not be reproduced as current rates. The order of 20 February 2026 ended certain IEEPA-based duties; a 10% section 122 surcharge was subsequently announced for 150 days. Its initial duration does not justify automatically extending it into October. [S04, S05]

In July 2026, USTR announced final section 301 action concerning forced labour: duties of 10% or 12.5% on 60 partners, with exclusions including articles covered by section 232. Total duties must therefore be reconstructed product by product rather than automatically adding every announcement. Excess-capacity investigations constitute a separate procedure. [S06, S07]

This legal mobility matters economically. Similar policy objectives can be pursued under different authorities, each with its own procedure, duration and scope for challenge. Exporters face more than the possibility of a higher rate: they may have to rebuild compliance documentation and renegotiate the contractual allocation of costs at short notice.

US industrial policy seeks to convert an advantage in demand into an advantage in production location. A company wanting to serve the market may be encouraged to manufacture domestically. Yet new factories themselves import equipment, components and sometimes foreign technology. Broad protection can therefore raise the cost of the reindustrialisation it seeks to accelerate. Distinguishing competing products from essential inputs becomes a permanent political choice.

Low-value parcels illustrate the extension of control into distribution. The February 2026 order continued the suspension of duty-free de minimis treatment. E-commerce models based on highly fragmented shipments must accommodate more formalities and costs. [S47] The effect reaches beyond competition between online platforms to warehouse organisation, taxation, seller responsibility and product traceability.

06 China and control of industrial chains

China's industrial strength is not simply a matter of wages. It combines scale, specialised suppliers, infrastructure, finance, skills and command of particular intermediate processes. A company can relocate final assembly without moving this ecosystem. Diversification measured only by final factories risks measuring the wrong object.

Authorities have several levers: market access, credit, standards, public procurement, research support, resource policy and export authorisation. Not every industrial advantage is a subsidy in the legal sense; conversely, preferential financing or below-market inputs can matter without an obvious budget transfer. Investigation should establish an advantage and its effects rather than treating all Chinese competitiveness as automatic proof of distortion.

Intermediate resources provide a possible response to Western technology restrictions. According to the IEA, the number of mineral tariff codes subject to Chinese export controls has tripled since 2023. The expanded rare-earth measures announced in October 2025 were suspended for one year until November 2026: announcement, suspension and earlier restrictions must be distinguished. [S14]

A licence derives power from the asymmetry between a component's low value and the high value of the production it enables. A magnet can represent a fraction of a vehicle's cost while determining whether it can be delivered. The supplier need not stop all exports: an unpredictable delay, extra documentation or selection among end users can be enough to change investment decisions.

This strategy has limits. Frequent use accelerates substitution, alternative processes and the financing of competitors. Customers may accept higher costs to reduce an exposure that has become political. Blocking power is therefore an asset whose use can depreciate it. For Beijing and Washington alike, the challenge is to influence the other side without making the search for independence irreversible.

07 The European Union between regulation and industrial policy

The EU has a large market and a regulatory apparatus capable of influencing foreign producers. Its challenge is converting this power into competitive productive capabilities. Common rules can structure demand; they do not guarantee affordable energy, fast permits or access to the capital required to meet it.

The new EU steel framework has applied since 1 July 2026. The preceding agreement provided for annual quotas of 18.3 million tonnes and a 50% out-of-quota duty. The framework also strengthens traceability of where steel was first melted and poured. Its scope remains the relevant products and allocations, not every metal. [S08, S09]

Electric vehicles illustrate another route. Definitive countervailing duties adopted in 2024 on battery electric vehicles originating in China range from 7.8% to 35.3% by company; in January 2026, the Commission issued guidance on price-undertaking offers. These are countervailing duties, not necessarily the total import duty. [S12]

European sovereignty is crossed by divergent interests. Steel producers seek protection while machinery manufacturers need competitive inputs. Some member states have greater fiscal capacity to support factories than others. Poorly coordinated autonomy policies can fragment the internal market they are meant to strengthen.

Europe must also distinguish reduced dependence from reduced competition. Procurement preferences may preserve scarce expertise; they can also lock buyers into expensive technology. Assessment should consider total cost, crisis availability, maintenance and replacement options. A company's nationality is only an imperfect indicator of those capabilities.

08 Carbon becomes a condition of market access

The EU Carbon Border Adjustment Mechanism, or CBAM, entered its definitive regime in 2026. It covers specified categories of cement, iron and steel, aluminium, fertilisers, electricity and hydrogen. The Commission describes a 50-tonne mass threshold for relevant importers and certificate pricing based on ETS auctions, using quarterly averages in 2026. Eligibility and exceptions require product-level checks; the threshold must not be indiscriminately extended to electricity and hydrogen. [S10]

The economic principle is to bring the carbon cost of imports closer to that borne by EU production, taking account of rules on free allowances and carbon prices actually paid abroad. It is not a uniform tax on selling prices. Two steel products with the same commercial value can face different charges if their embedded emissions differ.

On 30 September 2026, the Commission estimated that the 50-tonne threshold would have exempted 0.87% of embedded emissions over the period assessed, below the 1% limit. This illustrates a trade-off between administration and environmental coverage; it does not mean that 99% of importers are taxed. [S11]

Industrial effects extend beyond future payment. Customers request verifiable data on processes, energy and inputs. A business unable to document emissions may lose a tender before its carbon cost is compared with a competitor's. Measurement, verification and data transmission become commercial functions.

A purely educational example isolates the issue: if two processes differ by 1.5 tonnes of CO2 per tonne of product and the relevant carbon price is assumed to be EUR 80, the gross difference is EUR 120 per tonne before all regulatory adjustments. This is not a CBAM invoice. It shows why lower-carbon electricity, efficiency and traceable procurement can become export advantages, and why countries with limited financing have more difficulty adapting.

09 The regulatory border beyond tariffs

The EU Foreign Subsidies Regulation extends scrutiny to the source of financing. For certain concentrations, notification combines at least EUR 500 million in EU turnover with more than EUR 50 million in foreign financial contributions over three years. In public procurement, reference thresholds are EUR 250 million for the contract and at least EUR 4 million in contributions per third country over three years, subject to the regulation's conditions. A reportable contribution is not automatically an unlawful or distortive subsidy. [S20]

The practical effect is to move due diligence into accounts, guarantees, loans, capital contributions and relationships with public bodies. International groups must reconstruct these contributions beyond the bidding entity alone. Documentation costs can affect the choice of a financing partner well before an operation is reviewed.

Other instruments concern production methods. The published EU deforestation schedule provides for application on 30 December 2026 for large and medium operators and 30 June 2027 for micro and small operators, with exceptions including certain operators already covered by the timber regulation. The EU ban on products made with forced labour applies from 14 December 2027. Presenting both as fully applicable in October 2026 would be incorrect. [S22, S23]

These regimes should not be confused with general corporate responsibility or customs-origin rules. A product may have valid preferential origin and still fail an environmental requirement. A favourable social audit does not replace an export licence. Controls accumulate because different laws address different questions.

Digital and health regulation follow a similar logic. Data localisation, cybersecurity, medicine approval, privacy and equipment certification can structure markets without being tariffs. Analysis must identify the public objective, evidence requirements, recognised bodies and appeal mechanisms. Protectionist risk emerges when equivalence becomes impossible to demonstrate or requirements change without a realistic adaptation period.

10 North America and the geography of origin

Mexico and Canada are integrated into continental production networks in which components sometimes cross borders repeatedly. A duty on an intermediate good can consequently transmit through several stages, subject to exemptions or reimbursement mechanisms that require verification. The manufacturer's nationality alone does not establish a product's treatment.

USMCA automotive rules include a 75% regional-value-content requirement for relevant vehicles, compared with 62.5% under NAFTA, and labour-value-content requirements of 40-45%, with a USD 16 hourly threshold in the corresponding provisions. These percentages do not mean that every worker in a Mexican factory must earn that amount. [S32, S33]

Mexico's proximity reduces lead times and facilitates coordination with US customers. But nearshoring is not political immunity. Substantial transformation, component provenance, ownership and real local capability become central. Simple transshipment does not confer a new origin; an integrated factory can create significant regional value.

For Canada, integration provides market depth while exposing some industries to a dominant buyer. Diversification into other destinations requires ports, transport capacity, certifications and business relationships that cannot be replaced immediately. Dependence should therefore be measured not just by the largest customer's share but by the time needed to find another.

Canada, Mexico and the United States illustrate a broader contradiction: regionalisation can improve collective resilience while reinforcing the bargaining power of the largest member. Companies must distinguish preferential access, political stability and the capacity to survive a suspension of preferences. These are three separate assets.

11 Industrial Asia and diversification strategies

Japan, South Korea and Taiwan occupy decisive positions in equipment, components and semiconductors. Their challenge is to preserve markets and suppliers while respecting security constraints that are not always identical. Diversification often means adding capacity, qualifying suppliers and allocating activities by sensitivity rather than abruptly abandoning a major market.

Southeast Asia offers differentiated platforms. Vietnam combines export assembly with participation in several agreements; Malaysia has electronics expertise; Singapore connects services, finance and logistics; Indonesia seeks greater processing of its resources. This diversity makes it misleading to treat ASEAN as a single replacement destination for China.

RCEP began entering into force in January 2022 and supports regional integration that includes China. CPTPP constitutes another set of rules, with UK participation beginning in December 2024. These arrangements show that fragmentation between particular powers can coexist with deeper integration inside partially overlapping networks. [S34, S35]

India uses Production Linked Incentive schemes across 14 sectors, with an approved envelope announced in July 2026 of INR 1.91 lakh crore, equivalent to INR 1.91 trillion. An authorised envelope is neither spending already disbursed nor a measure of value added created. [S41] The industrial test is growth in local suppliers, engineering and productivity beyond subsidised assembly.

Regional economies benefit from demand for alternative suppliers, but success can increase their exposure. Rapid export growth also attracts investigations into circumvention or excess capacity. A durable position requires documenting what is actually produced, transformed and designed locally. Geographic diversification has strategic value only when it also diversifies capabilities and dependencies.

12 Wider Europe and Eurasian corridors

Central Europe developed as part of continental production chains, especially in automotive, equipment and electronics. The issue is no longer simply attracting a production unit but retaining a role during technological transitions. A region specialising in combustion-engine components can be exposed even if vehicle-assembly volumes remain stable.

Türkiye combines industry, proximity to markets and a transit role. The Caucasus and Central Asia may expand their importance in overland corridors, logistics and resources. But an announced route is not operational capacity: rail and port interfaces, transit rights, compatible formalities and accessible insurance are necessary. The weakest link limits the capacity of the whole network.

Sanctions have added a legal geography to this physical geography. The EU Council adopted its twenty-first Russia sanctions package on 23 July 2026, addressing areas including energy, finance, crypto-assets and vessels. Exposure must be assessed through counterparties, products and services, not merely the declared delivery country. [S27]

Rising trade with a transit country may reflect local demand, legitimate industrial transformation or circumvention. Aggregate data cannot distinguish these explanations. Product codes, volumes, local absorption capacity and end users must be examined. This discipline prevents a statistical anomaly from becoming an unsupported accusation.

For Eurasian economies, route diversification can provide real autonomy but also multiply compliance costs. The profitable corridor is not necessarily the shortest: it is the one that remains usable, financeable and insurable. Credible infrastructure policy should quantify reliability, not merely track kilometres or theoretical tonnage.

13 The Gulf and Middle East where resources meet transit

The Middle East concentrates resources, processing capacity and chokepoints. The IEA estimates that approximately 20 million barrels per day of crude oil and petroleum products passed through Hormuz in 2025. This is a reference preceding 2026 disruptions, not the actual flow on this report's publication date. [S17]

The third-quarter 2026 gas report describes an already visible shock: in the second quarter, European TTF averaged nearly USD 16 per million British thermal units, up 32% year on year, while Asian spot prices averaged around USD 17.5, up 45%. These are quarterly averages, not 7 October quotations. [S18]

Transmission extends beyond fuel prices. Gas feeds chemicals and fertilisers; electricity enters metals production; transport connects these products to markets. An energy interruption can make a foreign factory less competitive without any new tariff. Protectionism and geopolitical shocks can therefore compound one another while having different causes.

Gulf states also seek to use capital, energy and public orders to develop new activities. Local-presence requirements, training, subcontracting and procurement can accelerate learning. Their effectiveness depends on sustainable demand and the ability to operate projects after the investment phase. An impressive infrastructure project does not replace a profitable customer base.

For energy importers, the lesson is to diversify contracts, routes and uses. Two suppliers relying on the same strait do not necessarily represent independent risks. Strategic reserves buy time; they do not create permanent production. Useful investment combines energy efficiency, interconnections, industrial flexibility and fuel substitution where technically feasible.

14 Africa and Latin America beyond resource exports

Resource economies seek a larger share of processing. Ore, refining, active material, components and finished goods require different capital and skills. Moving between stages can increase domestic value, but only if energy, water, logistics and market access make processing viable.

Indonesia provides an instructive case beyond its own region. Nickel restrictions were examined in dispute DS592; the WTO panel found the measures assessed inconsistent with GATT Article XI:1, and Indonesia appealed in December 2022. This illustrates tension between domestic-processing ambitions, trade rules and the enforceability of dispute settlement. [S42, S48]

In Africa, AfCFTA seeks to expand a market whose effective size is often constrained by internal borders. A World Bank study published in 2020 simulated income gains of USD 450 billion by 2035 under full implementation; these are not realised gains. In August 2026, the Bank again stressed the importance of liberalising transport, financial and telecommunications services. [S36, S37]

Continental integration cannot be assessed through signatures alone. Firms need usable preferences, cross-border payments, reliable transport and recognised documents. Zero tariffs become less valuable when cargo remains at a border for weeks or trade credit is unavailable.

Latin America has agricultural, mining and energy strengths but faces similar challenges of processing and diversification. According to the Commission, the EU-Mercosur interim trade agreement has applied provisionally since 1 May 2026. It should neither be described as a negotiation without effects nor confused with complete ratification of the entire partnership. [S38]

The shared challenge is to prevent great-power competition from producing only another demand for extraction. A good agreement should organise training, maintenance, local-supplier access and risk allocation. A processing plant without technological autonomy or durable market access may relocate dependence rather than reduce it.

15 Morocco and the strategic value of connectivity

Morocco sits at the intersection of European industrial integration, Atlantic access, African activity and multiple trade agreements. It is not a large economy able to impose its rules alone; it is a platform capable of reducing the cost and risk of connections between several spaces. This role becomes more valuable as customers seek proximity, traceability and diversification.

Tanger Med handled 11,106,164 TEUs in 2025, up 8.4% according to its annual account. A TEU is a twenty-foot equivalent unit; traffic includes transshipment and measures neither Moroccan exports alone nor their domestic value added. [S43] Port performance creates an industrial opportunity, not sufficient proof of domestic integration.

Automotive and aerospace place supplier qualification and production continuity at the centre. Batteries and related materials add technology, capital and origin issues. Phosphates and fertilisers connect resources, energy, water and food security. In each area, announced capacity, committed investment, production actually sold and skills genuinely transferred must be distinguished.

CBAM increases the commercial value of measurable, lower-carbon production. But renewable capacity installed somewhere in the country does not automatically confer a low footprint on every product. Recognised data and methods are needed for the installations concerned. Decarbonisation must connect to industrial procurement, processes and verification.

Preferential agreements are not universal passports either. Morocco appeared in the 2026 US proceedings concerning imports made with forced labour. This does not establish a single duty on all Moroccan exports: it requires checking the product's final treatment and exclusions. [S44, S06]

Strategic priority should lie in industrial depth. A Moroccan supplier learning to design a component, certify a process, finance inventory and export to several clients provides more resilience than assembly growth dependent on imported inputs alone. The objective is not to reject foreign investment but to organise conditions under which it progressively expands national capacity to produce, decide and negotiate.

16 Steel aluminium and chemicals protection through the chain

The OECD projects global steel excess capacity of 745 million tonnes in 2028. This is a projected capacity gap, not an inventory of unsold steel. Low utilisation puts pressure on margins and can encourage export sales, but an aggregate excess-capacity measure cannot establish dumping legally for every product. [S13]

Steel concentrates several conflicts. It is essential to infrastructure and defence, employs geographically concentrated skills and requires substantial capital to decarbonise. It is also an input for thousands of firms. A barrier supporting its price can hurt construction, machinery, automotive and energy equipment. Upstream protection cannot be evaluated without downstream users.

Aluminium shifts attention towards electricity. Owning ore and refining capacity does not ensure competitive smelting. Energy contracts, carbon, grid availability and metal quality are decisive. Recycling can reduce some dependencies but requires collection, sorting and alloy compatibility.

Chemicals connect even longer chains. Higher gas prices affect ammonia; unavailable chemical inputs can affect mineral processing; polymers or high-purity gases can interrupt advanced industries. The distinction between traditional and strategic sectors becomes fragile: inconspicuous products support highly sophisticated production.

Coherent policy should identify grades and uses requiring essential local capacity, allow exemptions when inputs are unavailable and condition assistance on verifiable improvement. Closing the market can stabilise a factory; without modernisation, it can also postpone adjustment to a cost disadvantage and make the wider industrial system increasingly dependent on public support.

17 Automotive batteries and the energy transition

The IEA estimates that more than 20 million electric cars were sold in 2025, approximately one-quarter of the global market, with 20% growth. In this definition, electric cars include battery electric vehicles and plug-in hybrids; they are not synonymous with all hybrids. [S16]

Competition now concerns an entire industrial architecture: cells, chemistries, power electronics, software, motors, charging, data and vehicle financing. A country may retain assembly while losing value in traditional components. It may also host a battery plant without mastering active materials or critical processes.

Import duties can buy domestic producers time. They can also slow the spread of cheaper vehicles and delay reductions in oil consumption. The choice therefore goes beyond domestic industry versus imports: it involves transition speed, employment, affordability and future technological capability.

Changing chemistry changes resource geopolitics. Lithium iron phosphate batteries reduce the need for nickel and cobalt in the cathode, but do not remove lithium, graphite or specialised industrial processing. A policy based on a single mineral-demand forecast risks financing assets poorly suited to subsequent technologies.

Finally, announced factories, nameplate capacity, production yields and customer contracts must be separated. A gigafactory can be built without quickly achieving the quality or utilisation required for profitability. Public guarantees should therefore follow technical and commercial milestones. Gigawatt-hours in a press release are not a sufficient measure of sovereignty.

18 Semiconductors artificial intelligence and digital infrastructure

Semiconductors illustrate an interdependence few states can reproduce in full: design, specialised software, machinery, materials, fabrication, packaging and testing are distinct activities. An advanced fab depends on maintenance, consumables, electricity and personnel. Nameplate capacity matters only if this ecosystem remains accessible.

US advanced-export controls address particular equipment, technologies, uses and recipients; BIS provisions have changed repeatedly. Part 740 of the EAR also contains exceptions and conditional authorisations. It would be inaccurate to infer a general, immutable ban on every chip to every country in a region. [S25, S26]

Control extends to capital. The US programme covering certain outbound investments, effective since 2 January 2025, addresses categories of semiconductors, quantum technologies and artificial intelligence, with prohibitions or notifications depending on activity. It does not make every foreign digital investment prohibited. [S24]

For AI, available computing also depends on memory, networks, electricity and cooling. Purchasing accelerators is insufficient if the grid connection arrives years after the building. Digital sovereignty further requires distinguishing ownership of the data centre, control of software, model access, data location and the ability to replace suppliers.

Digital protectionism can take the form of procurement preferences, cloud certification or security obligations. Its benefits should be weighed against lock-in to less capable domestic suppliers and reduced interoperability. Better resilience may come from portable architectures, open standards and reversible contracts rather than physical localisation leaving technical dependence intact.

19 Critical resources and processing power

A resource's criticality depends on use, supply concentration, substitutability and replacement time. A material abundant in the Earth's crust can be strategic when few firms can purify it to the required specification. Geological reserves, mining, refining and component production should be observed separately.

In 2025, the IEA estimated that the top three refining countries accounted for an average 86% of supply across the principal energy minerals studied in 2024, versus around 82% in 2020. Its 2026 edition reduced the potential 2035 copper shortfall against the project pipeline from 30% to 25%. This is a supply-demand scenario, not a certain shortage of that magnitude. [S15, S14]

Australia and Canada can support mining diversification; Latin America and Africa offer significant development opportunities. Yet a mine outside the dominant supplier may still send output to that same supplier for processing. Resilience is not measured by counting flags on a deposit map.

For 2030, the EU has set benchmarks equivalent to 10% of annual strategic-material needs for extraction, 40% for processing and 25% for recycling, together with a diversification objective of no more than 65% dependence on one third country at relevant stages. These are capacity and diversification targets, not achieved outcomes. [S21]

Financing is decisive. More expensive alternative capacity can disappear during a price downturn, just before the crisis it was designed to withstand. Long-term offtake contracts, guarantees and price mechanisms can support this option. Their cost should be compared with the risk insured, with periodic review to prevent security from becoming indefinite assistance without performance requirements.

20 Agriculture food water and fertilisers

Food security combines production, income and the ability to import. A country may produce much of its grain while remaining exposed to fertilisers, energy or water. Another may import heavily but possess diversified suppliers, reserves and strong finances. Physical self-sufficiency therefore does not fully describe security.

Export restrictions often respond to rising domestic prices. They may temporarily protect domestic consumers while increasing scarcity and volatility internationally. Exposed buyers stockpile; other producers imitate restrictions; farmers receive a weaker price signal and may reduce future supply. Local stabilisation can thus relocate and prolong instability.

Sanitary and phytosanitary standards should be distinguished from tariffs. An animal disease or pest may justify a targeted restriction. The debate concerns scientific assessment, regionalisation of risk, duration and recognition of controls. Banning an entire country when risk is localised can be unnecessarily restrictive; ignoring documented risk can destroy an industry.

Fertilisers reveal agriculture's industrial connections. Nitrogen products depend heavily on energy chains; phosphates and potash add their own geographies. Input prices and seasonal credit affect yields months before food prices respond. Water adds another constraint: exporting a water-intensive crop can earn foreign currency while consuming a scarce local resource.

At the G20 on 1 October 2026, Reuters reported agreement to condemn coercive use of food trade but no comparable consensus on industrial excess capacity. This shows that governments can recognise a shared vulnerability without agreeing on trade-discipline instruments. [S45]

Robust policy combines proportionate reserves, diversification, market transparency, agricultural research, storage infrastructure and targeted household support. Broad closure is rarely a durable substitute, particularly when it makes essential inputs more expensive for the very farmers it seeks to support.

21 Defence health and continuity industries

Defence and health share a feature: some capabilities have no available substitute when they become indispensable. A profitable peacetime chain can be insufficient in a crisis. Public authorities consequently buy the ability to expand production, maintain equipment and mobilise resources as well as current output.

In defence, multi-year procurement can make investment in machinery and suppliers bankable. Yet assembly plants remain dependent on engines, explosives, sensors, software and re-export authorisations. Contracts should define access to parts, technical data and maintenance. Equipment delivery does not necessarily transfer freedom to use, repair or resell it.

Industrial offsets can build capabilities when transferred activities have customers and technical depth. They can also support artificial activity with no future after the original order. Evaluation should measure qualifications, productivity, independent exports and suppliers' ability to work for other customers. The headline value of offsets alone does not measure technology transfer.

In health, dependencies include active ingredients, intermediates, devices, specialised packaging and regulatory capacity. Qualifying a pharmaceutical supplier requires validation and quality control; improvised substitution is unacceptable. Lowest-price-only procurement can undermine supplier diversity, while domestic preferences without competition can sustain excessive prices.

Often the answer is to pay explicitly for continuity: multiple-award contracts, rotating stocks, reserve capacity, site transparency and delivery commitments. The premium must be distinguished from rent. Unused backup capacity is not necessarily useless, but it must be testable and deployable. Verifiable availability, rather than a national label alone, justifies public expenditure.

22 Finance taxation and value capture

Control over markets also operates through credit, insurance, payments and ownership. A legally permitted transaction can become impracticable if banks refuse financing or maritime insurance disappears. Conversely, guaranteed export credit can allow a more expensive supplier to win by offering better-matched financing.

Sanctions create caution sometimes extending beyond formal prohibitions. A bank may abandon a small lawful transaction when verification costs and sanction risks exceed its fee. Legal impossibility, internal risk policy and insufficient information should be distinguished. For exporters, the distinction determines whether to change counterparties, improve documentation or abandon the transaction.

Taxation affects value retained by host economies. Royalties, interest, service payments and management fees can remunerate genuine functions; they can also raise transfer-pricing questions. Their existence does not prove abuse. Analysis should examine functions, assets, risks, comparables and applicable treaties. Arbitrarily restricting payments can impair technology access; accepting them without scrutiny can erode the tax base.

OECD Pillar Two addresses large multinational groups around a EUR 750 million consolidated-revenue threshold and a 15% effective minimum, with detailed rules, exclusions and coordination mechanisms. The January 2026 side-by-side package introduced important adjustments. Fifteen per cent should therefore not be treated as a universal rate automatically payable by every company in every country. [S39, S40]

The industrial implication is clear: a tax holiday can lose appeal if it triggers a top-up charge elsewhere. States should compare tax incentives with infrastructure, training, research and administrative simplification. Support is justified only if it changes an investment decision or produces collective benefits exceeding its cost.

A project's national income statement should set wages, local value added, taxes actually collected and learning spillovers against subsidies, dedicated infrastructure, environmental costs and public risks. Gross exports and announced investment are useful but incomplete indicators. Development quality is revealed by what remains after financial flows have been distributed.

23 Logistics and the cost of time

UNCTAD estimates that approximately 80% of international merchandise trade volume travels by sea. This refers to goods by volume, not all goods and services by value. [S19] Maritime dependence connects trade with route security, port capacity and insurance.

A diversion keeps ships occupied longer, increases some fuel requirements and lowers the effective frequency of a given fleet. Costs can rise without a ship physically disappearing. Port congestion adds irregularity: producers finance not just extra average inventory but protection against unpredictable delivery.

Relocation can shorten lead times without removing dependencies. A factory near customers may still import its critical component from far away. A second route may converge on the same congested port. Genuine diversification maps second- and third-tier suppliers, terminals, chokepoints, insurers and the digital infrastructure coordinating flows.

Trade finance consequently becomes part of sovereignty. Targeted public guarantees, predictable customs, recognised electronic documents and prompt dispute resolution can improve access without additional barriers. These policies attract less attention than tariffs but can be more valuable to SMEs.

Average delivery time is not always the best performance measure. Variability, complete and on-time delivery rates, customs-clearance time and exception costs determine inventory. An administration reducing uncertainty can create an industrial advantage without directly subsidising a factory.

24 Limits of multilateral trade law

The WTO system distinguishes bound duties, which establish commitment ceilings, from applied duties. Trade-agreement preferences, exceptions and trade remedies add layers. A tariff increase is therefore not automatically a violation; compatibility depends on the commitment, partner treatment and authority invoked. [S46]

Anti-dumping involves comparison of export price with normal value, together with injury and causation; countervailing duties address subsidies meeting relevant criteria; safeguards concern import increases causing or threatening serious injury. A cheap import is not dumping by itself. These mechanisms require investigations and procedural protections. [S28, S29]

National security broadens interpretive conflict. A state may regard a dependency as dangerous while its partner sees a trade restriction. System effectiveness then depends on reviewing use of the exception without denying genuine risks. If every sector becomes strategic, the exception can absorb the rule.

The lack of a fully operational Appellate Body weakens the resolution of some disputes but does not mean WTO law has disappeared. The Multi-Party Interim Appeal Arbitration Arrangement, based on Article 25, provides an alternative among participants; consultations, panels and negotiated agreements continue to matter. The arrangement does not automatically bind every member. [S30, S31]

Small and medium economies must combine legal remedies, negotiation and evidence-gathering capabilities. A strong origin, subsidy or injury file can matter as much as diplomatic rhetoric. Resource asymmetry remains: companies can lose markets before litigation is resolved. Law sets the framework; cash and time often determine who can wait for enforcement.

25 Three scenarios for the coming years

The following scenarios are analytical constructions, not probability-weighted forecasts. They test decision resilience between late 2026 and 2028. Several can coexist across sectors.

In the first scenario, governments retain barriers but negotiate access corridors. Large firms able to finance compliance benefit. Intermediate countries gain when they offer genuine transformation and credible administration; they lose when their model relies only on a tariff differential that can disappear.

In the second, trade measures and physical shocks reinforce one another. Higher costs lead to public support, followed by investigations and retaliation. Companies duplicate capacity without secure demand. Public finances absorb growing risk, while countries with limited fiscal space become more vulnerable to food and energy prices.

In the third, easing tensions restores the value of efficiency. However, capacity built for security may become underused. Governments must decide which industrial insurance policies to retain. De-escalation does not remove the need for resilience; it makes the cost more visible and demands clearer justification.

Useful leading indicators include licensing delays, critical-input inventories, regional price gaps, new investigations, factory utilisation, financing conditions and shifts in declared origin. Political announcements matter, but supplier qualification, procurement and grid-connection decisions often reveal real restructuring earlier.

26 How to assess a protection strategy

Good policy begins with a measurable problem: dependence on a sole supplier, financing failure, learning spillovers or an unpriced environmental cost. It then compares responses. A broad tariff is rarely the only option; inventories, limited guarantees, joint research or certification recognition may achieve the objective with less damage.

A time horizon and exit conditions are essential. Learning support should track productivity and skills. Security measures should verify deployable capacity. Environmental compensation should measure avoided emissions. Without indicators tied to the objective, measures become difficult to end because beneficiaries are visible while costs are dispersed.

For a company, the first step is product-level mapping: classification, origin, suppliers, customers, technologies, permissions and routes. Margin and cash-flow analysis follows, then assessment of alternatives. An unqualified alternative is not a backup supplier; an unfinanceable contractual clause is not effective protection.

For a state such as Morocco, the objective is to negotiate integration rather than simply undergo it. Project incentives should be compared with skilled employment, genuinely additional local procurement, research, taxation and autonomy gained. Monitoring should follow outcomes without imposing impossible conditions that deter useful projects.

Protectionism does not eliminate interdependence. It redistributes its costs, responsibilities and power. The best-positioned economies will not necessarily have built the highest barriers. They will have identified what they must be able to produce, what they can safely buy and which dependencies they can no longer afford to discover in the middle of a crisis.

Principal sources

Global trade and the economic outlook

• UN Trade and Development — UNCTAD — Global Trade Update, April 2026.
• World Trade Organization — Global goods trade resilient in the first quarter of 2026, 31 July 2026.
• International Monetary Fund — World Economic Outlook Update, July 2026.
• World Trade Organization — World Trade Report 2026 — Executive summary.
• UNCTAD — Review of Maritime Transport.

United States trade policy

• The White House — Ending Certain Tariff Actions, 20 February 2026.
• The White House — Fact sheet on the temporary import duty addressing international payments problems, 20 February 2026.
• The White House — Continuing the Suspension of Duty-Free De Minimis Treatment for All Countries, February 2026.
• Office of the United States Trade Representative — USTR — Section 301 action concerning the failure of 60 economies to ban imports produced with forced labour, July 2026.
• USTR — Section 301 investigations into structural excess capacity and production in manufacturing sectors.
• USTR — Findings and proposed action in 60 investigations concerning trade in forced-labour goods, June 2026.

European Union regulation and market access

• Council of the European Union — New rules to protect the EU steel market from global overcapacity, 8 June 2026.
• Council of the European Union — Agreement on protecting the EU steel industry from global overcapacity, 13 April 2026.
• European Commission — Carbon Border Adjustment Mechanism — Definitive regime.
• European Commission — CBAM De Minimis Threshold Assessment, 30 September 2026.
• European Commission — Guidance on price-undertaking offers for battery electric vehicles from China, 12 January 2026.
• European Commission — Foreign Subsidies Regulation — Overview.
• Council of the European Union — The Critical Raw Materials Act.
• European Commission — Regulation on Deforestation-free Products.
• Council of the European Union — Products made with forced labour.
• Council of the European Union — Twenty-first package of sanctions against Russia, 23 July 2026.

Industries, energy and strategic resources

• OECD — OECD Steel Outlook 2026.
• International Energy Agency — Global Critical Minerals Outlook 2026 — Executive summary.
• International Energy Agency — Global Critical Minerals Outlook 2025 — Executive summary.
• International Energy Agency — Global EV Outlook 2026 — Executive summary.
• International Energy Agency — Strait of Hormuz.
• International Energy Agency — Gas Market Report, Q3 2026 — Executive summary.
• US Bureau of Industry and Security — BIS — Export controls restricting China’s capacity to produce advanced semiconductors for military applications, 2 December 2024.
• BIS — Export Administration Regulations, Part 740 — Licence exceptions.
• US Department of the Treasury — Outbound Investment Security Program.

Regional agreements and industrial strategies

• USTR — USMCA: Rebalancing Trade to Support Manufacturing.
• Federal Reserve — Trade Compliance at What Cost? Lessons from USMCA Automotive Trade, 18 July 2025.
• Australian Department of Foreign Affairs and Trade — Regional Comprehensive Economic Partnership — RCEP.
• Australian Department of Foreign Affairs and Trade — Comprehensive and Progressive Agreement for Trans-Pacific Partnership — CPTPP.
• World Bank — What’s Next for Africa’s Integration Agenda, 28 August 2026.
• World Bank — AfCFTA: Potential income gains by 2035, 27 July 2020.
• European Commission — EU-Mercosur interim trade agreement starts to provisionally apply, 30 April 2026.
• Government of India, Press Information Bureau — Production Linked Incentive schemes, 21 July 2026.
• Tanger Med — 2025 port activity results, January 2026 publication, in French.

International taxation and trade rules

• OECD — Global Minimum Tax: Understanding the Side-by-Side Package, January 2026.
• OECD — Cross-border and international tax.
• World Trade Organization — Anti-dumping, subsidies and safeguards.
• World Trade Organization — Agreement on Subsidies and Countervailing Measures — Overview.
• World Trade Organization — WTO legal texts.
• World Trade Organization — The Multi-Party Interim Appeal Arbitration Arrangement pending dispute-settlement reform, 28 March 2026.
• World Trade Organization — Dispute DS592: Indonesia — Measures Relating to Raw Materials.
• World Trade Organization — Indonesia appeals panel report concerning nickel-ore restrictions, 12 December 2022.

Trade diplomacy

Reuters — G20 trade chiefs to denounce food trade coercion but not excess factory capacity, 1 October 2026.