The New Global Trade Order and Its Impact on Georgia

In recent years, the global trade order has been changing rapidly, with the relationship between the United States and China being one of the key factors shaping global trade policy. As a result of these new trade relations, the global economy is facing significant changes, presenting both new opportunities and risks for Georgia. It is crucial for Georgia to analyze these changes adequately and develop appropriate strategies to make the most of the new reality for the benefit of the country.

Recently, Donald Trump announced that he plans to impose tariffs of over 60% on goods imported from China and an additional 10% on products from all other countries. This strong and serious move may be seen as a tactical position in negotiations with China. During Trump’s first term, China pledged to purchase an additional $200 billion of American products, but in reality, only 58% of that target was achieved (Peterson Institute for International Economics). This again shows how difficult it is to achieve goals involving significant financial and economic risks.

The tariffs imposed by the US have already changed global trade routes. For instance, in 2017, 19% of China’s exports went to the US, whereas by 2023, this figure had dropped to less than 15% (CEIC). However, China has reduced exports to the US and increased exports to other countries, especially in Southeast Asia and Mexico. Such diversification created additional constraints, as redirecting trade is never simple, particularly if the US government exercises stricter control over tariff evasion. It is important to note that these changes affect not only China but also the global economy, requiring adaptation and flexibility from all participant countries.

According to Goldman Sachs, such tariff policies present significant challenges for China. The 2018 trade war had a negative impact on China’s Gross Domestic Product (GDP) growth by 0.65 percentage points. If Trump’s new plans are implemented, the 60% tariff increase could reduce China’s GDP growth by 2 percentage points. This factor will significantly slow China’s economic growth and force it to take new strategic steps to maintain economic stability. It also highlights the importance of enhancing economic resilience and developing diversified export markets.

One possible way for China to mitigate the negative impact of tariffs is through the devaluation of its national currency, the yuan. In 2018-2019, the yuan depreciated by around 10%, partially offsetting the impact of tariffs. However, greater depreciation may be necessary in response to new tariffs, which carries the risk of capital outflows (Morgan Stanley). Furthermore, yuan devaluation could impact domestic financial stability, posing additional challenges for China’s central bank, which aims to maintain economic balance and avoid a financial crisis.

Changes in the global trade order will directly or indirectly affect Georgia as well. Georgia, as a regional and global trade partner, must adjust its own strategy to maximize opportunities and avoid risks. Considering its geopolitical location, Georgia occupies an important position in Eurasian trade networks and can use this advantage to support its economic development.

First, trade diversification and the expansion of partnerships are essential. Georgia can leverage the trade conflict between China and the US to strengthen cooperation with countries that may benefit from reduced Chinese exports. Southeast Asian countries have shown how a country can become part of international trade when other countries are restricted due to tariffs. Georgia should be ready to take advantage of new opportunities and strengthen negotiations with strategic partners.

Second, it is important for Georgia to strengthen its position in trade relations with the US. Deepening trade relations with the US will not only bring economic benefits but also be crucial for developing strategic partnerships. Such cooperation will help Georgia strengthen its international position and increase the export of its products to the US market. Moreover, Georgia’s role as an intermediary country between Europe and Asia could gain additional strategic significance for the country.

Additionally, Georgia has the opportunity to strengthen cooperation with other countries in Europe and Asia to develop new trade routes and reduce dependence on individual markets. In this regard, regional infrastructure projects, such as the Middle Corridor, will play a crucial role, providing Georgia with the opportunity to become an important transportation and trade hub in the Eurasian space. Successful implementation of these projects will contribute to the diversification and growth of the country’s economy.

Changes in the global trade order present both challenges and new opportunities for Georgia. The country’s economic success will largely depend on how well Georgia can adapt to these changes and how effectively it can develop new strategies that promote its long-term and sustainable economic growth. Innovative approaches, diversified partnerships, and support for regional projects will help Georgia become more competitive and adaptable in the context of the global economy.