The recent escalation by the United States’ tariff driven policy sparked an international discussion about its effects on today’s hyper-globalized economy. While hyper-globalization has reduced global inequality, it has increased inequality in the developed economies. As a result of this inequality in the West, a protectionist mindset was manifested and intends to use tariffs against emerging economies that heavily subsidize their local industries to support their economic competitiveness. As such, while Trump’s recent tariffs have been mocked for including places populated by penguins, his actions in general are not without basis.

The tariffs are mainly targeting what the United States has always deemed to be unfair business practices and recent transshipping strategies to bypass China-targeted policies. However, the current US administration’s focus with these tariffs seems to be solely against the practices of offshoring and towards bringing manufacturing jobs back to the United States.

Even though the labor-intensive manufacturing jobs for American companies have been offshored to low-wage countries, the high value jobs driven by technology, research and development have remained within the United States. By definition, these tariffs are taxes on imported goods which are designed to shield local industries from global competition until they are mature enough to compete. The unintended consequences of Trump’s actions will undermine and inefficiently allocate resources to labor-intensive jobs instead of maintaining the United States’ undisputed leadership in technological innovation.

Additionally, this would give an unintended cost advantage to companies like Samsung in South Korea which would still be cheaper in comparison to Apple, a flagship American company, which is bound to raise its prices due to the tariffs. On the other hand, these so-called unfair business practices have provided the American consumers with what some economists call foreign philanthropy, as they have received low-cost goods from countries which prioritized industrial subsidies over the social welfare of their citizens.

These countries, by design, have focused their investments on infrastructure (railways, roads, ports), disregarded environmental effects and maintained a low exchange rate for their currencies resulting in low wages and consumption leading to surplus production being exported abroad. This foreign philanthropy has allowed the United States to focus on the digital, while the rest of the world focused on the analog.

The Kuwaiti approach towards subsidies has been different where the focus was social rather than industrial. While the United States is worried about displacing strategic manufacturing competencies due to the trade deficit, Kuwait has not been able to create strategic competencies or invest in the necessary infrastructure to support the creation of one. In the most extreme of circumstances, a country would consider the ability to retool car manufacturing factories to build weapons.

However, a country would not be able to do that when neither the factories nor the expertise existed on its shores. In contrast, the economic focus in Kuwait has been on employment rather than innovation, production or investment in infrastructure. While recent government announcements highlighted a focus on investing in infrastructure (railways, Mubarak Port), these steps were needed during the times when oil prices and the general reserve fund were at their highest and ready for investments. Shifting from the predominantly social subsidies (housing, healthcare, electricity and fuel) towards industrial targets will not be easy despite being necessary. A balance needs to be made between social standards and industrial targets to foster competitive industries beyond oil extraction.

The direct and indirect ownership of local banks will be the backbone of any tangible steps towards redefining Kuwait’s future and economic reform, especially during these cash-strapped times for the government. China and Germany have both leveraged state-owned banks and energy companies to build industrial strength. Kuwait was poised to be a leader and pioneer in the petrochemical industry, solar energy and a logistics hub due to its unique location.

The employment-first strategies, however, managed to employ everyone without ensuring their development to be innovators in either the oil industry or the world of finance that serves it. An actionable strategy would be to leverage Kuwait’s significant sovereign wealth fund to onshore investments by partnering with industrial leaders in high-potential sectors like petrochemicals, renewable energy, finance and logistics. These partners can be provided with local incentives from land in industrial zones to low-interest rate financing to low energy costs. The blueprints exist, the urgency is clear and the time for Kuwait to take meaningful steps towards economic resilience and sustainability is now.