Research Objective and Background
A policy brief issued on September 22, 2025, by Kazunobu Hayakawa and Hiroshi Mukunoki of the Institute of Developing Economies analyzes the theoretical basis of Trump tariffs from the perspective of maintaining US hegemony. While Trump tariffs introduced in 2025 have thrown the global economy into major turmoil, the research examines protectionist policies of the United States as structural factors, considering economic policies necessary for maintaining hegemonic status.
Theoretical Framework for Optimal Production Location Distribution
Conflict Between Economic Efficiency and Economic Security: The research analyzes optimal production locations for each product from two perspectives: economic efficiency and economic security. For critical minerals and advanced products such as semiconductors used directly or indirectly in military products, the study points out the importance of securing production capacity in the home country or military allies, even if economic efficiency is inferior.
Emergence of Hegemonic Challenger: When a hegemonic challenger (Country D) emerges, the original hegemon (Country B, the United States) needs to shift from distribution based on economic efficiency to distribution based on economic security. This responds to risks of critical materials becoming difficult to obtain due to export restrictions.
Policy Tools and Options
Strategic Use of Tariff Policy: While imposing prohibitively high tariffs on hegemonic challengers, duty-free treatment is applied to allies (Country C). This mechanism reduces sales opportunities for hegemonic challengers while supporting production expansion by allies. Through carrot-and-stick tariff policies, it becomes possible to make allies commit to trade restrictions with hegemonic challengers.
Comparison with Domestic Production Subsidies: While import tariffs are generally more economically harmful than domestic production subsidies, tariff policy becomes a more effective means for imposing constraints on third-country trade as well.
Major Policy Implications
Gradual Product Classification: For goods where the distribution gap between economic efficiency and economic security is small, maintaining a WTO rules-based trading system is appropriate. Product classification according to military importance is crucial for establishing prospects for necessary responses.
Appropriate Response to Allies: The current omnidirectional tariff policy of the United States distorts optimal production location distribution by imposing additional tariffs even on allies such as Japan. Trade liberalization measures should be taken for allies, and introduction of trade policies with different restriction levels for allies and non-allies according to military importance is necessary.