At the intersection of geopolitics, conflicts and economics there are few instruments of intervention that are as controversial as sanctions and tariffs.
Simplistically put, while both can operate as instruments for influencing the behaviour of targeted parties, one operates on the prism of punitive coercion and the other of persuasive coercion.
What binds them together are some basic requirements, including that whoever wishes to apply sanctions or tariffs has to have the ability and the power to do so. To be in a position to meaningfully sanction others, you have to be in a position to control or deny access to a market or a resource that causes some form of harm to the targets.
Applying the sanctions has to have the effect of forcing the targets to alter their behaviour only because the consequences if they don’t are serious enough to force change.
In recent years the US — one of the few countries that has the ability to activate enough levers to make sanctions effective — has applied sanctions to various individuals and states whose conduct it sought to influence or redirect. For instance, individuals or institutions branded as terrorist funders or supporters are summarily excluded from the world’s financial system, where the dollar — by virtue of its role as the world’s reserve currency — reigns supreme.
Russia and Iran are subject to long-standing sanctions due to pervasive geopolitical differences with the US and its allies, and have had to find alternative ways of keeping their systems functional in the light of various exclusions from the global financial architecture.
The punitive nature of sanctions is contrasted against the resolve of the targeted nations and individuals to maintain their stance. When the conviction is resolute, the pain of sanctions is not enough to persuade change. Since Russia’s invasion of Ukraine in 2022, the sanctions applied on Russia have done little to persuade the Kremlin to abandon its mission. For more fragile countries without the depth of alternative resources caving in would be far quicker.
US President Donald Trump’s use of tariffs is apparently premised on his desire to address trade deficits and usher in a wave of new trade deals written on his terms. The response each country can adopt ranges from biting the bullet by accepting the tariffs to finding a way to negotiate a new deal. The problem is that companies from an affected nation have differing levels of dependency on the US market, just as the US consumer market will have varying levels of reliance on particular products.
When a company has a high dependency on the US market, the imposition of tariffs can be fatal as it has to work out whether it can absorb the hit by lowering its costs and still shipping enough volumes to remain sustainable, or simply hope that its product is important enough for the US consumer to accept the higher exit prices. When both dimensions fail, the writing is on the wall and the last recourse is for the country to step in by pushing for a trade deal.
Countries that opt for the negotiation table have to try to convert what are usually multiyear conversations and consultations into a solution within a matter of weeks before Trump ushers in new tariffs. For some countries, the time frames are irrelevant as they neither have the consumer numbers nor the economic resources to package into something the US will take seriously.
In this case, the tariffs are a blunt instrument of persuasion simply because nothing can persuade a poor country with little market influence to suddenly find parity in trade patterns with the US.
• Sithole (@coruscakhaya) is an accountant, academic and activist.
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