In April 2025, the global economy was on the verge of a new crisis. The tariff policy of the US President Donald Trump's administration has caused turmoil in global markets and threatened the economic models of many countries, including Ukraine. However, any crisis opens up new opportunities. The only question is whether Ukraine will be able to seize these opportunities to transform its economy and ensure sustainable development in these difficult conditions.

The global tariff war

April 2, 2025 will go down in history as the beginning of a global trade war between the United States and China. The US administration has imposed unprecedented tariff restrictions that have shaken the global economy. The basic 10% tariff on imports from all countries, introduced on April 5, was only the first step. Additional country-specific tariffs were to take effect on April 9, but were postponed for 90 days for bilateral negotiations.

China, the main trade competitor of the United States, faced a record 145% duty. European Union countries could potentially receive 20%, Japan - 24%, South Korea - 25%, India - 26%. Ukraine was included in the group of countries with a minimum 10% tariff, on par with such US allies as Australia, the UK, and Turkey.

The result of this policy was a rapid decline in stock and commodity markets. In three days, the capitalization of leading companies lost $14 trillion, the US market plummeted by more than 16%, and the price of oil fell by more than 20%, reaching its lowest level in four years - $62 per barrel of Brent.

Analysts compare this drop to the largest economic crises of the past: the 2020 pandemic, the 2008 global financial crisis, and even the Great Depression of 1929. However, there is a fundamental difference between these phenomena. While previous crises were caused by external factors, the current situation is the result of a conscious political decision.

Trump's strategy: returning to the real economy

Contrary to popular belief, Trump's decision to impose tariffs is not impulsive or ill-considered. It is a deliberate step towards restructuring the US economic model from a "paper" economy of indices to a real economy of production.

Over the past three decades, the US economy has been growing faster than ever, but this growth has been reflected mainly in the capitalization of high-tech and service companies. At the same time, real production has migrated to China and other Asian countries, leading to structural imbalances.

An illustrative example of such imbalances is the difference in the capitalization of automakers. In 2024, Tesla, with a production of less than 1.8 million cars , had a capitalization of about USD 1 trillion, while Toyota, with a production of more than 10 million cars had only a little over USD 300 billion. A threefold difference in capitalization with a sixfold difference in production clearly demonstrates the distortions of the modern economic system.

The financial crisis of 2008 first revealed the vulnerability of this model. In order to save the economy from disaster, it was necessary to resort to the policy of quantitative easing - printing money and saturating the markets with it. This tactic was subsequently used in any crisis, especially during the pandemic, when the volume of helicopter money reached unprecedented levels, triggering a significant increase in inflation.

However, the constant printing of money acts as an anesthetic - it temporarily alleviates the symptoms but does not cure the disease. As a result of this policy, the US national debt has exceeded USD 36 trillion for the first time in history. According to the Congressional Budget Office, by 2034 it will grow to USD 50.7 trillion, or 122% of the country's GDP. At the same time the trade deficit as of January 2025 reached a record high of USD 130.7 billion.

Obviously, this situation is unacceptable from the point of view of long-term economic security. If the course is not changed, sooner or later a new large-scale financial crisis will occur with unpredictable consequences, and it may not be possible to repay it by printing dollars.

Realizing this, Donald Trump began to act proactively, trying to equalize the trade balance and reduce the debt burden at the expense of other countries. Trump deliberately provoked an economic shock at the beginning of his term in order to get a positive result in a few months and present it to voters as a success of his policy.

The main target of Trump's tariff policy is China and related countries with significant production capacities. A decline in exports to the United States and a general slowdown in the global economy will lead to a drop in GDP growth in these countries and may cause a recession due to overproduction of goods and shrinking markets.

The second victims will be the traditional partners of the United States - the EU, Japan, South Korea and other Asian countries. Trump believes that these countries historically "owe" the United States, having enjoyed duty-free access to the American market and a security umbrella for decades in exchange for political loyalty. The United States will most likely reach an agreement with these countries - they will have to pay for both market access and security. The only question is the price.

The third victims will be all commodity exporting countries, as the risk of a recession pushes down commodity prices. We are already seeing this on the example of oil. It will be followed by a drop in prices for gas, most metals (except for critical ones), iron ore and other commodities, and to a lesser extent food products, but they will also become cheaper. In the medium term, commodity-exporting countries will suffer the most, especially if the confrontation with China escalates and the global economy slows down.

Ukraine in the new economic reality

What does Ukraine look like in this new economic reality? Our country is in the group with a minimum 10% tariff. On the one hand, this is a relatively low level of duties compared to other countries. On the other hand, even this level creates serious problems for Ukrainian exporters, especially in the steel industry.

In 2024, Ukraine's exports to the United States totaled $874 million, of which $363 million was for pig iron and another $112 million for pipes. Given that the Trump administration is reintroducing a 25% duty on steel and adding a new 10% duty, conditions for Ukrainian steelmakers are becoming extremely difficult. It is worth noting that Ukraine's trade balance with the United States is negative - in 2024, Ukraine imported $3.4 billion worth of American goods.

However, the main risk is not tariffs, but a drop in raw material prices that will hit Ukrainian exporters. With a negative foreign trade balance of USD 29 billion in 2024, a drop in export revenues could have catastrophic consequences for the Ukrainian economy.

An additional risk is the possible end of the duty-free trade regime with the EU on June 5, 2025, where a significant portion of Ukrainian exports are directed. If this regime is not replaced by favorable conditions under the updated free trade agreement amid global tariff wars, Ukrainian exports will suffer significant losses, as it will be extremely difficult to sell these products at affordable prices in other markets.

According to Ukrainian officials and agrarian associations, lifting the current emergency rules without introducing alternative mechanisms could cost Ukraine €3.3 billion in export revenues and lead to a 2.5% reduction in GDP

All of this raises a fundamental question for Ukraine: how to ensure economic sustainability in the face of global instability?

Structural problems of the Ukrainian economy

Throughout the years of its independence, Ukraine has been critically dependent on international commodity prices - first for metal, then for ore, and now for agricultural products. The country's economy has risen and fallen along with commodity market conditions, which has made every global financial crisis painful for Ukrainians.

This dependence on commodity exports led to the deindustrialization of Ukraine. Indeed, why invest heavily in production and wait for years for profits if you can quickly sell raw materials and get money?

As a result of this policy, Ukraine has lost its powerful industrial potential created by previous generations during the post-World War II reconstruction. We are talking about unique machine-building, metallurgical, chemical, aerospace and other enterprises. We have fully realized the importance of our own industry only now, when we are forced to look for ammunition and equipment around the world, although we used to produce them ourselves in significant volumes.

In the first quarter of 2025, Ukraine's trade turnover amounted to USD 28.4 billion. At the same time, imports (USD 18.5 billion) were almost twice as high as exports (USD 9.9 billion). The structure of Ukrainian exports remains predominantly raw materials: food products - USD 5.8 billion, metals and metal products - USD 1.1 billion, machinery, equipment and transport - only USD 882 million.

In contrast, imports are dominated by high value-added goods: machinery, equipment and transport - USD 6.8 billion, chemical products - USD 3.2 billion, and fuel and energy products - USD 2.5 billion.

This structure of foreign trade is typical for developing countries and does not ensure long-term economic sustainability. In the context of the global tariff war, raw material exporting countries without their own developed industrial production are doomed to falling incomes and lower living standards. More developed countries will simply redistribute their profits in their favor.

The way to a new industrialization of Ukraine

The current situation, despite all the risks, creates a unique window of opportunity for Ukraine. The US tariff policy and the related restructuring of global supply chains could become a catalyst for the economic transformation of our country.

At first glance, the resource deal offered to Ukraine by the Trump administration looks unfavorable, as it provides access to Ukrainian resources and infrastructure without any clear benefits in return. However, the alternative of being left out of the new global configuration is much worse.

Signing this agreement will turn Ukraine into an official partner of the United States, in which the American side will be financially interested. In view of this, it would be advisable to seek the abolition of the 10% duty imposed by the Trump administration, as well as the 25% duty on metallurgical products, by creating a free trade zone with the United States.

Such a free trade zone could stimulate the development of production in Ukraine of goods for further export to the United States and other Western countries. For example, instead of just mining lithium, Ukraine could produce batteries from it and eventually assemble ready-made electric vehicles for export to global markets. The same applies to other industrial products for which we have the natural resources and production base.

This would be analogous to the path taken by Germany, Japan, and South Korea after World War II, or by the Czech Republic and Poland after the collapse of the Soviet bloc. These countries received substantial investments to create export-oriented enterprises targeting the US and German markets, respectively.

Ukraine's new industrialization should be based on several key principles:

1. Focus on global value chains. Ukraine should integrate into international production networks, specializing in those links where it has a competitive advantage - from the extraction and primary processing of raw materials to the production of components and finished products.
2. Development of high-tech industries. Particular attention should be paid to promising areas such as the production of batteries and electric vehicles, renewable energy, aerospace, pharmaceuticals, and IT technologies.
3. Attracting foreign direct investment. Ukraine needs not only financial resources, but also technology transfer, management experience, and access to global markets, which can be provided by international corporations.
4. Development of the defense industry. In the face of ongoing Russia’s aggression and long-term security challenges, the defense industry should become the engine of Ukraine's technological development, as it has been in the United States, Israel, and other countries. It is equally important to integrate into the US and EU defense production chains.
5. Modernization of energy and transportation infrastructure. Competitive industry is impossible without reliable and affordable energy supply and efficient logistics.

Practical steps and challenges

Implementing the new industrialization strategy requires systemic changes in Ukraine's economic policy and institutional environment.

First, a clear industrial policy with defined sectoral priorities is needed.The state should act as a strategic coordinator for the development of key sectors, providing favorable conditions for private investment and entrepreneurial initiative.

Second, reforming the tax system is criticalInstead of indirectly subsidizing commodity exports through simplified tax regimes for financial groups and agribusinesses, targeted incentives are needed to develop the processing industry and the production of high value-added products.

Third, it is necessary to ensure access to financial resources for industrial enterprises.This requires the development of the financial sector, lower lending rates, and the introduction of effective government support mechanisms, such as export credits and guarantees.

Fourth, it is critical to develop human capital by modernizing the education and training system to meet the needs of modern industry. Ukraine needs not only to stop the outflow of skilled workers, but also to create conditions for the return of talented professionals from abroad.

Finally, it is necessary to create a favorable institutional environment,including effective protection of property rights, an independent judiciary, and transparent rules of the game for all economic agents.

Undoubtedly, Ukraine will face numerous challenges on its path to new industrialization, including:

• Limited domestic resources for investment, exacerbated by the ongoing war and the need for significant defense and security spending.
• Competition from other countries that also seek to attract foreign investment and integrate into global production chains.
• Technological lag in many industries, requiring significant investment in research and development and technology transfer.
• Institutional weaknesses, including corruption, inefficient bureaucracy, and insufficient protection of property rights, especially for foreign investors.
• Demographic challenges, including an aging population and imbalances due to the effects of the war, which limit the availability of skilled labor.

However, taking into account the experience of other countries that have successfully completed the path of industrialization in difficult conditions, these challenges are quite surmountable if there is political will and strategic vision.

Promising areas of industrial development in Ukraine

Based on the available resources, competencies, and global trends, we can identify several promising areas for Ukraine's new industrialization:

1. Production of components for renewable energy. Ukraine has significant deposits of rare metals needed to manufacture solar panels, wind turbines, and batteries. Currently, China is the main producer of renewable energy components, and it is China that will face high tariffs on its products as a result of the US tariff policy. The development of the relevant industries will not only allow for the export of high value-added products, but also ensure energy independence.
2. Defense industry. The war with Russia has created demand for a wide range of defense products, from ammunition to drones and other high-tech systems. Ukraine has historical traditions in this industry and unique combat experience that can be transformed into competitive advantages in the global arms market.
3. Aerospace industry. Prior to the Russia’s invasion, Ukraine was one of the few countries capable of designing and producing aircraft, rocket engines, and spacecraft on its own. Restoring and modernizing these capacities, with a focus on new technologies (drones, microsatellites, air defense systems), could be a powerful driver of economic growth.
4. Production of components for electric vehicles. The global transition to electric mobility is creating demand for batteries, electric motors, power electronics, and other components. Ukraine has the necessary resources (lithium, graphite, rare earth metals) and engineering potential to create the relevant production facilities.
5. IT technologies. Ukraine already has a well-developed IT industry, focused mainly on software development. The next logical step is to develop the production of computer hardware, components for data centers, storage systems, network equipment, etc. A promising area is the development of huge data centers for artificial intelligence models.
6. Modern machine building.including the production of agricultural machinery, equipment for the food and processing industries, and logistics equipment. This will increase productivity in traditionally strong sectors of the economy.
7. Pharmaceuticals and medical equipment.The COVID-19 pandemic and the war have demonstrated the strategic importance of domestic production of medicines and medical equipment. Ukraine has the scientific base and production potential to develop this industry.
8. Advanced processing of agricultural products.Despite its status as a global agricultural player, Ukraine still exports mainly raw materials instead of high value-added products. The development of deep processing of grains, oilseeds, and other crops can increase the value of exports by 3-5 times compared to raw materials.
9. Woodworking and furniture industry.Ukraine has significant forest resources, but most of the wood is exported in unprocessed or minimally processed form. Investments in modern woodworking enterprises, production of boards, furniture, interior decoration elements, and other wood products will significantly increase added value.
10. Deep processing of mineral resources.Ukraine has rich deposits of not only iron ore, but also titanium, manganese, uranium, and rare earth metals. Instead of exporting raw materials, it is advisable to develop metallurgy of special alloys, production of composite materials, and powder metallurgy, i.e., industries with high added value.
11. Production of building materials. Ukraine has all the necessary resources to produce cement, glass, ceramic products, and insulation materials. The development of this industry is important not only for exports but also for post-war reconstruction.
12. Waste recycling and the circular economy.The transformation of production waste into secondary raw materials and new products is in line with global trends in sustainable development and allows for more efficient use of resources. Ukraine has significant potential for recycling scrap metal, construction waste, agricultural waste, and polymers.

For each of these areas, a detailed development strategy needs to be developed, including government support measures, mechanisms for attracting investment, training programs, and research and development activities. It is also important to ensure systematic coordination between different industries and create conditions for the formation of industrial clusters.

The role of the state and institutional reforms

The experience of successful industrializations shows that the state plays a critical role as a strategic coordinator of economic development. This is especially true for Ukraine, where market mechanisms alone do not ensure optimal resource allocation due to institutional distortions, monopolization of certain industries, and external challenges.

At the same time, Ukraine should avoid the mistakes of excessive state intervention. The role of the state is not to directly manage the economy, but to create favorable conditions for private initiative and coordinate the efforts of various economic actors.

The key tasks of the state in the process of new industrialization are:

1. Develop and implement a national industrial strategy with clear sectoral priorities, targets and monitoring mechanisms. This strategy should be developed with the participation of business, academia and civil society and approved at the highest political level.
2. Create effective financial instruments to support industrial development, including export credits, export risk insurance, guarantees for investment loans, and venture capital funds for high-tech projects.
3. Reform the education and training system to meet the needs of modern industry. Particular attention should be paid to engineering specialties and dual education programs that combine theoretical training with practical on-the-job training.
4. Developing the research infrastructure and stimulating innovation. This includes supporting research in priority areas, creating technology parks, incubators, and accelerators, and promoting cooperation between science and business.
5. Ensuring macroeconomic stability as a basis for long-term planning and investment. Inflation control, national currency stability, and prudent fiscal policy are essential prerequisites for successful industrialization.
6. Infrastructure development, including energy, transportation, logistics, and digital. High-quality infrastructure reduces business costs and increases the competitiveness of the economy as a whole.
7. Implementation of institutional reforms aimed at protecting property rights, ensuring fair competition, fighting corruption, and reducing administrative pressure on business.

Despite all the challenges that Ukraine faces, the current global economic transformation creates a unique opportunity for a fundamental rethinking of our role in the global economy. The tariff wars launched by the Donald Trump Administration are reshaping global supply chains and creating space for new industrial centers to emerge.

Ukraine has all the necessary prerequisites to take advantage of this historic opportunity: rich natural resources, favorable geographical location, skilled labor force, scientific and technical potential, and partially preserved industrial infrastructure. But most importantly, the war forced Ukrainian society to mobilize, demonstrate incredible resilience and adaptability, which are critical qualities in the face of global change. The new industrialization of Ukraine is not just an economic project. It is a national strategy for survival and development in the face of geopolitical challenges. An industrialized Ukraine with a diversified economy integrated into global value chains will have a much better chance of defending its independence, returning the temporarily occupied territories, and ensuring a decent life for its citizens.