The customs turmoil seems endless, partly because Trump intends to leverage it for better negotiating positions with the rest of the world. However, if it’s not Trump, then it’s the court! Namely, the U.S. Court of International Trade based in Manhattan yesterday blocked the implementation of U.S. tariffs, reasoning that the president exceeded his authority.
– The court does not decide on the wisdom or potential effectiveness of the president’s use of tariffs as a lever. This is not permissible not because it is an unreasonable or ineffective decision but because federal law does not allow it – states, among other things, in the reasoning of the decision.
The ruling has so far been made in two lawsuits, one filed by (jointly) five small American companies importing goods from countries subject to tariffs, and the other filed by 13 U.S. states – because the tariffs will harm their businesses. There are still numerous unresolved lawsuits, so there could be more surprises.
Oregon’s Attorney General Dan Rayfield, a Democrat whose office is leading the lawsuit of 13 states, called the tariffs illegal, reckless, and economically devastating. Trump has, as expected, announced an appeal, and some analysts believe he will find another way to impose the desired tariffs.
Setting aside the fact that Trump will not achieve much with tariffs – a return to factory settings has long been impossible – a much more important question for us is what position Europe will take in the new world that is being created? And can Croatia at least start thinking about its own direction that can fit into the EU narrative?
Europe should not quarrel with the U.S. nor copy Trump’s style, but it must start to carve new paths for long-broken competitiveness. However, while the EU is still on the path to finding a way to this new competitiveness, small countries like Croatia have little choice. The key lies in self-sustainability, adaptability, and flexibility.
Gradual Diversification
– Croatia is at a critical point in its economic history. Excessive dependence on tourism makes the economy vulnerable, while the lack of diversification limits long-term development. The first step in the transformation requires recognizing the tourism sector as the current economic foundation of the country. The state should provide significant support to the entire sector, from large tourism companies to small renters. Large companies need capital for restructuring and enriching their offerings, while small renters need a guarantee of return on their previous investments.
However, revenues and added value from tourism must be strategically redirected to other sectors of the economy according to a clear timeline: the first year 90% to tourism, 10% to other sectors; the second year 80% to tourism, 20% to other sectors, and so on until achieving a balance of 50 to 50. Such an approach guarantees gradual diversification without destabilizing the existing economic model – emphasizes Marinko Škare from the Faculty of Economics and Tourism in Pula.
He emphasizes that the added value from tourism must be directed towards ensuring self-sufficiency in key areas: energy self-sufficiency through investments in renewable sources; water self-sufficiency through infrastructure and sustainable management; food self-sufficiency through agricultural development and investment in AI and the digital economy.
It’s not that we don’t see how dependent we are on others, but how to move from a standstill in a time of abundant European money that allows the government to do nothing? Škare says we need strong institutions that will ensure the rule of law, protection of property rights, effective dispute resolution, and reduction of transaction costs, thus creating a favorable environment for entrepreneurship. Okay, we know that too, but institutions exist for themselves, not as an efficient service for voters and companies. Croatia is not Norway, after all.
Škare insists that we must focus on the long term, not the short term. And in the long term, we must redefine economic growth. – New measurement tools are needed that go beyond traditional production metrics and better encompass well-being, sustainability, and distributional aspects. Future technological transformations – quantum computing, biotechnology, and fusion energy – will profoundly reshape the economy in ways we have yet to understand. At the same time, demographic changes such as a declining population require new economic frameworks for managing migration and adapting to changing age structures.
Transformative elements are a long-term perspective: the development of multidimensional growth metrics that encompass well-being and sustainability, assessing the impact of revolutionary technologies on economic development, and creating economic frameworks for societies with declining populations.
These research priorities can be integrated through four innovative areas – the integration of machine learning and econometrics, the development of hybrid methods that combine the predictive power of machine learning with causal reasoning of econometrics; through computational modeling based on the simulation of complex adaptive systems and linking individual behaviors with national growth outcomes, as well as through interdisciplinary synthesis methods, i.e., creating formal frameworks that connect ecological economics with science and through economic monitoring systems, specifically through the integration of alternative data sources such as satellite imagery and mobile data for timely identification of structural and cyclical changes. Essentially, a comprehensive approach is necessary – emphasizes Škare.
We Have Advantages in Abundance
The question is how to make any government, and thus institutions, think and act in a connected and holistic manner? No tax reform, for example, has been a comprehensive and thoughtful act. We are unable to connect two ministries, two administrations, or two agencies, let alone all of them, and force them to sit at the same table so that any new decision has a head and a tail.
However, Škare is convinced that the new era naturally pushes towards the transformation of economic knowledge and strategies. The digital revolution, climate change, and demographic trends require abandoning traditional economic frameworks and developing new approaches that better encompass the complexity of the modern economy.
– Success depends on coordinated progress in measuring, modeling, and understanding economic processes. Only through the integration of different disciplines and methodologies can we develop economic systems that will serve well-being, sustainability, and fairness in the coming decades. Yes, all of this requires a long-term vision and disciplined implementation. In the Croatian context, where political cycles often disrupt long-term strategies, this is undoubtedly a challenge. However, the alternative – remaining in a vicious circle of dependence on tourism and susceptibility to economic ‘black holes’ – is not a sustainable option – Škare is categorical.
It is true that we have long left the economy of comparative advantages (except for tourism), but we have advantages in abundance, from geographical location, the potential to be the EU’s granary (and not Ukraine), to EU membership to initiate the transformation from a tourist country to a technological and self-sufficient oasis that can offer unique value in the global market. Let’s remember this in the upcoming elections.
