Tariffs and Innovation: How Should We Respond to Rising Protectionism?

Lately, every time I scroll through the headlines, it feels like the world is becoming noisier, tenser, and harder to navigate. Under President Trump’s second term, the return of aggressive tariff strategies has created an even less predictable environment for international collaboration. The new tariff hikes, including a 145% increase on Chinese imports and abrupt policy reversals, are reshaping the global economy and industrial landscape. And Finland, too, is finding itself sailing through uncharted waters.

One could debate whether this “break-it-or-make-it” tariff negotiation strategy best serves United States’ national interests.^{1(You are transferring to another service)} However, the consequences of Trump’s second term, from escalating trade wars to shifting dynamics within the North Atlantic Treaty Organization (NATO), are already being felt. Innovation ecosystems in Europe are increasingly exposed to ripple effects of regulatory uncertainty, supply chain disruptions, and shifting talent flows. Regions like ours, deeply rooted in open global networks and high-value innovation, feel the strategic pinch more acutely than ever.

The Hidden Cost: How Protectionism Undermines Innovation

Tariffs and trade barriers don’t just raise costs. They quietly erode the foundation for innovation. Studies show that a 10% tariff can cut returns on research and development (R&D) investment in high-tech manufacturing by as much as 50%^{2(You are transferring to another service)}, as firms divert resources from innovation to offset rising expenses. More broadly, protectionist policies resulted in reduced productivity, stifled knowledge exchange, and heightened uncertainty, which makes long-term technological advancement harder to sustain^{3(You are transferring to another service)}.

According to the Economist’s Trump Exposure Index released in February, Finland ranks among the 10 least exposed countries to Trump-era risks. On a scale from 0 (least exposure) to 100 (most exposure), Finland scores 17.5 in trade, 23.7 in security, and 6.1 in immigration, suggesting only a mild direct impact^{4(You are transferring to another service)}. The Trump tariff on the EU starts at the baseline of 10% and can increase to 20%. Thus, we are not insulated from the ripple effects.

For research, development and innovation (RDI) actors in Helsinki-Uusimaa, increased trade barriers mean higher costs for critical components, tighter R&D budgets, and a more cautious approach to long-term innovation. Meanwhile, the U.S. counterpart risks losing access to highly specialised Finnish technologies and research collaborations, jeopardising transatlantic innovation ecosystems that benefit both sides.

When Trust Fades, Openness Falters in Global R&I

Europe’s innovation capacity has long rested on two pillars: openness and trust. Within the EU, cross-border research, talent mobility, and shared standards have enabled decades of progress by driving the European Research Area^{5(You are transferring to another service)}. But today, as geopolitical fragmentation accelerates, our trust, not just trade, with global partners is quietly slipping away. And without trust, openness doesn’t endure. It begins to crack under pressure.

Since 2022, European institutions have decisively severed research ties with Russian entities, following its unprovoked war against Ukraine. Cutting ties was necessary to uphold democratic values and protect security interests. Besides Russia, a more complex erosion of trust is unfolding. Restrictions on technology collaboration with China are tightening, as concerns grow over intellectual property rights, dual-use technologies, and democratic alignment. Meanwhile, the U.S. shift toward bilateral deals and more selective partnerships is making the multilateral research landscape more fragmented and fragile.^{6(You are transferring to another service) 7(You are transferring to another service)}

For regions like Helsinki-Uusimaa, this matters deeply. Our innovation ecosystem depends on transparent, rules-based cooperation, particularly in strategic fields like artificial intelligence, quantum technologies, and cybersecurity. When trust breaks down between global actors, those channels narrow. And when they do, it’s not just political alliances or trading partners that suffer, but our collaborative innovation efforts to solve complex, cross-border challenges.

Economic Fallout: Slower Growth, Shrinking R&I Investments

Tariff escalation and geopolitical crises are hindering global growth. The 2025 forecast from the OECD^{8(You are transferring to another service)} shows weaker economic momentum. According to the Research Institute of the Finnish Economy (Etla), 20–25 percent tariffs could reduce the EU’s economic growth by 2.5–3.0 percent. It is a stark reminder of how protectionism can reverberate across the entire block.

In practical terms, this means less private-sector investment in R&D, posing a challenge to a metropolitan region like Helsinki-Uusimaa. We produce nearly a third of Finland’s GDP and a substantial share of national R&D output. Our target to raise regional R&D expenditure to 5% of GDP by 2030 is not just an ambition; it is essential for the long-term resilience of our region.

Climate Caught in the Crossfire: The Green Transition as Risk  

One area particularly at risk is the green transition. Achieving climate neutrality demands accelerated innovation, but rising protectionism and shifting public priorities may threaten that.

As the EU sets a goal to fund defence and energy security, funding for renewable energy, battery development, and circular economy solutions could face growing pressure. Analysts^{9(You are transferring to another service)} warn that the green transition may slow if trade tensions spread further. That will undermine Europe’s ability to meet climate goals and weaken regions like Helsinki-Uusimaa that have positioned themselves as leaders in sustainable innovation.

What Can We Do? 5 Strategic Moves for Collective Regional Resilience

Despite the rising risks, today’s geopolitical shifts also create opportunities, especially for regions that are globally connected, agile, and aligned in purpose. Helsinki-Uusimaa and its RDI actors now have a chance, and a responsibility, to act together more deliberately and decisively. Here are five concrete collaborative actions we can take to strengthen our regional resilience and global competitiveness:

1. Attract Global Talent

As some countries turn inward, we can turn outward. Finland, and the Nordics more broadly, are seen as politically stable, democratic, and high-quality-of-life destinations. Helsinki-Uusimaa could benefit from a new wave of global talent if we actively coordinate efforts to attract and retain it. This means improving visa pathways, offering English-language services, and building integration support seamlessly.

Whether it’s researchers affected by U.S. immigration bottlenecks or scientists facing cuts in research funding, we have a chance to draw exceptional minds to not only boost our innovation ecosystem but also help counter Finland’s ageing demographics and labour shortages.^{10(You are transferring to another service)}

2. Form Strategic International Partnerships

Finland’s NATO membership and deepening Indo-Pacific ties open new avenues for research and innovation partnerships. But seizing these opportunities will require joint action. RDI actors in Helsinki-Uusimaa can benefit by proactively joining transnational initiatives in cybersecurity, 6G, and AI ethics. We can also strengthen our visibility by engaging in region-to-region diplomacy with other European innovation valleys and like-minded global partners. Collaborating on foresight, piloting joint projects, and building trust-based alliances will ensure our actors remain embedded in high-value networks and at the forefront of international innovation.

3. Invest in Critical Technologies

The EU’s push for digital and tech sovereignty aligns closely with our regional strengths. Finland’s national Semiconductor Strategy anticipates major restructuring in chip supply chains, and both the EU and U.S. CHIPS Acts are bringing advanced manufacturing and R&D back onshore. Helsinki-Uusimaa is well positioned to contribute, especially through the existing ecosystem around Nokia in Espoo and its strong ties to Aalto University. But to lead in areas like 6G, cybersecurity, and ethical AI, we must coordinate investment strategies, deepen university-industry collaboration, and collectively champion our expertise at the European and global levels.^{11(You are transferring to another service)}

4. Lead on the Circular Economy

Circularity is one of our most strategic levers in an era of resource insecurity. The European Commission has recognised Helsinki-Uusimaa as an innovation valley under the European Circular Innovation Valley initiative. This is a clear signal and a call to action. Our region already leads in circular plastics, sustainable food systems, and regenerative business models. Now we must scale those strengths. That means building pilot platforms and demonstrators, aligning regional strategies with European circular economy goals, and reinforcing public-private cooperation to create lasting impact. The more closely we collaborate, the stronger our positioning will be.

5. Expand to New Global Markets

As old trade routes narrow, new ones are opening. The EU is deepening ties with like-minded partners such as Canada, Japan, and India. These relationships open new avenues for Finnish firms to export, co-innovate, and scale.^{12(You are transferring to another service)} Helsinki-Uusimaa can benefit from this if we further coordinate efforts in market entry, branding and RDI positioning. That means we could develop joint export accelerators and innovation missions targeting key markets, brand our region as a trusted partner in health tech, climate solutions, and digital governance and also coordinate responses to EU and international funding calls.

Tariffs and protectionism may resurface, but we don’t need to remain passive. If Helsinki-Uusimaa plays its cards right, by prioritising openness, foresight, and collaboration, we can not only withstand global geopolitical turbulence but also emerge stronger, leading Europe’s next wave of innovation.

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