U.S. President Donald Trump's April 2, 2025 advertisement marks the most significant change in direction for international trade in 50 years: a global tariff schedule not seen since the late 18th century. That day may well stand as the day of the end of the era of globalization.

Instead of discussing the bizarreness of this action, I prefer to talk about its antidote: innovation. An innovative product offers a surprise effect that increases the willingness to pay more. And, to deal with tariffs, it is essential that there is a gap between the cost of manufacturing and the selling price of the product or good.

Those with a smaller gap are caught in the low-cost trap and are increasingly exposed to uncertainty.

Being different - not better than the competitor - should be the goal of strategy; companies should always seek to be on the frontier. However, most managers are trapped in an inertia of focusing on cost reduction, which turns into business anorexia. They seek to be the cheapest in the market because they believe this will keep them competitive.

The expression competitive is associated with price reduction but, in its origin, the word competitiveness was associated with challenging existing paradigms. The centers of excellence, of competitiveness, have not been created to do things cheaply, quite the contrary, but unfortunately, most of them get caught up in cost savings and disguise it with the excuse of being efficient.

This efficiency is a trap because, in cutting costs, it ends up cutting wages, for example. Workers at the U.S. retailer Walmart repeatedly protest about their low wages; after the 2008 crisis, the income of the families in the socioeconomic group of these employees fell by almost 20%.

This strategy can also lead to catastrophes. The trimming policy implemented during the development of the Boeing 737MAX made the aircraft less safe and, according to investigators, contributed to the crashes of Lion Air Flight 610 (2018) and Ethiopian Airlines Flight 302 (2019).

According to a U.S. government report , the 2010 Deepwater Horizon oil rig blowout in the Gulf of Mexico - and the subsequent largest oil spill in history - was caused by cost-cutting.

These examples show that seeking leadership through cost cutting has very limited effectiveness and can have serious consequences.

Focusing on innovation is a difficult strategy because basing business leadership on this concept requires the additional effort of dedicating - and paying for - time to think.

Companies focused on innovation are able to absorb additional costs. In its strategy to conquer the U.S. market, the Mexican beer Corona positioned itself with the highest price in the market, competing directly with Heineken, the leading brand among imported beers.

Corona was able to sustain this high cost structure by focusing on consistent taste and quality, bottling all of its U.S. production at a single plant in Mexico City.

However, agreement to recent research , investment in research - which discovers new things and leads science to disruptive insights - has plummeted over the past 40 years.

Innovation makes it possible to increase the level of sophistication and value of products and, consequently, to raise their prices. A high price is, in reality, a right earned by the innovating company.

Each region of the world can, and should, identify what its natural advantage is due to factors such as climate or access to certain natural resources or skilled labor -such as the watchmaking houses in the Jura region (Switzerland), which rely on graduates of watchmaking schools in the area-, and find the best way to develop and exploit it to improve its position compared to other companies in its sector. To do this, I have identified five patterns shared by companies and regions that have succeeded in increasing the value of their products and thus increasing the differential between price and their costs:

1. Focus on high-value segments of different markets. In New Zealand, small cooperatives dependent on the dairy giant Fonterra have developed niche, highly specialized and unique products as a result a clear and deliberate industrial policy to increase the value and sophistication of the dairy sector. In the Basque Country, instead of cheap steel, the aim is to produce high-value steel, as the price for a kilo of steel for making doors is not the same as for its use in the aeronautical industry.

2. Delve into the science behind the business. research and development activitiesare costly for companies. That is why, for example, the Inter-American development Bank includes in its strategy the promotion of the creation of research centers. The purpose is that these centers -depending on universities and governments- generate high-value knowledge in the production of technological innovations. In Chile, for example, they identified the antimicrobial qualities of copper and its capacity to limit the development of pathogenic microorganisms.

3. Expand into other products and industries. The basis of companies is not the products (which become obsolete), but the knowledge behind them. For example, the use of copper in food processing and packaging on an industrial scale, its incorporation into air filters or its employment as an antibacterial agent in textile products.

4. Orchestrate public-private cooperation through the design of a robust industrial policy. For example, the Basque government coordinates the interaction between public and private actors to foster innovation in the region.

5. Search for ideas at the cutting edge. Specific knowledge is a core topic for innovation in organizations. For example, exchange with foreign universities have helped transform and improve the New Zealand dairy industry.

The imposition of universal tariffs by the US government has been an attack on economic globalization and multilateralism, forcing companies to rethink their strategies for competing in the marketplace. Companies that focus on low production costs will not be able to absorb the tariffs.

A high price is, in fact, a right earned by companies that innovate. promote economic development through innovation and specialization, increasing the value of products and giving their producers a uniqueness that makes them stronger, should help to diminish the risks caused by this economic war.