In a world increasingly divided by trade barriers, the recent plunge of India’s rupee to a record low of 88.44 against the US dollar serves as a stark warning of protectionism’s economic toll. This currency crisis, triggered by escalating US tariffs, underscores how isolationist policies not only disrupt global markets but also harm the very economies they claim to protect. As foreign investors flee and trade outlooks dim, India’s story is a microcosm of a broader truth: walls don’t build prosperityāthey erode it.
The catalyst for this downturn traces back to August 2025, when President Donald Trump imposed a punishing 50% tariff on most Indian imports as retaliation for India’s continued purchases of Russian oil. This move, effective immediately, doubled existing levies and threatened billions in Indian exports, exacerbating capital outflows of over $11.7 billion and forcing the Reserve Bank of India to intervene aggressively. Far from shielding American jobs, such tariffs ripple outward, destabilizing currencies and growth in emerging markets while inviting retaliatory measures that could spiral into a global trade war.
Enter Changpeng Zhao, better known as CZ, the visionary founder of Binance and a vocal advocate for open economies. Responding directly to the news of India’s rupee woes on September 11, 2025, CZ tweeted: “The best way improve economy is to adopt innovation. Protectionism is always at the expense of the people, ie, the economy.” His words cut to the core of the issue, emphasizing that true economic advancement comes not from barriers but from embracing progress.
CZ is sure that the best way to grow the economy is innovation. New tech opens markets, creates jobs, gives people freedom. Protectionism only blocks the road ahead. It guards the past, but steals the future. Economies thrive where ideas compete, not where walls go up. This perspective isn’t just philosophicalāit’s backed by hard data. In the crypto and tech spaces CZ has pioneered, we’ve seen how blockchain and digital assets democratize finance, creating millions of jobs worldwide and fostering borderless innovation.
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History and research reinforce CZ’s stance. A comprehensive study by Davide Furceri and colleagues, published by the IMF and NBER in 2019, analyzed tariff impacts across 151 countries over five decades. It found that tariff increases lead to economically and statistically significant declines in domestic output and productivity in the medium term. Specifically, a 1 percentage point rise in tariffs is associated with a 0.119% drop in output and a 0.234% decline in productivity after five years. These effects compound, reallocating resources to less efficient sectors and stifling overall growthāexactly what we’re witnessing in India’s current turmoil.
On the flip side, innovation drives sustainable expansion. A 2021 Eurosystem report on productivity trends in EU countries highlights how frontier firmsāthose leading in technological adoptionāachieve average annual total factor productivity (TFP) growth of 2.7% to 2.9%, far outpacing laggards at just 0.4%. This isn’t abstract; it translates to real-world gains. Digital technologies, for instance, boost efficiency through automation and better resource allocation, with young innovative firms often delivering over 100% annual productivity surges in their early years. Even amid the COVID-19 pandemic, accelerated digital uptake in the euro area contributed to productivity rebounds, proving innovation’s resilience where protectionism falters.
Consider the broader implications. Protectionist policies like the US-India tariffs not only devalue currencies but also deter investment in cutting-edge sectors. India’s vast talent pool in tech and AI could propel global growth, yet tariffs risk diverting resources to outdated industries. Meanwhile, nations prioritizing innovationāthink Estonia’s digital economy or Singapore’s open trade hubsāenjoy robust job creation and higher living standards.
To chart a path forward, policymakers must heed CZ’s call: dismantle barriers and fuel innovation. This means investing in R&D, easing regulations for emerging tech like AI and blockchain, and fostering international collaboration. The alternativeāmore wallsāonly perpetuates cycles of stagnation, as evidenced by India’s rupee crisis and decades of economic data.
In the end, economies don’t thrive in isolation. They flourish when ideas flow freely, competition sparks creativity, and innovation unlocks untapped potential. Protectionism may promise short-term safeguards, but it ultimately robs us of a prosperous future. It’s time to choose progress over the past.