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Your guide to what the 2024 US election means for Washington and the world
The writer is chairman of Rockefeller International. His latest book is ”What went wrong with capitalism”
While Donald Trump has yet to act on his Multiple tariff threatsIt’s likely he does. So the fear is that the US president’s aggressive trade stance will sow global disruption, depressing growth and confusing markets, especially when they are put into perspective.
However, retaliation is not the only or even the most likely response to Trump, no matter how far he ultimately delivers on his threats.
The US has weaponized tariffs for eight years. Those imposed by Trump in his first term in office have mostly been continued or – in the case of China – expanded by Joe Biden. Some nations retaliated; Others offered concessions or challenged them in the face of global trade demands. But most moved on quietly, seeking trade with countries other than the United States.
Trump’s first year in office since 2017 has seen trade more or less steady at just under 60 percent of global GDP. However, the US share of trade flows has been offset by a decline in US trade flows by an increase in other regions, particularly in the countries of Asia, Europe and the Middle East. Trump 2.0 seems likely to bring more of the same: trade without America.
In the last eight years, more than four out of five nations – developed and developed – have adopted as a share of their national GDP. Gains of more than 10 percentage points were held in more than a dozen major nations from Japan, Italy and Sweden to Vietnam, Greece and Turkey. The big exception is the USA, where it has fallen to around 25 percent of GDP. The US has grown faster than most of its peers – but without a boost from Trade.
America may be increasingly dominant as a financial and economic superpower, but not as a trading power. The share of global stock indices has almost exploded 70 percent. The share of global GDP has increased up to 25 percent. However, the share of global trade is less than 15 percent and has declined significantly in the last eight years.
Many of the warnings about Trump’s impact focus on how new tariffs could hurt exporting nations that rely on the United States as a major customer. In Trump’s first term, before the pandemic and despite his tariff offensive, developed countries experienced robust growth and developing countries experienced a sharp acceleration in exports of both goods (led by technical products and raw materials) and services (led by transportation and digital services). .
Global trade talks had fallen apart after 2008 as tensions caused by that year’s financial crisis made large multinational deals too difficult to complete. But many nations continued to pursue smaller deals. The number of bilateral and regional agreements rose steadily with fresh impetus after Trump took office for the first time, soon joining “Tarif Man.”
The U.S. became an outlier, looking to itself as others cultivated the art of the trade deal. Since 2017, the US has abandoned talks on partnerships with the EU and Asia and has not dismantled a single new trade agreement. Meanwhile, the EU has negotiated eight deals and China has concluded nine, including a landmark 15-nation partnership in Asia.
By the end of last year, dealmaking was picking up again as the start of Trump’s second presidency approached. The EU rushed to finalize the outline of a difficult agreement – 25 years in the making – with Mercosur Alliance members in South America, followed by one with Mexico. Now Mexico is rushing to expand trade ties with counterparts in Latin America, partly as insurance against what Trump might do next.
The result: Over the past eight years, as the locus of global trade shifted from the United States and toward the Middle East, Europe and Asia, nations that registered big share gains included the United Arab Emirates, Poland and, above all, China. Of the 10 fastest-growing trade corridors, five have a terminus in China; Only two have a terminus in the USA.
Trump says the tariffs have respect and help restore US power. But it’s another risk worth considering. The new president’s brand of populism vows to free the U.S. from heavy government intervention through taxes and regulations. However, tariffs are a different form – and are equally subject to the laws of unintended consequences.
So far, the “America First” tariff regime has done less to damage its main target, China, than to force U.S. allies to look elsewhere for trade. So the risk of even broader tariffs may be less about trade wars than about undermining the US’s relevance as a trading power and ultimately changing its economic capabilities.
