Unlock the White House Watch newsletter for free
Your guide to what the 2024 US election means for Washington and the world
The writer is the president of Rockefeller International. His latest book is ‘What went wrong with capitalism‘
While Donald Trump has yet to take action more tariff threatsprobably will. So there are fears that the US president’s aggressive trade posture will sow global disorder, depress growth and roil markets, particularly if targeted nations retaliate.
But retaliation is not the only or even the most likely response to Trump, regardless of how broadly he ultimately follows through on his threats.
The US has been using tariffs as a weapon for eight years. Those imposed by Trump in his first term have largely been continued or – in the case of China – expanded by Joe Biden. Some nations fought back; others have offered concessions or contested them before global trade arbitrators. But most just quietly moved on, seeking trade with countries other than the US.
Since 2017, Trump’s first year in office, trade has held more or less steady at just under 60 percent of global GDP. But there was a decline in the US share of trade flows, which was offset by increases in other regions, particularly in countries in Asia, Europe and the Middle East. Trump 2.0 seems likely to bring more of the same: trade without America.
Over the past eight years, more than four out of every five nations – developed and developing – have seen trade grow as a share of national GDP. Gains of more than 10 percentage points were recorded 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 fell to around 25 percent of GDP. The US grew faster than most of its peers – but without stimulus trade.
America may be increasingly dominant as a financial and economic superpower, but not so much as a trading power. Its share of global stock indexes has practically exploded 70 percent. Its share in global GDP has risen to more than 25 percent. However, its share in global trade is below 15 percent and has declined significantly over the past eight years.
Many warnings about Trump’s influence have focused on how the new tariffs could hurt exporting countries that rely on the US as their main customer. But during Trump’s first term, before the pandemic and despite his tariff offensive, developed countries saw steady growth and developing countries a strong acceleration in exports of goods (led by technology products and commodities) and services (led by transport and digital services).
Global trade negotiations fell apart after 2008 as tensions fueled by the financial crisis that year made huge multinational deals too difficult to strike. But many nations continued to make smaller deals. The number of bilateral and regional agreements has steadily grown, with fresh momentum since Trump first took office and soon dubbed himself “tariff man.”
The US has become an exception, watching others cultivate the art of the trade deal. Since 2017, the US has left the partnership negotiations with the EU and Asia and has not concluded a single new trade agreement. Meanwhile, the EU negotiated eight agreements and China concluded nine, including a landmark 15-nation partnership in Asia.
At the end of last year, deal-making sprang to life again as the start of Trump’s second presidential term approached. The EU rushed to finalize a difficult draft agreement — 25 years in the making — with members of the Mercosur alliance in South America, followed by a deal with Mexico. Now Mexico is rushing to expand trade ties with compatriots in Latin America, in part as insurance against what Trump might do next.
The result: Over the past eight years, as the locus of global trade has shifted from the US to the Middle East, Europe and Asia, countries that have seen big share gains have included the United Arab Emirates, Poland and, above all, China. Of the 10 fastest growing trade corridors, five have one end in China; only two have a US terminal.
Trump says the tariffs will command respect and help restore American power. But there is another risk worth considering. The new president’s brand of populism promises to free the US from heavy-handed government intervention through taxes and regulations, but tariffs are another form — and just as subject to laws of unintended consequences.
To date, the “America First” tariff regime has done less to damage its main target, China, than to force America’s allies to look elsewhere for trade. Therefore, the risk of even wider tariffs may have less to do with starting trade wars than with undermining the importance of the US as a trading power and ultimately undermining its economic power.
