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The writer is president of Rockefeller International. His last book is 'What's wrong with capitalism?'
While Donald Trump has not acted yet Multiple tariff threatsHe probably will. So the fear remains that the US pass-through trade stance will sow global turmoil, leading to lower growth and wandering markets, especially if it criticizes the target countries.
But retaliation is not Trump's only or even most likely response, no matter how widely distributed his threats are.
The United States has used tariffs as a weapon for eight years now. A continuation of those imposed by Trump in his first term or – in the case of China – by Joe Biden. Some countries retaliated. Others made concessions or were limited before global trade arbitrators. But most moved quietly, seeking trade with countries other than the United States.
Since 2017, Trump's first year in office, trade has more or less consistently occupied less than 60 percent of global GDP. But there was a decrease in the United States' share of trade flows, offset by an increase in other regions, especially 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 five countries – developed and developing – have seen trade rise as a share of national GDP. Gains of more than 10 percentage points were smashed in more than a dozen major countries, from Japan, Italy and Sweden to Vietnam, Greece and Turkey. The big exception is the United States, where it has fallen to about 25 percent of GDP. The United States was growing faster than most of its peers – but without a boost commerce.
America may be increasingly dominant as a financial and economic superpower but not so much as a trading power. Its share of global stock indices has almost exploded 70 percent. Its share of global GDP has risen to more than 25 percent. However, its share of global trade is less than 15 percent, and has declined significantly in the past eight years.
Many warnings about Trump's impact focus on how the new tariffs will hit countries that rely on the United States as their main customer. But during Trump's first term, before the pandemic and despite his tariff offensive, developed countries saw stable growth and growth that saw a strong acceleration in exports of both goods (led by tech products and commodities) and services (led by transportation and digital services).
Global trade talks collapsed after 2008, as tensions sparked by that year's financial crisis forced too broad multi-round deals. But many countries continued to pursue smaller deals. The number of bilateral and regional agreements has risen steadily, with new momentum after Trump first took office and quickly styled himself the “tariff man.”
The United States became curious, looking with others who had cultivated the art of the business deal. Since 2017, the United States has abandoned talks on partnerships with the European Union and Asia, and has not cut a new trade deal. Meanwhile, the EU has negotiated eight agreements and China has concluded nine, including a landmark partnership in 15 countries in Asia.
By late last year, dealmaking picked up again as the start of Trump's second presidency approached. The European Union rushed to finalize the outlines of a difficult agreement – 25 years in the making – with members of the Mercosur alliance in South America, followed by one with Mexico. Now, Mexico is rushing to expand trade ties with fellow Latin Americans, partly as insurance against what Trump might do next.
The result: Over the past eight years, as the locus of global trade has shifted away from the United States and toward the Middle East, Europe and Asia, countries recording significant stock gains have included the United Arab Emirates, Poland and, above all, China. Of the 10 fastest-growing trade lanes, five have one terminal in China; Only two have a station in the United States.
Trump says tariffs will get respect, help restore power to us. But there is another risk worth considering. The new president's brand of populism is due to freeing the United States from heavy government intervention through taxes and regulations, but tariffs are another form — and equally subject to the laws of unintended consequences.
So far, the America First tariff system has done less to damage its main target, China, than to force us allies to look elsewhere for trade. Thus, the risk of broader tariffs may be less about triggering trade wars than undermining America's importance as a trading power and ultimately undermining its economic prowess.
