What Next for Global Trade?
In 2018, US President Donald Trump finally turned his protectionist words into action by imposing sweeping tariffs on imports from allies and adversaries alike. But while Trump’s use of tariffs to protect domestic industry is not new, his attacks on the larger trading system certainly are.
WASHINGTON, DC – The year 2018 marked the return of the import tariff. As of October, the United States had imposed levies on roughly 12,000 products, accounting for 12.6% of its total imports; its main trading partners had retaliated with tariffs on 2,087 products, accounting for 6.2% of US exports. With trade tensions mounting, many observers have warned of a full-scale trade war, or even the collapse of the global trading system.
Of course, this is not the first time in recent history that the US has tried using trade policy to advance its interests. In 1971, the Nixon administration famously imposed a 10% tariff on all imports in an attempt to halt the growth of the US current-account deficit. And more recently, the Reagan administration erected non-tariff barriers against a number of import goods, particularly from Japan.
Nonetheless, there are some key differences between these episodes and the latest wave of tariff increases. For starters, the timing is surprising. Until 2018, globalization seemed like an unstoppable and irreversible force. International trade was considered to be completely liberalized, and any talk of trade policy was met with yawns in academic and policy circles alike. Stranger still, the rise of protectionism has come at a time when US unemployment is at a 50-year low, the stock market is up, and GDP growth is projected to be around 3% for the year.