Trump Can Make America Hurt Again

Columnist based in New YorkWhile Trump has yet to act on his multiple tariff threats, it’s likely he will. So fear lingers that US president’s aggressive trade posture will sow global disorder, depressing growth and roiling markets, particularly if targeted nations retaliate.But retaliation is not the only or even the most likely response, no matter how broadly he finally delivers on his threats.Washington has wielded tariffs as a weapon for eight years now. Those imposed by Trump in his first term were mostly continued or – in the case of China – expanded by Biden. Some nations retaliated; others offered concessions or challenged US before global trade arbiters. But most just quietly moved on, seeking trade with countries other than US.Since 2017, Trump’s first year in office, trade has held more or less steady at just under 60% of global GDP. But there’s been a decline in US share of trade flows offset by an increase in other regions, particularly the nations of Asia, Europe and West Asia. Trump 2.0 seems likely to bring more of the same: trade without America.Over the past eight years, more than four of every five nations – developed and developing – have seen trade rise as a share of their national GDP. Gains of more than 10 percentage points have been chalked up in more than a dozen major nations, from Japan, Italy and Sweden to Vietnam, Greece and Türkiye. The big exception is US, where it has dipped to around 25% of GDP. US economy has been growing faster than most peers, but with no boost from trade.America may be increasingly dominant as a financial and economic superpower but not so much as a trading power. Its share of global equity indices has exploded to almost 70%. Its share of global GDP has inched up to more than 25%. Yet its share of global trade is under 15%, 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 US as their main customer. But during Trump’s first term, before the pandemic and despite his tariff offensive, developed nations saw stable growth and developing ones saw a strong acceleration in exports of both goods (led by tech products and commodities) and services (led by transport and digital services).Global trade talks had fallen apart after 2008, as tensions stirred up by the financial crisis that year made vast multi-nation deals too difficult to conclude. But many nations continued to pursue smaller deals. The number of bilateral and regional agreements rose steadily, with fresh impetus after Trump first took office, and soon styled himself ‘Tariff Man’.US became an outlier, looking on as others cultivated the art of the trade deal. Since 2017, US has abandoned talks on partnerships with EU and Asia, and cut not a single new trade deal. Meanwhile, EU has negotiated eight agreements and China has concluded nine – including a landmark 15-nation partnership in Asia.By late last year, dealmaking picked up anew, as the prospect of a second Trump presidency grew. EU rushed to finish the outline 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 hurrying to widen trade ties with fellow nations 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 shifted away from US and towards West Asia, Europe and Asia, nations registering big share gains included UAE, Poland and, above all, China. Of the 10 fastest-growing trade corridors, five have one terminus in China; only two have a terminus in US.For its part, India did not join the new 15-nation trade partnership in Asia, and is not one of the big beneficiaries of the regional boom. Since 2017, trade has risen by about six percentage points to 46% of India’s GDP. But that gain is small compared to most Asian nations; on average they have seen bigger gains from a higher base than India, with trade rising by 8 points to 88% of GDP. India’s global footprint is also growing at a relatively slow pace. Its share of world trade has increased in the last eight years, but thanks mainly to its strength in services; its share of trade in goods has been roughly flat for over a decade. Among the world’s 10 fastest-growing trade corridors, India is a partner in only one – its connection to China.Despite its relatively modest trade profile, India has not managed to escape targeting by Trump. Since taking office last week the new US president has continued issuing tariff threats against rivals and allies alike. He says imposing tariffs will command global respect and help restore US power. But there’s another risk worth considering.Trump’s brand of populism vows to free US from heavy govt intervention in the form of taxes and regulations, but tariffs are another form – and equally subject to the laws of unintended consequences. To date, the ‘America First’ tariff regime has done less to damage its prime target, China, than to compel US allies to look elsewhere for trade. So the risk of even wider tariffs may be less about triggering trade wars than undermining US relevance as a trading power, and eventually sapping its economic prowess.The writer is chair of Rockefeller International