Trump’s shake-up of world trade: Much ado about nothing?
Subscribe to enjoy similar stories. As Donald Trump prepares to be sworn in as US president on 20 January, an issue uppermost on the minds of policymakers around the world is how to respond to his policies. What will his declared unilateralism do to world trade? If he carries out his tariff threats—particularly vis-a-vis America’s largest trade partners Mexico, Canada and China—will we be back to the doomsday scenario of the 1930s, when world trade shrank due to tariff wars between countries ? What happens to countries like India that see world trade as a key factor in their pursuit of high economic growth—of 7% or more? These are all legitimate questions.
But the world has changed structurally in the last 50 years and the damage to world trade is likely to be limited. In addition, going by past events, it’s unlikely that Trump will succeed in his tariff threats. Consider the last issue first.
It is often forgotten that Trump’s tariff-levying authority is given by the US Congress. While it is likely that the new Congress will endorse Trump’s tariffs, this is by no means a foregone conclusion. Already, on legislation to increase debt limits and a couple of appointments, the Congress has voted against Trump’s proposals.
More importantly, the tariff war that Trump unleashed in his first term achieved very little. Consider his well-publicized tariff war with China that started in 2018. Of the $200 billion increase in US exports to China negotiated by Trump, less than half was achieved.
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