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The chair of Rockefeller International and author of ‘What Went Wrong With Capitalism’ shares insights
Despite ongoing tariff threats from Donald Trump, there is anticipation of action being taken. Concerns persist that the aggressive trade stance of the US president could lead to global instability, impacting growth and financial markets, especially if targeted countries respond with retaliatory measures.
However, responses to Trump’s actions are not limited to retaliation, with other outcomes being more probable. Over the past eight years, tariffs have been utilized by the US as a strategic tool. The tariffs imposed during Trump’s first term were largely maintained or expanded by Joe Biden, particularly in the case of China. While some nations retaliated, others made concessions or brought challenges to global trade authorities. Many countries simply redirected their trade efforts towards partners outside the US.
From 2017 onwards, global trade has remained relatively stable at around 60 percent of global GDP. Nonetheless, there has been a decline in the US’s share of trade flows, offset by increased activity in other regions such as Asia, Europe, and the Middle East. It is expected that Trump’s second term will continue this trend of trade evolving without significant US involvement.
During the past eight years, the majority of nations, both developed and developing, have experienced an increase in trade as a percentage of their national GDP. Several major countries have seen double-digit growth, while the US has witnessed a decrease to approximately 25 percent of GDP. Despite its economic strength, the US has not benefitted significantly from trade expansion.
While the warnings about Trump’s tariffs emphasize potential harm to exporting nations reliant on the US market, developed countries saw steady growth and developing nations experienced a surge in exports during his first term. The breakdown of global trade talks post-2008 financial crisis led to a rise in bilateral and regional agreements, with the US being notably absent from new trade deals.
As the focus shifts away from the US towards other regions, countries like China, the United Arab Emirates, and Poland have seen substantial gains in trade activity. Trump’s tariff strategy, aimed at asserting US dominance, may inadvertently erode the country’s relevance as a global trading power, impacting its economic standing in the long run.