The world continues to do business without the US

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The author is the chairman of Rockefeller International. His latest book is ‘What’s Wrong With Capitalism‘

While Donald Trump has not acted on him many threats of chargeschances are you will. So fears remain that the US president’s aggressive trade stance will spread global chaos, depressing growth and shaky markets, especially if the targeted countries retaliate.

But retaliation isn’t the only possible response to Trump, no matter how broad he ultimately delivers his threats.

The US has used tariffs as a tool for eight years now. Those imposed by Trump in his first term were largely continued or – in the case of China – expanded by Joe Biden. Other nations retaliated; others offered concessions or challenged them before the global business press. But many continued quietly, seeking trade with countries other than the US.

As of 2017, Trump’s first year in office, trade has remained at more than 60 percent of global GDP. But there has been a decrease in the share of American trade caused by the 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 a rise in trade as a share of their national GDP. Gains of more than 10 percent were reported in more than a dozen major nations, from Japan, Italy and Sweden to Vietnam, Greece and Turkey. The major exception is the US, where it has fallen to 25 percent of GDP. The US is growing faster than most of its peers – but it’s not catching on business.

America may be stronger as a financial and economic superpower but not as a trading power. Its share of world indices has exploded to approx 70 percent. Its share of world GDP has risen to more than 25 percent. However, its share of world trade is less than 15 percent, and has declined significantly in the past eight years.

Many of the warnings about Trump’s impact have focused on how the new tariffs could hurt exporting countries that depend on the US as their main customer. But during Trump’s first term, before the pandemic and despite his tax hike, developed countries saw steady growth and developing countries saw a sharp increase in sales in both (led by technology products and goods) and services (led by transport and digital services) .

Global trade negotiations collapsed after 2008, as the tensions caused by the financial crisis that year made major multilateral agreements more difficult to conclude. But many nations continued to push for smaller agreements. The number of bilateral and regional agreements increased gradually, with a new impetus after Trump took office, and soon called himself “the man of tariffs”.

The US became an outsider, watching as others developed business entrepreneurship skills. Since 2017, the US has abandoned negotiations on cooperation with the EU and Asia, and has not cut a single new trade agreement. Meanwhile, the EU has negotiated eight agreements and China has completed nine, including an important 15-nation partnership in Asia.

Towards the end of last year, the negotiations started again as the start of Trump’s second presidency approached. The EU is rushing to finalize a tough deal – 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 other Latin American countries, in part as insurance against what Trump might do next.

The result: in the last eight years, when the area of ​​world trade moved away from the US and towards the Middle East, Europe and Asia, the countries registering the greatest profits include the United Arab Emirates, Poland and, above all’ of all, China. Of the 10 fastest growing trade routes, five have at least one stopover in China; only two have termini in the United States.

Trump says the tariffs will command respect, and help restore US power. But there is another risk that we should consider. The new president’s brand of populism pledges to free the US from heavy-handed government intervention through taxes and regulations, but tariffs are another form — and subject to unintended consequences.

So far, the “America first” tariff regime has done little to harm its main target, China, more than to force US partners to look elsewhere for business. So the risk of broader tariffs is likely to be less about provoking trade wars than undermining the importance of the US as a trading power, and ultimately undermining its economic power.