Spilling your Mexican beer on your t-shirt sewn in Vietnam while watching a US series on Netflix on your Chinese-made smartphone sitting outside at a Parisian cafe is an ordinary occurrence in our globalised world.
But does the tariff war set off by US President Donald Trump spell the end for globalisation?
Many experts believe that countries will still trade and be interdependent, but that trade will be more costly and complex.
Trump Wednesday said he will jack up tariffs on China to 125 percent, but he announced a 90-day pause on his threatenned “reciprocal” levies on everyone else, leaving in place a recently introduced 10-percent across-the-board tariff.
Countries began reducing tariffs after the end of World War Two as a way to boost trade and growth via the General Agreement on Tariffs and Trade, which was signed in 1947.
It was succeeded by the World Trade Organization, uniting 166 nations that account for over 98 percent of global trade.
Often referred to as the “global trade police”, the WTO is all but powerless against the protectionist wave washing over the globe.
“The international wave of globalisation that began over thirty years ago is at its close,” said economist Branko Milanovic, a specialist on inequality, in an article published last month in the US magazine Jacobin.
Nicolas Baverez, a partner at the French business law firm August Debouzy, agreed with that assessment.
“If we define it by a massive drop in economic barriers and the unification of markets for goods, as well as services, data and capita, then the cycle has definitely ended,” he said.
Globalisation’s weak spots have been prominently on display in recent years.
First the Covid-19 pandemic demonstrated the extreme fragility of supply chains that have been extended across the world.
Then the war in Ukraine showed the risks associated with energy dependency on nations like Russia.
That added to the gradual nibbling away at global free trade by trading blocs that have formed around the United States, China, Russia and the European Union.
They have deployed a range of measures that impact trade, such as tariffs, limits on technology transfers, financial sanctions, immigration restrictions and subsidies.
“It is a very dramatic departure of the US from the post-war approach to trade policy” and “is bound to have knock-on effects in terms of protectionism elsewhere,” economist Adam Slater at Oxford Economics told AFP.
Global trade in goods has grown regularly over the past years to hit $24 trillion in 2023, according to WTO.
Imports into the United States account for 13 percent of the global total, while US exports account for 8.5 percent of total exports.
Bringing production back home may play well politically, but businesses will be crunching the numbers.
Neil Shearing, group chief economist at Capital Economics, said the high cost of shifting production and uncertainty about tariff levels over the long term, means “only a fraction of the manufacturing that has moved overseas is likely to move back to the US”.
Even if tariffs are set high it may not be enough.
“In some areas, for example toys, textiles and furniture, the cost advantage of emerging economies is so huge that even large tariffs don’t make the US competitive,” Shearing said.
Former WTO chief Pascal Lamy said Trump’s tariff Big Bang would unlikely completely undermine the global trading system.
“Thirteen percent of global imports are affected by Trump’s follies,” he told AFP.
“There’s no reason the other 87 percent become contaminated.”
He said that he expects that if the US closes up its economy other countries would open theirs.
Numerous nations have sought recently to breathe new life into trade deal talks in the hopes of compensating for lost business in the United States.
Japan, South Korea and China called Sunday for their negotiations for a comprehensive trilateral free-trade agreement to be speeded up, and agreed to create “a predictable trade and investment environment”.
China wants to take advantage of the situation and replace the United States as the motor of the world economy.
Beijing will “adhere to the correct direction of economic globalisation, practice true multilateralism and strive to be a force for stability and certainty,” Premier Li Qiang said last month.
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This article was generated from an automated news agency feed without modifications to text.
