The world is moving on to trade without the US
By: Ruchir Sharma (Financial Times)
So, the tariffs have been in place for eight years. The US has seen trade as a share of GDP fall while the US economy has grown faster than other developed economies -- without the boost from trade. The US has demonstrated financial and economic dominance within the global economy without trade dominance.
Why is this a bad thing? Seems like imposing tariffs was the right call at the right time.
S E E D E D C O N T E N T
While Donald Trump has yet to act on his multiple tariff threats, it’s likely he will. So the fear lingers that the 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 to Trump, no matter how broadly he finally delivers on his threats.
The US 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 Joe Biden. Some nations retaliated; others offered concessions or challenged them before global trade arbiters. But most just quietly moved on, seeking trade with countries other than the US.
Since 2017, Trump’s first year in office, trade has held more or less steady at just under 60 per cent of global GDP. But there’s been a decline in the US share of trade flows offset by an increase in other regions, particularly the nations of 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 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 Turkey. The big exception is the US, where it has dipped to around 25 per cent of GDP. The US has been growing faster than most of its 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 per cent. Its share of global GDP has inched up to more than 25 per cent. Yet its share of global trade is under 15 per cent, 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 the 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”.
The US became an outlier, looking on as others cultivated the art of the trade deal. Since 2017, the US has abandoned talks on partnerships with the EU and Asia, and cut not a single new trade deal. Meanwhile, the 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 start of Trump’s second presidency approached. The 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 the US and towards the Middle East, Europe and Asia, nations registering big share gains included the United Arab Emirates, Poland and, above all, China. Of the 10 fastest-growing trade corridors, five have one terminus in China; only two have a terminus in the US.
Trump says tariffs will command respect, and help restore US power. But there’s another risk worth considering. The new president’s brand of populism vows to free the US from heavy government intervention through 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 broader tariffs may be less about triggering trade wars than undermining US relevance as a trading power, and eventually sapping its economic prowess.
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The seed author carefully avoids mentioning that global trade depends heavily upon credit and debt. Rapid expansion of a debt bubble among the developing countries are beginning to ring alarm bells over national defaults and a consequent global recession (or depression). Concerns over increased debt burden among developed economies has waxed and waned since the 2008 financial crisis.
Imposed tariffs and withdrawal from global trade may provide the US a hedge against the growing possibility of global deflation. The rule-based interdependent global economy was always destined to collapse without access to a magic money tree. After all, debt only creates money; debt does not create wealth. Certainly beginning to look like imposing tariffs was the right call at the right time.
Of course, that is what one would expect.
Trump is an irresponsible idiot who seems to be trying to mess up our system and our relationships with other nations.
That's one person's opinion. The only system he seems to be messing up is the Democrats "systems" and he's letting everybody else know that they aren't going to walk all over the US like they did with Biden.
It is irrational support like that from people like you that has enabled Trump. Trump is harming international relationships and threatening with action that would raise consumer prices in the USA. He has placed incompetent people in charge of important positions. He has attempted to violate the CotUS by ordering the end of jus soli.
Trump is an irresponsible loose-cannon who does not give one shit about the American people. You complain about Biden yet are blind to a PotUS who really could fuck things up for the USA.
Should I wait for you to provide something to back up that claim or just put it with the rest of your opinion?
Your opinion.
Again, your opinion.
Why You're dealing in "what if" scenarios in your head. You bitch, whine, moan and complain about what COULD happen all the while ignoring what DID happen under Biden.
If you really put your mind to it, you would see that what we are seeing right now is a result of the Biden Administration.
First of all, Jeremy, yes that is my opinion. Second, no I am not going to bother since you ignore every fact and every argument. Third, this is yet another example of partisan blindness to not see how Trump's belligerent threats damage international relationships. This is basic human nature — when some newly minted asshole assumes power and starts pushing his weight around, those affected will respond in a negative fashion. They will immediately diminish belief that the nation this asshole represents is as trustworthy as it used to be. They will start taking actions to protect themselves and to provide counter measures based on likely scenarios given what the asshole has revealed about his intentions.
Not at all good for international relationships. You should know this already.
The only surprise is that you admit it.
Again with the opinion you expect me to take as fact.
Where do you and others get this notion that people on this site are not routinely opining and that penning opinion is somehow a bad thing?
Most of what we write is opinion. Many times the opinion is supported by logic and/or facts. And then there are times where a fact is stated (e.g. Trump attempted to steal the 2020 election).
What is interesting is how some like you react. Even when facts supported by overwhelming evidence are presented, there are some who will absurdly deny with nothing more than a 'nuh-uh'. How anyone thinks that is persuasive is a mystery. Just makes the individual look ridiculous.
When people opine they do not necessarily expect everyone to take their opinion as fact. This is yet another strawman ploy by those who engage in dishonest tactics in lieu of being able to put forth a cogent rebuttal.
I never said it was a bad thing. But it is a bad thing when you try to push that opinion as fact.
See, there you go again, opining and that penning opinion.
Then present facts and it will cease. Blathering on and on "it's been proven before" isn't presenting fact. If it's been proven before then you will have no problem putting it up again.
Again, your opinion trying to pass off as fact.
Funny how you keep on about Trump supposedly doing this, but never opined on Hillary doing the same, or any Democrat calling Trump an illegitimate president in 2016.
It's not, but when some continuously call others' opinions "delusional" or "ridiculous", then after giving their own opinion, it comes across as that person is trying to pass that opinion off as a fact and everything else fits into the "delusional" or "ridiculous" category.
The problem is that you merely declare that an opinion is 'pushed as a fact'. That is you simply making a bullshit claim since nowhere did I claim that I was stating a hard fact.
This truly stupid tactic that you et. al. employ does nothing other than illustrate you have no argument. So what value is it to play this stupid game?
No, that actually is a fact. You pretending otherwise does not change reality.
Another tactic ... inventing scenarios and pretending they are real.
How you interpret posts is a problem that only you can solve.
and will continue until you prove it as fact.
As I said before, present facts and it will cease. Blathering on and on "it's been proven before" isn't presenting fact. If it's been proven before then you will have no problem putting it up again.
Oh the irony.....
Which is a truly pointless way to operate unless someone has stated that they are making a factual claim.
You have, for years now, been presented sound evidence to back claims and you just 'nuh-uh' it. Do you really think that members of this site do not see your ridiculous game?
No, it's not.
None of you (collective you) leftists have ever shown definitive evidence that Trump tried to overthrow the election. Trum had absolutely nothing to do with those J6 rioters to breach the Capitol.
What is fact is that you (collective you) leftists continue to ush that "peacefully and patriotically" is inciting violence
Delusional.
Pretty much what we see from you on this thread when we point out how you operate.
Then present the facts.
Of course it is opinion that the evidence is sound. So it seems an opinion is used to back an claim (opinion).
The tariff regime has been in place for eight years; under both Trump and Biden. So, why hasn't the US economy contracted? Why haven't the other economies who replaced the US as trading partner grown at a faster pace than the US economy?
The fundamental question unanswered by the hair-on-fire fearmongers is why Trump's policies have made the US economy stronger instead of weaker over the last eight years?
Because tariffs in and of themselves are not necessarily bad. What is bad is what Trump is doing right now. He is using (excessive) tariffs as a weapon to beat other nations into submission rather than engage them with dignity via diplomacy.
You actually believe that is true?
Are you attempting to claim Trump invented the concept of economic coercion in geopolitics? There are a number of countries around the world that give lie to the claim that Trump is doing something different.
Trump's application of long standing US economic policies serves to upset the status quo. At some point it becomes necessary to recognize that status quo was not benefiting the US sufficiently.
The US economy growing stronger compared to other global economies is absolutely true. And the US is not attempting to dominate global trade. Countries are not competing with the US for trade because the US is stepping back. The economic results of the last eight years demonstrates beyond doubt that the global economy needs the US more than the US needs the world. The results demonstrate that globalism harms the US more than it benefits the US.
No. Focus.
You attributed that to Trump's policies.
Well, if we're going to discuss the idea fairly and intelligently, we'll need to acknowledge that single-variable analysis on such a subject is silly.
Tariffs are just a tiny part of the overall US economic picture, and their influence is utterly dwarfed by things like the actions of central banks, regulatory environments, the availability of capital, geopolitical strength, energy costs, currency valuation, and a host of other more important things.
We would also need to factor in the levels of organic growth we should expect to see as other countries start to prosper in the global marketplace. The idea that the US should somehow maintain a constant percentage of global trade ignores the naturally increasing purchasing power of factory workers in places from Mexico to Malaysia and from India to Indonesia.
We haven't even talked about currency fluctuation, and the impact of constant currency manipulation, especially by the Chinese.
Why would economics work differently in the US than elsewhere? Why is the US hampered by complexities that other economies do not experience?
Is that distinction due to the fact that free trade has not been fair trade? Has the US been treated differently in the global marketplace? Has free trade harmed the US? Has free trade failed to deliver promised prosperity?
All the hand waving over complexities doesn't alter the facts that the US economy has become a larger share of global GDP while trade contributed less to US GDP. The US economy has grown stronger compared to other economies yet is failing to meet domestic needs. Isn't that an indictment of free trade to deliver promised prosperity to the US?
That increased trade has come at the cost of increased debt. Global trade, as it is being practiced seems to only provide prosperity on credit. That type of prosperity depends upon deficits not mattering. The results suggest that free trade is incompatible with fiscal responsibility.
The strength of an economy doesn't factor in to currency fluctuations? What is being suggested is that currency manipulators can exploit free trade for an advantage. Free trade favors criminal behavior. Wouldn't fair trade include mechanisms to address that criminal behavior?
The size and diversity of our economy and the wealth of our citizenry compared to that of other nations It's a blessing, not a hamper, BTW. Tariffs mean less here than they do in smaller, less diversified economies.
Absolutely. China never tried to manipulate currency with Pakistan or New Zealand, now did they?
The point here being that the article itself reveals an overly simplistic bias against the use of tariffs as a political tool while ignoring all of the other contributing factors to the supposed "decline" in US trade (which didn't actually decline). There is a very conspicuous and convenient omission of actual trade numbers.
I'm not sure I follow your point here. Whose debt? Are we talking about trade deficits or federal budget deficits?
Correct. Obviously. At which point it ceases to be free trade.
Sooo..... Trump is irresponsible when he imposes tariffs but Biden is fine when he expands them. Got it.
Clearly you do not "got it".
Where do I make that claim?
You just created this bullshit out of thin air.
I made the observation that Trump is harming our relationships with his tariff threats. That does not mean that tariffs in and of themselves are wrong. What is wrong is Trump using outrageous tariffs as a threat rather than use responsible, reasonable negotiation.
I hope I don't need to cite your own comments to you. Hopefully you'll remember calling Trump an irresponsible idiot. You seem to have that on a repeat loop.
The article clearly states that Trump's tariffs were expanded by Biden. Yet you make no reference to Biden, nor do you acknowledge that that he participated in this "irresponsible" behavior. To be fair, Joe may not have been aware he was doing it.
In addition, imposing tariffs IS a form of negotiation.
Worked with Colombia, and it only took an hour.
Then focus on that instead of changing my statement to something like "Trump is irresponsible when he imposes tariffs but Biden is fine when he expands them.".
Again, imposing tariffs is not in and of itself a problem. It is how Trump is operating using outrageous tariffs as a threat rather than engaging trading partners with diplomacy and seeking to come to reasonable terms.
The article also talks in general about Trump's approach to tariffs. That, obviously, is what I am referring to.
Then, why did Biden expand on them?
Biden threatened countries around the world with sanctions, which is completely different. Sanctions begin with an 'S' and tariffs begin with a 'T'. Totally different.
Biden attempted to economically isolate countries deemed unfriendly. Trump hasn't done that. Biden seized property of countries and individuals deemed unfriendly. Trump hasn't done than. Biden used economics and trade as a weapon of war targeting enemies, adversaries, and allies. So, now those on the sunset side of the political aisle want to scapegoat Trump for what Biden did.
I am not referring to past tariffs, I am referring to the tariff approach Trump is using in his current term.
Read the opening sentence of the article:
Using tariffs is not in-and-of-itself bad. What is bad is Trump's use of outrageous tariffs as threats rather than engage in respectful, diplomatic negotiations in an attempt to accomplish the same objective without pointlessly harming international relationships. Note also that when a relationship with one trade partner is harmed that is a net negative that affects the relationships of all trade partners (in different ways). It is an unforced error. It is idiotic.
Good for you. Still doesn't answer my question.
You're good with anybody else doing it EXCEPT Trump. You've made your opinion on that perfectly clear. Multiple times.
You still didn't answer my question.
And they are crying that others aren't buying the bs.
How is this possible when the same article states that global trade is flourishing without the US? The US does not dominate global trade so how can the US sow global disorder? And the article specifically states that the US economy has strengthened as trade contributes less to economic growth. This is a tail-wagging-the-dog argument.
If Trump's 'outrageous' tariffs are idiocy then that idiocy has precedents. Other Presidents have used tariffs, sanctions, and economic threats as weapons of war against adversaries, enemies, and allies in an attempt to sustain US dominance.
It is not possible for the US to dominate global trade by offshoring manufacturing. If the US refuses to compete on the bread & butter items being traded globally then trade will not contribute to US prosperity. Idiot trade policy would allow the world to take advantage of the US by exploiting our marketplace. One sided trade (free trade) doesn't work without credit and the US cannot create real prosperity with a credit card.
The real world data does indicate that Trump's tariffs were the right call at the right time. As you have pointed out, using tariffs is not in-and-of-itself bad. Past Presidents used tariffs to topple governments, impose social engineering onto other countries, force preferences to allow US oligarchs to exploit other economies. Why not complain about those tariffs? Why are Trump's tariffs intended to spur US competitiveness worse than the politically motivated tariffs used in the past?
You're missing the point, Jeremy. Let me help.
Trump = Bad.
Ergo, anything Trump does = bad thing.
Example:
Do you see how this works now?
Thanks.
You won't believe how many mysteries of bullshit comments that has cleared up wondering how some come to the conclusions they do.
And you yet again resort to ridiculous exaggeration ... fabricating a strawman.
What causes you to (strangely) think we must control global trade in order to sour relationships with our trade partners?
And people complain liberals have no sense of humor.......