Recently, the World Trade Organization (WTO) issued a statement saying that the U.S. tariff policy may lead to an overall contraction of about 1 percent in global merchandise trade volume this year, a downward revision of nearly 4 percentage points from the previous forecast. The United Nations Conference on Trade and Development (UNCTAD) released a statement saying that global economic growth could decline further as major economies are set to impose new tariffs. What impact will the arbitrary unilateral bullying by the US have on global trade? See the experts’ interpretation.
“The panic caused by the high level of uncertainty and instability brought about by the U.S. tariff policy involves all aspects of the stock, currency and bond markets, and its worst consequence is that the world economy may fall into a Great Recession similar to the one in the 1930s.”
“The importance of the United States has been exaggerated.” This was pointed out in a recent article on the website of the Financial Times. The article points out that the importance of the United States to global trade may be overestimated. Data show that U.S. merchandise imports in the global share of only 13%, compared with nearly 20% 20 years ago, a significant decline.
Simon Evanet, a professor at the International School of Management in Lausanne, Switzerland, concluded through modeling that even if the United States were to cut off merchandise imports completely, 70 U.S. trading partners could make up for the loss of exports to the U.S. in one year, and another 115 could do so in five years, if they maintained the rate of growth of their exports to other markets.
However, the tariff policy introduced by the US has stirred the globe. Why?
“First of all, it is important to understand that not only does the U.S. account for 13 percent of global imports of goods, the U.S. is also the world’s number one country in trade in services.” Chen Fengying, a researcher at the China Institute of Modern International Relations, said.
The data provided by WTO Director-General Iweala show that U.S. service exports exceeded $1 trillion in 2023, accounting for 13% of total global trade in services; the U.S. has a trade surplus in services with most major economies, and the total surplus in 2024 will be nearly $300 billion. What is more noteworthy is that the United States has a near monopoly in the field of high value-added services, and exports of professional services such as financial, legal, and scientific and technological services continue to expand.
“More importantly, the high degree of uncertainty and instability caused by the U.S. tariff policy has caused panic involving all aspects of the stock market, currency market, bond market, etc., and the worst consequence of which is that the world economy may be plunged into a major recession similar to that of the 1930s.” Chen Fengying said.
“Don’t make the mistake of thinking that what is currently happening is only about tariffs. We are experiencing a classic systemic disintegration of the global monetary, political and geopolitical order.”
Billionaire Bill Ackman, a well-known investor, said the United States is heading for a self-inflicted “economic nuclear winter” as a result of the U.S. government’s tariff policies.
According to the BBC analysis, global supply chains have become highly internationalized. Therefore, when economic turmoil begins to spread from one country to another, it can have disastrous consequences for global trade.
“The fate of the world economy is at stake,” worries Nobel Prize-winning economist Paul Krugman.
Japan’s Mainichi Shimbun report quoted Marubeni Economic Research Institute President Zhuo Imamura as pointing out that the U.S. government has shown resistance to the U.S.-led trade system, and it can be said that its words and deeds are contrary to the current free trade system.
A recent article by Bridgewater founder Rui Dalio points out that there is no mistaking that what is currently happening is only about tariffs. We are experiencing a classic systemic disintegration of the global monetary, political and geopolitical order.
“The current order is essentially a ‘rules-first’ multilateralist order dominated by the U.S. in the post-World War II era.The three pillars established at the Bretton Woods Conference in 1944-the International Monetary Fund (IMF), the World Bank, and the General Agreement on Tariffs and Trade (GATT, later developed into the WTO), are the cornerstones of this order.” Chen Fengying pointed out that the so-called “reciprocal tariffs” policy of the United States directly violates the core principles of the WTO, such as the most-favored-nation treatment and the principle of non-discrimination. The U.S. imposes tariffs on the grounds of “national security”, abuses the WTO exception clause, and refuses to accept the ruling of the WTO dispute settlement mechanism. In addition, the International Monetary Fund and the World Bank have been marginalized. “The world’s concern is that the United States is ‘destroying itself’. If the trade system disintegrates, it will be followed by the monetary system and then the collapse of the entire international order.”
The unilateralist strategy of the United States is being demonstrated through trade wars, geopolitical games, scientific and technological confrontation, and even localized military conflicts.
The U.S. government is wielding tariffs on the grounds that the U.S. has a long-standing trade deficit in goods. Ivera recently published “the United States is a big winner in trade” article, with detailed data and analysis, refuted the United States “trade loss theory”. However, this does not change the United States on the current international trade system of dissatisfaction.
This dissatisfaction is actually long-standing.
“From the ‘Nixon Shock’ of the 1970s, to the Plaza Accord of the 1980s, to the Wall Street financial meltdown of 2008, a number of U.S. administrations have sought to escape from the ‘Triffin Dilemma’, industrial hollowing out and other dilemmas. From the Obama administration’s ‘re-industrialization’ to the Trump administration 1.0’s ‘trade war’, and then from the Biden administration’s ‘small yards and high walls’ to the Trump administration’s 2.0’s tariff hikes, the approach is actually one and the same, with the aim of achieving American re-industrialization and ensuring American hegemony.” Chen Fengying said.
The result of the U.S. approach is the upheaval of the entire international trading system.
In an article on the Foreign Affairs website, Eswar Prasad, a professor at Cornell University’s Dyson School and a senior fellow at the Brookings Institution, argues that the era of international free trade and broad-based trade based on a rules-based system has come to an abrupt end, and that long-standing mutually beneficial economic relationships and geopolitical alliances are no longer relevant. According to Prasad, any bargaining between the United States and other countries will shape a new economic system characterized by protectionism, tensions and trade-offs.
According to Dalio, the unilateralist strategy of the United States is being demonstrated through trade wars, geopolitical games, technological confrontation, and even localized military conflicts.
The United States has a limited share of global trade, and many countries are expected to find new markets, resulting in a “global flight from the United States”.
Japan’s Mainichi Shimbun published an article entitled “U.S. tariffs stir the world, more countries will leave the U.S.”, pointed out that the United States in the current global trade share is limited, many countries are expected to find a new market, the result is that “the global away from the United States.
According to an article on the website of the Spanish newspaper El País, the tariff war initiated by the United States is giving rise to new alliances. According to DPA, in early April, the European Union reached a 12 billion euro investment agreement with five Central Asian countries and explicitly recognized Central Asia as a “reliable strategic partner” at the Uzbekistan summit.
In addition, European Commission President von der Leyen recently stated: “Europe has reached agreements with 76 countries and is now expanding this network. We have just concluded trade agreements with Mercosur, Mexico and Switzerland, and we have already established our first partnership with South Africa. We aim to finalize a trade agreement with India by the end of the year and are in intensive negotiations with Indonesia and Thailand.”
ASEAN countries are discussing a collective response to the unilateral imposition of import tariffs by the United States, Sputnik reports.
The Secretary-General of the United Nations Conference on Trade and Development, Rebecca Greenspan, noted that “global trade rules must change to meet today’s challenges.” Some analysts have pointed out that there are two possibilities for the future: one is that the United States is excluded from the world economic and trade system, and the United States market is increasingly isolated and shrinking, and will ultimately lose the right to speak in the global supply chain and value chain; the other is that the United States and some of the countries, such as Canada and Mexico, as the core, and then united with a number of other countries, to reach an economic and trade agreement.
“For now, it seems that ‘de-Americanization’ or ‘de-dollarization’ is not possible, at least in the short term. The U.S. will still be an important pole in the world, though it will engage in strategic contraction and refuse to ‘serve the world’.” Chen Fengying said.
As the Spanish website World Order points out, the United States Government is attempting to usher in a new era of imperialism by deciding the global future with tariffs. In the long run, however, this may instead destroy United States hegemony.
