The rest of the world must fill the void left by Trump’s protectionism
It has been a turbulent week for those of us who believe in international collaboration.
Populist candidates have mopped up the votes in the Italian elections, and with the proposed introduction of US import tariffs on steel and aluminium and the resignation of Trump’s pro-trade economic adviser Gary Cohn, “America first” has successfully made the transition from campaign slogan to government policy.
Key to this new policy is President Trump’s belief that “trade wars are good, and easy to win” – a claim that will be tested with both the EU and China expected to retaliate with their own measures in short order.
This is a watershed moment for all companies, but in particular the middle market businesses that move goods across borders. Further barriers to trade or a change of heart in China will risk an already uncertain global economy.
Washington should remember that economics is not a zero-sum game. If an escalation does occur, Trump’s tariffs could be just the tip of the iceberg.
That being said, these tariffs are hardly a dramatic change in direction. The World Trade Organisation calculates that non-tariff barriers operated by G20 countries, such as anti-dumping measures, grew from about 300 in 2010 to more than 1,200 by 2016.
Navigating these measures is swiftly becoming a core business challenge. From micro-breweries in Hackney to multinational steel producers in China, businesses of all sizes rely on talent, trade and technology from around the world to thrive.
As international collaboration becomes more challenging, in many cases only the biggest, entrenched global organisations will have the scale and expertise to adapt.
Surviving in this hostile trade environment requires a very different skill set. Even the smallest businesses will require considerable regulatory insight and analytical skills to help guide them through the quicksand of geopolitics, economics, trade policy, and demographic change.
Trump is realising the policies he was elected to enact, but the rest of the world still exists and will not stand still. As a US national myself, I have made my home in London, but I spend much of my time on business abroad. There are signs everywhere that other major economies of the world are filling the gap in international cooperation left by the US.
The Belt and Road initiative is a long-term capital and infrastructure project led by China which is already impacting Asia Pacific, Africa, and many parts of Europe.
Meanwhile, in Santiago de Chile, 10 countries are meeting today to sign the Trans-Pacific Partnership – an initiative that was once spearheaded by the US and is now being driven forward by Japan.
The retreat of America from global trade leadership also offers opportunities to businesses. China’s desire for a bigger role in the global economy presents international firms with the chance to embed themselves in the Chinese supply chain.
Furthermore, the renegotiation of trade deals provides an opportunity to adjust them to take into account new sectors borne of the global economy.
One example of this is digital services, which did not exist when agreements such as Nafta were drawn up. The middle market, which has strengths in the digital world, could be one of the beneficiaries.
Rarely does anyone win a trade war. Trade is not a prize which can be won or a patch of land on which the victor can plant their flag. Trade is a balancing act; an understanding that we can build a more prosperous world when we let our businesses work together.
If we lose sight of this and let Trump’s protectionist attitude direct the discussion, there may be nothing left to fight over.
Read more: US markets drop as trade war threats heat up