In recent decades, the world has witnessed an unprecedented escalation in protectionist policies, and reached its climax with the administration of US President Donald Trump, which imposed wide customs definitions that sparked retaliatory reactions from countries such as China, Canada and the European Union.
Writer Jason Douglas and Tom Verles in the Wall Street Journal reported that barriers to free trade are increasing globally, in a scene that reminds of commercial isolation in the 1930s.
Even before Trump, many countries raised their barriers, especially against China, to protect their industries from imports, such as electric cars and steel. Today, these measures are expanding due to the high American fees, as the European Union has announced its intention to protect its industries from commercial transfers coming from the United States.
Economists warn of long -term damage to international growth and cooperation, although the world does not face a dedication as the one that happened in the thirties. The effectiveness of the World Trade Organization has declined, and Trump threatens to expand his trade war to include goods such as medicines and cars.
Countries such as South Korea, Vietnam, Mexico, Indonesia, and even Russia have responded with restrictions on Chinese goods. According to Global, she wants to Alrt, the number of commercial restrictions in the Group of Twenty increased by 75% since the beginning of Trump, with more than 90% of American products undergoing import restrictions.
Fitch’s estimates indicate that the average American definitions may reach 18% if Trump’s threats, the highest level in 90 years.
Echoes of the Smot-Holly Law
The authors stated that the customs definitions in the thirties of the twentieth century were the alarm of the death of global trade, which were already collapsing with the sinking of the American economy and other economies in recession and collective unemployment.
The Smot-Holly Law-a attempt to protect American farms and factories from foreign competition-has paved the way for increasing customs tariffs on imports to the United States to about 20%, and major economies raised commercial restrictions in response.
The authors stated that after the war, specifically in 1947, the United States signed with about 20 other countries on the general agreement for customs definitions and trade, with the aim of reducing commercial barriers and contributing to rebuilding the global economy.
This led to a decrease in the average customs duties between the major economies from about 22% in 1947 to 14% in 1964, then to 3% in 1999. In 1995, the World Trade Organization replaced the agreement, to supervise the global trade system.
The authors pointed out that these developments contributed to the promotion of international trade, which led to low prices for the benefit of consumers. But the liberalization of trade came at a price, as some blame the decline in customs barriers in the erosion of local industries in developed countries, with many jobs moved to low production costs such as China, which led to the imposition of new fees during the first Trump state, the approach that continued in the era of Joe Biden.
The authors added that other countries have escalated against China, whose economy could not absorb the surplus of industrial production, prompting cheap Chinese goods to global markets and increased commercial tensions.
In his recent decisions, Trump imposed 25% customs duties on Mexico and Canada, and 20% on China, which responded by imposing fees on American soybeans and other reprisals. While the European Union announced the imposition of 50% fees on US whiskey imports and motorcycles starting next April.
The authors emphasized that Trump is the prosperity of global trade disastrous for America, and seeks to reduce the trade deficit with China, Mexico, Vietnam and the European Union, in addition to reviving industries such as semiconductors and shipbuilding. His supporters assert that his policies will create jobs and enhance investment, but the impact of trade war may be less severe today thanks to the transformation of advanced economies towards services and the increasing government experiences in crisis management.
Increasing economic repercussions
The authors stated that the escalation of the trade conflict led to a state of uncertainty, which negatively affected spending, investment and employment. In the United States, consumer confidence declined and stock markets decreased, while surveys showed weak investment in companies.
In Europe, BMW expected losses of one billion euros due to American and European customs duties, warning that these fees may lead to a “negative cycle.” For its part, Fitch warned of the slowdown in global economic growth this year to 2.4% due to the escalation of commercial conflicts.
The escalation of protective tendency
The authors pointed to the increasing pressure to impose more customs duties to protect strategic industries from Chinese competition, such as electric cars and semi -conductors. Meanwhile, the Russian war on Ukraine and Trump’s demands to Europe bearing more defense expenses increased military spending and enhancing economic sufficiency. Neil Shering, chief economist in Capital Economics, said that the perception that prevailed in the 1990s on economic integration between Europe and the United States has disappeared, and governments were seeking greater independence.
The authors added that returning to the previous commercial openness levels is difficult due to the decline in the role of the Trade Organization, as a result of Washington’s obstruction to appoint judges in the Appeals Authority since 2019.
A spokesman for the Organization of Trade, Ismail Deng, said that member states are still seeking to resolve conflicts through channels within the organization, while the organization’s general manager of Naguzi Okono Iyalia confirmed that the organization aims to deal with crises and prevent the escalation of tensions.
For his part, Douglas Erwin, a professor of economics at Dartmouth College and author of a book on the history of American trade policy, believes that removing commercial restrictions after imposing it is complicated, as each tariff becomes a bargaining paper. In light of the geopolitical competition, especially with China, and the promotion of countries for their local industries and military capabilities, the possibilities of reducing protectionism appear small.
In conclusion, Erwin warned that retracting these policies would be difficult, with the possibility of commercial barriers and economic tensions.
