Global Trade in the Shadow of Protectionism

2nd February 2020

Trade tensions between the US and China, as well as rising protectionism, could shape the future of global commerce. How might these forces change the world economy this year?

As 2020 begins, the future of global trade stands uncertain, cast in the long shadows of rising protectionism and trade tensions, particularly between the United States and China. The war of tariffs, restrictions, and economic retaliation that has characterised the past few years shows no sign of abating, and the world watches with bated breath to see how the balance will tip in the coming months.

For decades, the global economy has been built on the ideals of free trade—an interconnected network of nations and markets working in tandem to create growth and opportunity for all. Yet, recent events have made it clear that these ideals are under threat. Protectionism is on the rise, with governments around the world opting to shield their industries from foreign competition through tariffs, subsidies, and restrictions. The US-China trade war is the most visible example of this, but it is part of a wider trend that shows no sign of reversing.

As we consider the future of global trade, we might find ourselves reflecting on the words of Thomas Hardy in Tess of the d'Urbervilles, where the protagonist’s fate seems sealed by the inexorable forces of society. Much like Tess, who struggles against the tide of destiny, the world economy is now at the mercy of the forces of protectionism and political decision-making. These forces shape the future of global trade, limiting opportunities for growth and raising the spectre of economic stagnation.

The Rise of Protectionism: A Shift in the Global Order

Protectionism, as an economic strategy, has existed for centuries. It is rooted in the desire to shield domestic industries from foreign competition, often through tariffs, quotas, and other trade barriers. Historically, protectionism has been viewed as a response to perceived threats to national sovereignty or economic security. However, in recent years, this age-old strategy has gained new momentum, as governments around the world have become increasingly wary of the consequences of globalisation.

In the United States, President Donald Trump’s “America First” policy has been a driving force behind the rise of protectionism. Since his election in 2016, Trump has repeatedly criticised trade agreements and foreign competitors, particularly China, accusing them of unfair practices and currency manipulation. His administration has imposed tariffs on billions of dollars’ worth of Chinese goods, setting off a chain reaction of retaliatory measures. This trade war has caused significant disruptions in global supply chains and has sent shockwaves through the financial markets.

Much like the fateful decisions of characters in Jane Austen’s Pride and Prejudice, the actions of leaders in the US and China seem driven by a complex mix of pride, self-interest, and a desire to assert dominance on the world stage. Just as Elizabeth Bennet and Mr. Darcy must navigate the intricacies of social and familial expectations, so too must the leaders of these two nations negotiate the delicate balance of economic power and national pride.

The impact of this protectionist shift extends far beyond the US and China. Countries across the globe have started to take a more cautious approach to trade, adopting tariffs or imposing new trade barriers in response to perceived threats. The EU, for example, has introduced a series of measures aimed at protecting European industries from foreign competition, while the UK’s departure from the European Union raises questions about the future of trade in and out of the UK. The rise of populist leaders in countries such as Brazil and Italy further underscores the growing scepticism towards globalisation and free trade.

The US-China Trade War: A Microcosm of Global Tensions

The US-China trade war is perhaps the most significant example of the current protectionist shift. The two largest economies in the world have been locked in a bitter battle over trade imbalances, intellectual property theft, and market access. While the US has accused China of engaging in unfair trade practices, China has countered by accusing the US of trying to contain its rise as a global power.

The trade war has had a profound impact on the global economy, with both nations bearing the brunt of the economic consequences. US manufacturers have faced higher costs as a result of tariffs on Chinese goods, while Chinese businesses have been hit by restrictions on their access to the US market. The volatility in trade relations has also caused uncertainty in global supply chains, as companies seek to minimise their exposure to trade risks by diversifying their sourcing and production strategies.

The outcome of the US-China trade war could have far-reaching implications for the future of global commerce. A protracted conflict could undermine the stability of global trade, leading to a fragmentation of the international trading system. On the other hand, a resolution to the trade dispute could pave the way for a new era of cooperation between the two nations, which could have a stabilising effect on global markets.

One might look to the works of George Orwell, particularly 1984, for a parallel. In Orwell’s dystopian world, the superpowers of Oceania, Eurasia, and Eastasia engage in endless conflict, perpetuating a cycle of war and destruction. In many ways, the US-China trade war reflects this constant struggle for dominance, where each side seeks to impose its will on the other, and the international community is left to watch as the world teeters on the brink of a new order.

The Future of Global Trade: Navigating Uncertainty

Looking ahead, the future of global trade seems uncertain. Protectionism is likely to remain a significant force in the coming years, particularly as political leaders continue to prioritise domestic industries and seek to secure better terms for their countries. The rise of populist politics in many nations only adds to the sense of uncertainty, as trade deals are often shaped by political considerations rather than economic pragmatism.

For many businesses, the rise of protectionism presents a challenge to their global strategies. Companies that have long relied on open borders and unfettered access to international markets may find themselves having to rethink their business models in response to new trade barriers. The uncertainty surrounding future trade relations could also make it more difficult for companies to plan for the future, leading to a slowdown in investment and economic growth.

Yet, there are reasons to be hopeful. History has shown that the global economy is remarkably resilient, and despite the challenges posed by protectionism, there are still significant opportunities for growth and innovation. In the long term, countries may realise the benefits of collaboration and free trade, and the pendulum may swing back towards a more open and interconnected world.

Shakespeare’s The Merchant of Venice offers a valuable lesson here. In the play, Shylock, the Venetian moneylender, is motivated by a desire for retribution, but ultimately, the resolution lies in the balance of mercy and justice. Similarly, the global economy will need to strike a delicate balance between protectionism and cooperation, between national interests and global stability. Only by finding this balance can we hope to navigate the complex web of international trade in the years to come.

Conclusion: The Road Ahead

In conclusion, the future of global trade will undoubtedly be shaped by the forces of protectionism and trade tensions. The US-China trade war is a microcosm of the broader challenges facing the global economy, and the rise of populism and nationalism further complicates the outlook. While the immediate future may be fraught with uncertainty, there is hope that collaboration and cooperation can ultimately prevail. Like the characters in The Tempest, who must navigate the tempests of life, the world economy must learn to adapt to changing circumstances and find new ways to chart a course toward stability and growth. Whether this will be a tale of success or failure remains to be seen, but the story of global trade is far from finished.