Barriers to Global Trade Rise At a Pace Not Seen in Decades

 

"Barriers to open trade are rising across the world at a pace unseen in decades, a cascade of protectionism that harks back to the isolationist fervor that swept the globe in the 1930s and worsened the Great Depression.

It isn't just President Trump's extensive tariffs, which set off retaliatory measures across Europe, China and Canada targeting hundreds of U.S. goods.

Even before Trump retook the White House, many countries were increasing trade barriers, often against China, as they tried to beat back a flood of electric cars, steel and other goods pressuring their homegrown industries.

Now those efforts are proliferating as countries brace for a new wave of goods redirected across the globe by the U.S.'s rising tariff shield.

The European Union said last week it plans to toughen measures to protect its steel and aluminum producers from imports diverted from the U.S. by Trump's 25% tariffs on those two metals. And on Monday, Trump said during a cabinet meeting that the U.S. will announce automotive tariffs "very shortly," and will unveil pharmaceutical tariffs "at some point." But later Trump said in the Oval Office that he "may give a lot of countries breaks."

Economists and historians said the flurry of recent moves suggest the world could be heading toward the largest, broadest surge in protectionist activity since the U.S. Smoot-Hawley Tariff Act of 1930 touched off a global retreat behind tariff walls that lasted until after World War II.

Economists don't think the world is headed for anything like the Depression of the 1930s, or a rerun of that decade's collapse in global trade. Average tariff rates globally are much lower than in the 1930s and 1940s.

But they do warn of lasting damage as tariffs and other hurdles to trade increase. Among the risks: slower growth, higher inflation and a collapse in global cooperation that further fractures longstanding alliances.

The World Trade Organization, which traces its roots to the post-World War II accord among advanced nations to curb the beggar-thy-neighbor policies of the '30s, has largely lost its relevance as an arbiter of disputes and cheerleader for integration.

Trump, a Republican who has said free trade has allowed other countries to take U.S. jobs and industries, is poised to take his trade fight to a whole new level, risking a much bigger retaliatory onslaught. He has said he wants to tariff imports of semiconductors, drugs and cars and is set to unveil a plan on April 2 to hit major U.S. trading partners with "reciprocal" levies linked to tariffs, taxes and other perceived impediments to U.S. commerce.

In addition to the many steps taken against the U.S. in recent weeks -- including Canadian levies on U.S. computers and sports gear -- many countries have been stepping up pressure on China.

In February, South Korea and Vietnam imposed stiff penalties on imports of Chinese steel after complaints from local producers about a surge of cut-price competition. Similarly, Mexico began an antidumping probe into Chinese chemicals and plastic sheets.

Even sanctions-hit Russia is seeking to stem an influx of Chinese cars, despite warm relations between President Vladimir Putin of China and President Xi Jinping of China. Russia increased in recent weeks a tax on disposing of imported vehicles. More than half of newly sold vehicles in Russia are Chinese made, compared with less than 10% before its 2022 events in Ukraine.

"We do seem to be on the threshold of a much broader if not all-out trade war," said Eswar Prasad, professor of trade policy at Cornell University and a former International Monetary Fund official. In this hostile new landscape, "it's every country for itself," Prasad said.

In all, there were 4,650 import restrictions in force among the Group of 20 leading economies as of March 1, including tariffs, antidumping duties, quotas and other import curbs, according to Global Trade Alert, a Switzerland-based nonprofit that tracks international trade policy. That is up 75% since Trump first won office in 2016 and almost 10 times the number of such restrictions in force at the end of 2008.

In the U.S., more than 90% of 5,200 product categories are subject to harmful import restrictions, up from half just before Trump's first term in office, Global Trade Alert data show.

According to the Tax Foundation, a think tank that scrutinizes tax policy, the average tariff rate facing goods imported into the U.S. is back to where it was in 1946, at 8.4%, compared with 1.5% when Trump first won office in 2016.

If Trump follows through on all his remaining tariff threats, tariffs on U.S. imports could hit 18% on average, Fitch Ratings estimates -- the highest level in 90 years.

The Smoot-Hawley Act, an effort to protect U.S. farms and factories from foreign competition in the 1930s, paved the way for an increase in tariffs on imports to the U.S. to about 20%. Major economies raised trade barriers in response.

After the war, in 1947, the U.S. and almost two dozen other countries signed the General Agreement on Tariffs and Trade in an effort to lower barriers to international trade and rebuild a shattered world economy. Average tariffs among major economies fell from about 22% in 1947 to 14% in 1964 and to 3% in 1999. In 1995, the WTO took the place of GATT.

The drop in tariffs led to a surge in global trade that lowered prices for consumers.

But falling trade barriers were blamed for hollowing out industries in advanced economies as jobs moved to lower-cost countries such as China.

That fueled a backlash, leading to new tariffs during the first Trump administration, many of which remained in place under then-President Joe Biden. Meanwhile, more countries targeted China, whose weak domestic economy left it unable to absorb all the goods its factories produced, resulting in a deluge of cut-rate products worldwide.

Trump's latest fusillade has included 25% tariffs on Mexico and Canada and 20% tariffs on China. China responded with tariffs on U.S. soybeans and other retaliatory measures, while the European Union unveiled plans for 50% tariffs on imports of U.S. whiskey and motorcycles starting next month.

For Trump, the decades during which global trade expanded were a catastrophe for the U.S. His goal is to eliminate the U.S.'s yawning trade deficits with China, Mexico, Vietnam and the EU and to restore the U.S.'s manufacturing might in everything from computer chips to containerships.

The president and his supporters say his policies will create new jobs, boost investment in the U.S. and usher in a new age of economic vitality.

The fallout of the widening trade war might be less painful today than in the 1930s, given changes in the world economy. For many rich nations, services are more important than goods, and central banks and governments learned valuable lessons about stabilizing economies with stimulus.

Some countries, such as Australia and Japan, have resisted retaliating against Trump's levies, citing the blowback to their economies. Such pragmatism might keep the trade war from spiraling out of control, said Frederic Neumann, chief Asia economist at HSBC in Hong Kong.

Still, widening trade conflict creates uncertainty for businesses and consumers, squeezing spending, investment and hiring. In the U.S., consumer confidence is sliding, stock markets have fallen, and surveys of businesses' investment intentions are weakening.

German automaker BMW said recently it expected to take a hit of 1 billion euros, equivalent to about $1.1 billion, from U.S. levies on Mexico and imported steel and EU duties on China-made electric vehicles.

"If you overdo it with tariffs, it sends a negative spiral to all market participants," BMW Chief Executive Oliver Zipse said. "There are no winners in that game."

The global economy is already fracturing into blocs, with capital and trade flowing increasingly between geopolitical allies, according to the IMF.

Fitch Ratings said last week it expects global economic growth to slow this year, to around 2.4%, from 2.9% in 2024, citing the likely effects of the escalating trade war in the U.S. and beyond.

Returning to the level of openness to trade that existed a decade ago will be tough, assuming countries even wish to do so. The world's trade referee, the WTO, has been sidelined by Washington, which accused it of overreach into domestic-policy decisions and refused to approve judges to its top appeals panel since 2019. WTO spokesman Ismaila Dieng said member states continue to resolve disputes via other channels at the organization. WTO Director-General Ngozi Okonjo-Iweala said the organization was created to manage times like these and prevent tensions from escalating.

Bringing down trade barriers once they go up is hard, said Douglas Irwin, professor of economics at Dartmouth College and the author of a history of U.S. trade policy. That is because every trade restriction is a potential bargaining chip, so no one wants to "unilaterally disarm," he said.

Throw in geopolitical rivalries, especially with China, and domestic priorities such as rebuilding industries and rearming, and the chances for dialing back the protectionist fervor look slim.

"That is why I worry the de-escalation scenario is a really tricky one," Irwin said.” [1]

Globalist dreamed about keeping ahead of everybody by democracy's ability to invent. China showed that this is a pipe dream. At the end Communist in Vietnam are as inventive as sclerotic British. According to America's vicepresident Vance there is no freedom benefit in UK.

1.  Barriers to Global Trade Rise At a Pace Not Seen in Decades. Douglas, Jason; Fairless, Tom. 
Wall Street Journal, Eastern edition; New York, N.Y.. 25 Mar 2025: A1.