President Trump’s on-again-off-again tariffs have disrupted the global trading system and caused whiplash for businesses and consumers. He has vacillated mightily, announcing tariffs on imports from practically every U.S. trading partner and then pausing or rolling some back. Legal challenges have added to the turmoil.
No matter where the tariffs eventually settle, they will have repercussions that go far beyond trade. Raising tariffs, or at least the constant looming threat of that happening, undermines trade and weakens economic links that stabilize international relations. By shredding rules that have governed trade and by disregarding free trade agreements, Mr. Trump has undercut the entire international rules-based order. This includes ignoring the rules of the World Trade Organization, hindering its work and threatening to abandon it.
Denying low-income countries with growing young work forces the opportunity to develop their economies through trade could lead to a surge of migrants that will put pressure on the countries that receive them. A retreat from free trade will hurt consumers worldwide through higher prices and more limited choices, raising the prospect of political discontent in their countries.
Whatever their ostensible objectives, the Trump tariffs will make the world a poorer and more perilous place.
A full-scale retreat from global trade is unlikely, but international commerce is already shifting in ways that can deepen geopolitical fissures. Business interests have long kept relationships between rivals on an even keel. In the past two decades, for instance, U.S.-China frictions have been smoothed by the eagerness of American companies to sell their products and services to China’s rapidly growing middle class and to use Chinese suppliers.
American investors keen to gain access to China’s financial markets played a similar role. When China manipulated its currency during the 2000s to gain a competitive advantage for its exports, the presence of U.S. commercial interests ensured that the United States did not take punitive action. For China, the benefits from opening up to American businesses and investors pushed Beijing, for a while, at least, to align its own economy with U.S. free market principles. It eased restrictions on investments flowing into and out of the country, and even took steps to reduce government intervention in foreign exchange and other financial markets.