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Trumpeting a global trade war

The US underpinned the liberal economic order. So what now in a world of America First?

Taking liberties

O ften accused of being rambling or incoherent, in his inaugural address President Donald Trump did—for better or worse—have something substantial to say. He summed it up in the two-word slogan, “America First.” To the uninitiated, this might have sounded like typical new-president waffle that might be forgotten as quickly as the “thousand points of light” of George HW Bush’s 1989 inaugural. Those who know their American history, however, were not so easily soothed. For “America First” was also the slogan of the isolationists during the 1930s, the last time the world descended into a serious trade war. The question that can no longer be ducked is whether it could happen again.

On their path to the top, many presidential candidates— Barack Obama and Bill Clinton included—have aired anxieties about trade, but they have tended to cool their rhetoric pretty quickly on assuming office. They were bound to do so if the United States were to maintain the role it has had for the last 70 years, as the linchpin of the liberal trading order. No winning candidate, however, has adopted anything like the language of Trump, who has talked of the “rape” of America’s jobs.

And as he stood in front of the Capitol on 20th January, he doubled down on that line. “Protection,” he said, “will bring great prosperity and strength.” He indicated that all his decisions on trade, taxes, immigration and foreign affairs would be made in the interests of American families and workers. In Trump’s America trade is a zero-sum game in which only one party gains, and in which the interests of Americans as suppliers of products or labour are all-important, entirely dominating the interest they have as consumers.

Trump is an ugly new feature on the world’s trading landscape, but he did not come from nowhere. In important respects he is a creature of his time. If the great contemporary political battle is between globalisers and the malcontents, then trade is the front line. Even before the remarkable events of 2016, world trade had been in trouble, mainly for economic reasons. Now, though, there is a new political cloud hanging over world trade, bringing in its wake greater protectionism and the real possibility of a full-on trade war.

Trump has quickly given notice that the US would withdraw from the 12-nation Trans-Pacific Partnership (TPP) free trade agreement, and seek to renegotiate the North American Free Trade Agreement (Nafta) with Canada and Mexico. He has made clear that he will punish countries that “violate” trade agreements. This is aimed largely, though not exclusively, at China, which Trump seems intent to weaken through trade issues. And the most immediate risk of Trump’s protectionist stance is, undoubtedly, a trade war with Beijing. Everything depends on how far the US is prepared to go, and the extent to which the Chinese retaliate. The broader risk to the world economy is that we are losing America as the champion of an open, rules-based, regime of trade and investment, the role it has played ever since the Second World War.

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About Prospect Magazine

In Prospect’s March issue: Sam Tanenhaus, George Magnus and Dahlia Lithwick examine the state of America after Donald Trump’s first couple of weeks. Tanenhaus looks at the situation faced by the American press, Magnus looks at the state of global trade and Lithwick inspects the diminishing right to choice women face over abortion. Anne Perkins explores the rise of Theresa May through the political ranks and David Edmonds looks at how empathy affects our decision making. Also in this issue: Jay Elwes on Trump’s relationship with America’s intelligence agencies, Anita Charlesworth on the state of the NHS and Nick Cohen on what is done in the name of “the people” by politicians