Global Trade Trends: How Nations Are Shifting Away from U.S. Dependence

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The writer is the chair of Rockefeller International and has penned a book titled What Went Wrong With Capitalism.

Donald Trump has hinted at using tariffs, but he hasn’t acted yet. Still, there’s concern that his aggressive trade stance could create chaos in the global economy. If other countries retaliate, it could trigger a downturn in growth and turbulence in the markets.

However, retaliation isn’t the only possible reaction. The US has been using tariffs as a tool for the past eight years. Trump’s tariffs have largely continued under President Biden, especially against China. While some nations pushed back or sought negotiations, many simply shifted their trade focus away from the US.

Since Trump took office in 2017, global trade has remained stable at about 60% of the world’s total economic output. However, the US’s share has diminished, while regions like Asia, Europe, and the Middle East have seen growth in their trade activities.

Interestingly, more than 80% of countries, both rich and poor, have watched their trade increase as a part of their economy. Nations like Japan, Italy, and Vietnam have seen significant jumps in trade’s contribution to their GDP. In contrast, the US has experienced a decline, now hovering around 25% of its GDP.

While America holds strong as a financial powerhouse, its role in global trade is waning. The US contributes nearly 70% to global equity markets and just over 25% of global GDP, but its trade percentage has dropped below 15% in recent years.

Many worry that Trump’s tariffs could hurt countries that depend on exporting to the US. Yet, during his first term, developed nations maintained steady growth, and many emerging markets accelerated their exports of goods and services, especially in tech and digital industries.

After the financial crisis of 2008, global trade talks stalled, making it tough to strike broad agreements. However, smaller, bilateral deals started popping up, particularly after Trump assumed office. While the US turned inward, regions like the EU and China actively sought new trade agreements, moving ahead with multiple partnerships.

As Trump began his second term, there was a renewed enthusiasm for trade deals. The EU finalized agreements that took years to negotiate, while Mexico expanded its trade relationships with other Latin American countries, partially in anticipation of potential tariffs from the US.

This shift has seen countries like the UAE, Poland, and China significantly enhance their trade shares. Out of the ten fastest-growing trade routes, China dominates several, while only a few connect back to the US.

Trump believes tariffs will elevate US standing globally, but there’s a risk. His “America First” approach aims to lessen government interference, yet tariffs can also be seen as a form of economic intervention. Instead of provoking trade wars, this strategy might diminish the US’s relevance and economic strength in the trading arena.