China Is the Biggest Protectionist Threat
Even before Trump, the country was pursuing a go-it-alone economic strategy that had little use for trade.
Boeing, are you paying attention?
Photographer: Qilai Shen/BloombergGlobal trade was slowing even before President Donald Trump was elected. The ratio of total world exports to global gross domestic product -- a rough measure of how many times a dollar of goods gets passed back and forth between national economies in order to create a single dollar of economic value -- has been drifting lower since 2011. Hyun Song Shin, the head of research at the Bank for International Settlements, attributes the change to weaker financing conditions for exporters, as well as a stronger dollar.
Trump's trade war is likely to curb these exchanges even further. Tariffs tend to echo along these international value chains -- a tax on smartphones that China exports to the U.S. will depress Chinese demand for the South Korean components that went into making the device, hurting both economies. Trump’s tariffs are already spurring companies to move production out of China. Uncertainty over where the trade war might surface next could force companies to move production back to their home countries. And as Japan’s recent export restrictions on advanced chemical sales to South Korea show, trade wars could quickly become normalized all over the world, magnifying the threat to globalization.