A Recent History Of Global Trade In One Chart

Ok, so let’s just be honest here. Anyone who suggests that the world would be a better place with less trade and less cooperation between countries is probably wrong.

For one thing, the idea that we should deglobalize isn’t at all intuitive. It represents the antithesis of progress – a step back in time to a more primitive existence.

Also, advocates of the Trumpian trade ethos don’t like to mention any of the benefits they derive (knowingly or unknowingly) from global trade. I would probably pay to watch a random sample of lower middle class Trump supporters (the “forgotten ones” that the new president so enthusiastically courts despite the fact that they live paycheck to paycheck and he quite literally lives in a golden skyscraper) visit the local Wal-Mart only to find that the price of goods imported from China has gone through the roof thanks to new trade barriers put in place by the incoming administration.

Erecting barriers and deliberately antagonizing trade partners is a short-sighted, draconian “fix” that represents no less than step backwards for society at a time when we desperately need forward-looking, sustainable solutions.

With that as the backdrop, consider the following commentary from Goldman which is presented alongside a graphical history of trade:

The election of Donald Trump has amplified concerns about a rollback of free trade, particularly given US presidential discretion over trade policy. As president, Trump will have the authority to withdraw from bilateral and multilateral trade agreements, and to raise tariffs without congressional approval. In past statements, Trump has called for imposing tariffs on imports from Mexico and China of 35% and 45%, respectively. The Trump administration will likely face pressure to move policy in this direction, though the exact measures it will take remain uncertain.

What to look for in 2017 (and beyond):

• Concrete steps on trade by the incoming US administration. We think any tariff increases are unlikely to be applied across the board, as goods trade flows differ significantly by country and product.
• The effects of US tax policy on importers, exporters, and trade flows. The House Republicans’ tax proposal includes a destination-basis cash flow tax, which would reduce the tax rate for net exporters and increase it for net importers. In theory, this would make US imports less competitive (reducing demand for imports) and US exports more competitive (increasing demand for exports). Dollar appreciation would likely provide only a partial offset to this effect, leading to higher net US exports (among other consequences). We think Congress is more likely to ultimately move away from the proposal.
• Pursuit of bilateral and regional trade agreements, particularly as an alternative to the TPP. In particular, the Regional Comprehensive Economic Partnership (RCEP) being promoted in Asia by China looks set to gain momentum. In contrast, the TPP will likely remain shelved, while the busy European election calendar makes much progress on the TTIP unlikely.
• China’s push for market-economy status under the WTO, which would limit other countries’ use of tariffs in anti-dumping cases against China. The US and EU have resisted the change to China’s status.
• Signs of improvement in global trade–with upside in services trade and a continued recovery in container trade– although the potential for increased trade barriers poses downside risks to these views.