Last March, Donald Trump decided to drag age-old protectionism out of the past, imposing tariffs on U.S. imports. Retaliation from China – the main target – followed; Fears of a trade war resurfaced.
Beyond the fact that initial threats from the United States were generally followed by negotiations and exemptions, the magnitude of the exports at risk, and the risks to derail the economic upswing sound like good reasons to take markets’ anxiety with a pinch of salt.
Recently, global trade has actually done well: in volume it rose by an estimated +4.8 percent in 2017 while protectionist measures continued to pile up (+489 new measures in 2017 compared to 2016). The acceleration of global growth was strong enough to more than offset the dampening effects of new protectionist measures and push many countries to open up again to benefit from the synchronized acceleration in growth.
On a forward-looking basis, Euler Hermes’s latest analysis on protectionism: “Trade Games, Trade Feud or Trade War?” evaluates the impact of higher U.S. tariffs on global trade in 2018 and 2019. It defines three scenarios based on the rise of the average U.S. import tariff and different levels of retaliation among major trade partners.