No, Trump’s Tariffs Are Not The End Of Globalization — Not Even Close

BOGOTÁ — It’s the riskiest chapter of the U.S.-China trade war: a hardball negotiating strategy to see who blinks first. Nobody can predict its outcome, which could be global recession. And yet, I’ll wager on the established forces behind the world economy: its existing production structures and potential for integration, communications and payment systems, supply chains, not to mention the universal and interconnected peoples we all are now.

U.S.-led free trade will prevail.

Globalization, including the unification of markets, did not happen because some clever and immensely wealthy person thought it up. It is the result of the development of technology and our means of communication at a dizzying pace. Scientific, technical and human progress have helped streamline consumption, which is why it is naïve to think that Donald Trump’s measures will end globalization and soon have us all living in autarchic societies, instead of liberal democracies with access to affordable goods and services in ever more countries on the planet.

What Trump is doing is not so much balancing the country’s trade deficit as honoring campaign promises made to his voters. He is boosting public revenues through import tariffs, which will allow him to cut taxes on firms. Ordinary folk, or consumers, will ultimately pay the resulting rise in consumer prices, which effectively makes this a zero-sum game.

President Trump does not intend to end globalization as defined so far. He is using tariffs to get a tighter grip in any negotiations. He has placed both domestic and foreign policy into the same terrain of negotiability, which he knows so well, expecting benefits to always exceed costs.

Yet, as he will surely know, he does not control all the variables. Politics differ from commerce, and the situation he has created has already gone beyond the realm of trade and business.

When it comes to re-industrializing certain, often enormous, sectors affected by outsourcing, either to China or elsewhere, Trump has set the bar high through tariff imposition. But he also knows that his country’s GDP structure is more than 80% services and only 20% industry. His tariffs will, in fragmented form, expose this vast services sector to reprisals, which will affect the bulk of the country’s economy and revenue sources.

Eventually he will turn to negotiations, in keeping with his style, hoping to win the best he can possibly expect, off the dark scenario he has painted beforehand. He knows service-sector firms could not hope for the results they have today if the global economic structure were radically different — and without Chinese participation — and that a recession is worse than a trade deficit.

He knows that low wages in foreign countries have allowed U.S. firms to keep and boost their profits, and that with technology replacing manpower, and not just in China, returning to 1950s style manufacturing is impossible. Factories simply don’t need as many people as they used to.

For our country, Colombia, the scenario ahead could even be an opportunity. Our sales to the United States may not be reduced like our competitors in that market for the higher tariff rates on their goods. Furthermore, Trump’s strategy seemingly includes a devaluation of the U.S. dollar, which should be taken into consideration.

And one more thing… Those who keep repeating old theories to explain periods of change like this one may be tempted to describe Trump’s protectionism as revolutionary. I would say it is more likely they are baffled by the contradiction of this captain of big capital ‘ending’ globalization, as he is said to be doing. We’re facing unusual and difficult days, certainly, but it’s neither the end of globalization — nor the end of the world.