With Trump flaunting the tariff threat, globalisation is bound to suffer a setback as US policies could accelerate the transformation of the trading system which is fragmented, regionalised, and less interconnected
Ever since Donanld Trump hit the campaign trail for a second term as US President, his tariff threatening stance has turned the global spotlight on the consequences of his action. On assuming office in January, Trump lived up to his word. His executive orders were marked by renewed tariffs and aggressive protectionism, suggesting a potential challenge to the post-Cold War era of globalisation. While globalisation may not fully end, US policies could accelerate its transformation into a fragmented, regionalised, and less interconnected system.
The shift from globalisation is discernible as Trump’s renewed tariffs on imports from China, Mexico, and Canada, along with threats against the EU, discourage free trade and global supply chain integration. “America First” policies encourage domestic manufacturing and production, reducing reliance on foreign imports, and rising tariffs have led companies to diversify supply chains or shift production closer to their largest markets, signaling a departure from the hyper-globalised model.
There could be financial decoupling as well since efforts to bypass dollar-dominated trade systems, especially by emerging economies like China, India, and Russia, challenge the dominance of the global financial architecture. There is also the impending threat of erosion of multilateral iInstitutions as Trump’s disregard for organizations like the World Trade Organization (WTO) undermines the rules-based trade system.
Eminent economists concur with this assessment. Nouriel Roubini, Professor Emeritus since 2021 at the Stern School of Business of New York University, is of the view that de-globalisation and the regionalisation of supply chains are becoming the new norm. Adam Posen of Peterson Institute observes that Trump’s second term policies could dismantle what remains of the post-war liberal trade order and Anne Krueger former Chief Economist, the World Bank worries that “The return of protectionist policies under Trump signals a fundamental threat to global economic cooperation.”
The issue is what comes next. Economic alliances like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and African Continental Free Trade Area (AfCFTA) may gain prominence. Competition in AI, semiconductors, and green energy could see rival ecosystems emerge and nations may increasingly prioritise securing supply chains within politically allied countries.
The upshot of Trump’s disruptive trade policies is clear. If countries band together to reduce US economic dominance, it could weaken America’s ability to project power globally, resulting in diminished influence in matters relating to trade, diplomacy, and security.