David J. Lynch – Washington Post (thanks to Mary M.)
The tariff barrage that President Donald Trump unleashed this week on the world economy marks a decisive end to an era of freewheeling globalization that was shaped by American policymakers, business executives and consumers.
The United States is now abandoning the system that made it rich and powerful, gambling that it can become more prosperous by waging a global trade war on friend and foe alike.
Trump’s new protectionism breaks with international economic policies that were pursued by more than a dozen American presidents as the nation grew into a superpower that boasted a $30 trillion economy, the world’s largest and most innovative.
“This is a historical moment. Even if there is paddling back by the administration and even if negotiations start to soften the edges, this is the nail in the coffin of globalization,” said Carmen Reinhart, former chief economist of the World Bank and now a professor at Harvard University’s John F. Kennedy School of Government.
From the end of World War II until Trump’s 2016 election, U.S. leaders led a global effort to lower barriers to trade, investment and finance. Spreading prosperity to distant lands was seen as an antidote to the authoritarian movements that arose from the Great Depression to trigger a ruinous global conflict.
The strategy worked. But after the Cold War’s end in 1989, when global integration expanded to encompass low-wage countries like China, the costs for factory workers in advanced economies like the United States sparked a bipartisan backlash.
Trump’s announcement of the highest U.S. taxes on trade since 1909 capped a quarter-century of domestic disquiet over a global economic system that lavished disproportionate benefits on educated Americans while leaving less-skilled workers to the vagaries of the market.
The president insists that high tariffs and unilateral American action will deliver a new “Golden Age,” as companies flood the U.S. with trillions of dollars in investment. The stock market will soar and gleaming new factories — “the best anywhere in the world” — will replace the shuttered plants of an earlier age, the president promised in the Rose Garden on Wednesday.
“We’re going to be an entirely different country, and it’s going to be fantastic for the workers. It’s going to be fantastic for everyone,” Trump said.
Mainstream economists call that outcome unlikely, and the early reviews from Wall Street were brutal. On Thursday, the S&P 500 index dropped nearly 5%, its worst day since the first months of the pandemic, and the carnage continued Friday, with all three major indices down more than 5% in afternoon trading. Economists at JPMorgan said that Trump’s tariffs, and foreign retaliation, meant a 60% chance of a global recession this year. (continued)