'MAGA of Trump 2.0' is an undeniable threat to globalization

Editor's note: He Weiwen is a senior fellow at the Center for China and Globalization. The article reflects the author's opinions and not necessarily the views of CGTN.

Donald Trump's spectacular victory in the 2024 US presidential election means a much more aggressive agenda to "Make America Great Again (MAGA)", as articulated in the 2024 Republican Party's election manifesto, and pledged repeatedly by Trump himself during the campaign.

Trump's economic and trade agenda, among others, covers three main aspects:

First: A counter-globalization strategy for moving manufacturing and supply chain back to America and saving the American automotive industry. He will deploy the strong executive power of the president to impose the orders to "Buy American, Hire Americans," prohibiting all American companies with outsourcing businesses from obtaining any contracts from the federal government. The ultimate goal is to make America "a manufacturing superpower."

Second: A counter-multilateralism trade policy of extreme protectionism and unilateralism. In the narrative of protecting American workers and farmers, he calls for "trade rebalance" and cutting down $1 trillion trade deficit. For this purpose, Trump Administration 2.0 will impose a basic tariff of 10 percent to 20 percent on all imports worldwide, and revoke China's permanent normal trade relations (PNTR) status which will lead to an accumulative 60 percent of tariff level on all imports from China.

Third: A counter-world green transition policy of retreating to oil and gas superiority. He will quit the Paris Accord once again, and call off restrictions on American oil and gas production, making America the world's largest producer of both oil and natural gas. He will also call off Biden's policy on electric vehicles and stop imports of Chinese automobiles.

The first policy, forcing all manufacturing back to America, will lead to a major disruption of the existing global supply chain and a wishful decoupling with the rest of the world. The global division of labor is based on economic laws and market forces, not on government will. During the 2017-2024 period, both the Trump and Biden administrations advocated vehemently to move manufacturing back to America. The latest Federal Reserve data shows, however, that the American manufacturing production index in September 2024 was 99.1 (2017=100.0), no increase over the past eight years. 

Trump wants to fight economic and market forces. According to this logic, Boeing aircraft manufacturing, currently scattered in 66 countries and regions of the world, should only happen in the US. World-leading chip design and manufacturing companies should move to America as well. Electric vehicles should not be made in Mexico but in America only. In the end, the massive manufacturing return is unlikely to happen, but the high tariffs, executive restrictions and penalties will cause significant harm and distortion in the existing global supply chain.

The basic tool for manufacturing in America and "trade rebalance" is unilateral high tariffs. Trump has said that the word he loves best in the dictionary is tariff. The 10 percent to 20 percent tariffs on all imports from the world in general, and 60 percent tariffs on imports from China in particular, will not reduce US trade deficit, but will shake world trade. It is a direct and blunt violation of the core of the multilateral trading system with the World Trade Organization (WTO) at the center – the unconditional "most favored nation" treatment to all WTO members, without any discrimination. The US unilateral tariffs on all imports from all countries, are shaking the very foundation of the post-war world free trade system and thus is likely to bring the world trade back to pre-GATT (General Agreement on Tariffs and Trade) years.

The US's unilateral tariffs on imports will not reduce its trade deficit, as shown in the past eight years, because tariffs are mutual. When the US imposes tariffs on imports, the exporting country also imposes tariffs on imports from the US in return, thus there is no change in mutual tariff levels, only damages caused to economies and families of both countries. 

A Bloomberg report estimated that the revocation of PNTR with China and China's retaliation will result in a 40 percent fall in US imports, and if all US trading partners retaliate, US imports will fall by 55 percent. US exports will fall by 30 to 60 percent.

It will repeat the extremely sad scenario during the Great Depression in the 1930s when the US raised drastically tariffs across the board under the Smoot-Hawley Tariff Act, and the UK, France and Canada retaliated heavily, resulting in a 61 percent fall in US exports and 66 percent fall in its imports, thus prolonging the Great Depression.

The new Trump shock to globalization and multilateral trading system will happen in an already fragile world suffering from geopolitical confrontation and geoeconomic fragmentation, with both economic and trade growth well under the historical average. Trade restriction measures have more than tripled over the past three years. An International Monetary Fund staff discussion note has observed that in the worst scenario, global fragmentation could shave 7 percent off world GDP. A World Economic Forum report also described a pessimistic picture that the global economy may be on the brink of a reversal of the steady increase in integration that characterized the second half of the 20th century.

The third policy of reviving traditional fossil energy will also deal a heavy blow to the world's common efforts in fighting climate change and pursuing green transition. It will also disrupt the growth of electric vehicles, solar and wind power. In the end, it will weaken the new engine of the world economy's sustainable growth.

All the above three policies, if fully enforced, will slow down the already slow growth of the world economy and trade. 

Disruption in the global supply chain and a major threat to WTO survival and reform look more likely.

It is more than ever necessary that various countries, international organizations and business communities around the world to work together to support globalization and uphold a multilateral trading system based on WTO rules. And in the meantime, they must maintain dialogue with incoming Trump administration, make the best efforts to maintain stable economic and trade relations with Washington and with American business community and people at large.