President Donald Trump has repeatedly touted what he calls the return of manufacturing to the United States, hailing companies that have vowed to pour large amounts of money into making everything from computer chips to cars in America.
But announcements are easy to make. In the long term, why would companies and other countries decide to invest in the US, which has upended the global economic order in just weeks? The United States moved from a stable economy, a trusted partner in trade agreements and global security, to a source of confusion and doubt in mere weeks after Trump assumed office on January 20.
Perhaps no one has put it more bluntly than Ursula von der Leyen, the president of the European Commission, on Wednesday, when she said to a news outlet in Germany: “The West as we knew it no longer exists.”
In other words: The United States isn’t the only trade game in town.
Sure, the US is the world’s biggest economy, with a gross domestic product of almost $30 trillion. But China, the world’s No. 2 economy, is at about $18 trillion, according to the World Bank. And the total value of the European Union’s economy is around 17 trillion euros, or about $19 trillion.
“We have 166 members in the organization. US trade is 13% of world trade. That means that there’s 87% of world trade happening between the other members of the WTO,” Ngozi Okonjo-Iweala, director-general of the World Trade Organization, told CNN’s Richard Quest on Wednesday.
Trump has repeatedly claimed that other countries have been “ripping off” the United States for years, despite American growth rates that have been the envy of the developed world. So far, he has imposed 25% tariffs on aluminum and steel; 25% tariffs on goods from Mexico and Canada that aren’t compliant with a free-trade agreement; a massive 145% duty on Chinese imports; a 25% tariff on cars, with separate tariffs on auto parts coming at a later date; and a 10% baseline tariffs on all US imports.
But those numbers don’t quite capture the whiplash-inducing speed with which Trump has levied tariffs, then walked them back, only to announce more tariffs, with another policy change soon after. The constantly changing playing field has made it even more difficult for businesses and nations to contend with the new policies.
The tariffs in place now “will likely slow global economic growth significantly,” Moody’s Ratings said in a recent report. “And the inconsistent approach to policymaking has undermined confidence globally.”
The changes have been not only swift but also deep.
“These are very fundamental policy changes,” Federal Reserve Chair Jerome Powell said at an event hosted by the Economic Club of Chicago on Wednesday. “There isn’t a modern experience of how to think about this.”
His comments sent US stock markets slumping, with investors clearly uneasy about what it means when a usually staid central banker suggests the world economic order is being turned topsy-turvy. (Trump ripped Powell on social media the next day, ostensibly for not lowering interest rates quickly enough, writing: “Powell’s termination cannot come fast enough!”)
