Have we seen the peak of globalization? Are we entering a new paradigm of increased protectionism under President Trump’s “America First” economic policies?

According to an article recently published in the Barclays investment blog, these questions cannot yet be answered.

While we will likely never see a full retreat of globalization, the election of Donald Trump as president of the U.S. and the UK’s vote to leave the European Union strongly signaled a shift away from a globalizing trend that was strongest in the 1990s and early 2000s.

The authors of the article show that, in this period of “hyperglobalization,” those countries that benefitted the most were emerging economies with manufacturing capabilities – neither those at the top, nor those at the bottom.

If the turn from a globalized economy continues, these countries stand to lose the most.

Pinch of Protectionism

However, this is not to say that other developed nations will avoid the pinch brought on by protectionism.

As an advanced consumer economy, the United States greatly enjoys the low prices made possible by the lower costs of manufacturing in other countries. Bringing these manufacturing jobs back to the mainland would cause prices to jump substantially and, as a result, would likely bring a wide array of damaging macroeconomic consequences.

Furthermore, the increased cost borne by businesses employing these expensive domestic workers would only serve to boost the motivation for developing workplace automation.

Overall, the effects of an enduring trend toward protectionism are somewhat murky now, but it is clear that the changes brought on if the trend continues will not be pleasant.

Related

Leave a Reply

Your email address will not be published.