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A “Reagan moment” for international trade?

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By Mohamed A. El-Erian

The latest round of tit-for-tat tariffs by the United States and China has intensified the ongoing global debate about whether the world is facing a mere trade skirmish or heading rapidly toward a full-blown trade war. But what is really at stake may be even more fundamental. Either accidentally or by design, US President Donald Trump’s administration may have paved the way for a “Reagan moment” for the international trade regime.

In the 1980s, US President Ronald Reagan initiated a military spending race with the Soviet Union that ended up altering the global balance of power in ways that affected many countries worldwide. Today, Trump has launched a tariff race with China, an economic superpower, perhaps with similarly far-reaching potential consequences. Like under Reagan, the US is better placed to win the current competition with China – but the risks are sizable.

In the latest escalation of the trade dispute, the US imposed levies on $34 billion worth of Chinese imports. China immediately implemented retaliatory tariffs, spurring the US to threaten even more protectionist measures. These actions exacerbate tensions over the Trump administration’s imposition of tariffs on imports from other countries, including some of America’s closest allies (such as Canada), and its threats to withdraw from the World Trade Organization, which undergirds the rules-based system regulating cross-border flows of goods, services, and capital.

Many existing trade agreements would benefit from modernization. And most economists agree that the US has genuine trade grievances against China, including intellectual property theft,........

© AzerNews