One Response to Trump’s Tariffs: Trade That Excludes the U.S.

Patricia Cohen

As President Donald Trump this weekend opened what could become a global trade war, a growing number of countries, including the United States’ closest allies, are forging their own economic partnerships without the United States. If Washington is putting up a higher fence around its trade, other nations are lowering theirs. In just the last two months, the European Union concluded three new trade deals.

The bloc, completing negotiations that started 25 years ago, reached a major agreement with four South American countries in December to create one of the world’s largest trade zones, linking markets with 850 million people. Two weeks later, the EU struck a deal with Switzerland. Then last month, the bloc bolstered trade arrangements with Mexico. It also resumed talks, after a 13-year postponement, on a free-trade agreement with Malaysia.

“With Europe, what you see is what you get,” European Commission President Ursula Von der Leyen boasted to the World Economic Forum in Davos, Switzerland. “We play by the rules. Our deals have no hidden strings attached.”

On Saturday, Trump ordered 25% tariffs on Mexico and Canada — partners in a trade bloc that he signed in his first term — and 10% tariffs on China. By late Monday, the tariffs on Mexico and Canada had been delayed a month, but Europe, Trump promised, was next.

Of course, the United States, with the planet’s largest and strongest economy, cannot be ignored. But it can, at least sometimes, be avoided. By punishing longtime allies with tariffs, Trump is encouraging other nations to form trading blocs and networks that exclude the United States.

Last month, Indonesia became the 10th nation to join BRICS, a group including Brazil, Russia, India, China and South Africa that was established in 2009. This economic club now includes half the world’s population and more than 40% of its total economic output. Another eight countries, including Bolivia, Thailand, Kazakhstan and Uganda, are on the path to becoming full partners.

In May, the 10-country Association of Southeast Asian Nations, known as ASEAN, will meet the six Middle Eastern nations that make up the Gulf Cooperation Council. The summit’s host, Malaysia, has invited China to attend. China is also poised to update its own free-trade agreement with ASEAN, which includes Cambodia, the Philippines, Indonesia and Vietnam. And trade and investment between ASEAN and India, the world’s most populous nation, is deepening.

Britain, too, recently christened a new partnership. In December, it officially joined the trans-Pacific trade bloc, a group that includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. London is also looking to repair its frazzled economic relationship with the EU.

And Brazilian and Mexican officials have talked about expanding their trade agreements.

The global economy is increasingly becoming “one that is characterized by ever deepening trade relationships excluding the United States,” said Jacob F. Kirkegaard, a senior fellow in Brussels at the Peterson Institute for International Economics. The trend is not necessarily anyone’s preference, he said, but the arrangements offer a “second best” option given the United States’ rejection of a more open economic order. He added the proliferation of trading blocs, like the one between the EU and South American nations, also helped countries avoid an overreliance on China.

Trump’s latest unilateral and protectionist missives have sped up a reel that had already begun to unspool. Over the past couple of decades, the backlash against a globalized world of open borders and hands-off government simmered. Factories moved to nations with lower labor costs, farmers faced increased competition, and the 2008 financial crisis threatened to wreck the global financial system.

In 2016, Britons, unhappy with dictates agreed upon by the 27 other members of the EU, voted to exit. Trump during his first term bridled at any institutions and accords — the World Trade Organization, climate treaties and trade partnerships with countries on the Pacific Rim — that could limit his prerogatives.

At the same time, economic power around the globe was shifting. China had emerged as an economic superpower. Not only does it now account for more than 30% of the globe’s manufacturing, but it has also leaped ahead of the rest of the world in cheaply producing sophisticated electric vehicles, batteries and solar panels.

Regional trade routes and networks among allies grew faster after the COVID-19 pandemic exposed supply chain vulnerabilities, Russia invaded Ukraine, and relations between the United States and China worsened.

The biggest changes in trade can be seen in Asia. Nearly 60% of Asia’s trade happens within the region, according to a new report from HSBC Global Research. And half of the world’s fastest-growing trade corridors are there. In 2023, China’s exports to ASEAN nations bypassed those from the United States.

China’s trade with Latin America — Brazil, in particular — has also been rising. India’s status as a world economic power has grown as well. It surged past Britain to become the world’s fifth-largest economy in 2022. “India’s trade expanded across the geopolitical spectrum,” an update on trade released last week by McKinsey Global Institute reported.

And India is on the path to becoming a leading exporter of digital services, which are not subject to tariffs. An increasing number of European, Australian and Japanese multinationals are opening operational hubs — known as global capability centers — there.

New Delhi flexed its economic independence by refusing to go along with Western sanctions against Russia. And now it and China are the biggest buyers of cheaper Russian oil. Persian Gulf nations like Saudi Arabia and the United Arab Emirates have also shifted their attention to India and China, increasing energy exports to meet the growing demand. Asia receives more than 70% of total gulf oil and gas exports, according to one report.