IFS Zooms In: The Economy Trade Wars: The end of globalisation?
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Jun 4, 2025 In this intriguing discussion, Professor Meredith Crowley, an economics expert from the University of Cambridge, delves into the current trade wars and their potential to unravel globalization. She explores the rising tariffs and what they mean for international relationships, particularly between the US and China. Crowley also addresses the shift in global trade dynamics, emphasizing the complexity of supply chains. The conversation highlights the impact of U.S. trade policy changes and the necessity to rethink trade agreements in this new landscape.
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Trade Growth and Supply Chains
- Global trade grew rapidly from 1980 to 2007 but plateaued around 2010 at about 30% of global GDP.
- Much of current trade consists of parts and components moving through integrated global supply chains, not just finished goods.
Supply Chain Flexibility
- Firms may rely on a single supplier for a component, but many can switch suppliers given a sufficient cost incentive.
- The US shifted imports from China to Mexico and Vietnam when tariffs made Chinese imports 20-30% more expensive.
Shift in US Trade Policy
- The global trading system expanded after WWII with rules promoting trade and peace but includes provisions allowing for flexibility during domestic economic stresses.
- US tariffs on China starting in 2018 marked a major departure, with Biden maintaining these tariffs, signaling a less open US trade policy going forward.