President Trump's self-proclaimed “liberation day” has the echo of another moment in which he announced onboard tariffs on US trading partners, and the advanced Western economy threw a wall around itself.
Like Brexit, the fateful vote in Britain left the European Union almost nine years ago, and Trump's tariffs hit the established order a hammer. Detaching the US from the global economy is different from the view of the Brexiteers, an equal act of liberation, as the UK withdraws from the European trade bloc.
The shock of Trump's move has echoed even more widely given the American economy's growing size and its position as a global commercial fulcrum. But, like Brexit, its ultimate impact is unstable. Trump was still able to overturn himself, being disciplined by a market plunge and suffering breathlessly in one-off deals.
More importantly, according to economists, the rise of free trade is irreversible and its advantages are so powerful that other parts of the world find ways to maintain the system without a central player. The barriers continue to decline due to all setbacks in trade liberalization and the complaints expressed in Trump's actions.
Optimists point out that the European Union did not understand after Britain left. Recently, political stories in London are about how the UK can approach its European neighbours. Yet, that sense of possibility only occurred after years of turbulence. Economists expect similar disruption to ease the global trading system as a result of Trump's theatrical exit.
“It's not the end of free trade, but it's certainly a setback from free free trade, the way the world appears to be moving forward,” said Eswar S. Prasad, professor of trade policy at Cornell University. “The logic is that this is when other parts of the world unite and promote free trade,” he said. “The reality is that it will be all nations in itself.”
Such a world would not only be unruly, but it would potentially become even more dangerous. Trade wars do not necessarily swirl into the shooting war, but historians point out that several conflicts, such as the war of 1812 and the Opium Wars of the mid-19th century, are rooted in trade conflicts. The full trade war between the US and China will already inject sparks into the flammable relationship.
“When we think about the wider conflict between the US and China, the economic and financial relationships have given us a balance, and that balance is currently eroded.”
Trump has stopped the kind of gunboat diplomacy that Britain used against China in the Opium War. However, his pugilistic attitude towards some of America's closest trading partners, such as Canada and Mexico, has deepened the sense of dislocation and has allowed him to divide the country's response.
The economist said that due to its unquenchable appetite on German-built cars and iPhones assembled in China, the US's singular position as the biggest engine of global growth would make it difficult for the country to reorient trading relationships around the less welcome American market.
This suggests that many countries will try to cut their transactions with Trump. Prime Minister Kiel Starmer said he would do so last week after the US struck Britain with 10% tariffs. Others impose retaliatory tariffs to try to improve their negotiating position with the United States.
China hit quickly on Friday, with severe tariffs of 34% after speculating that it could coordinate responses between neighboring Japan and South Korea. Already, the European Union has warned not to abandon cheap exports in the market in countries priced from the US market.
“It depends a lot on how Europe decides to play this,” said Simon Johnson, professor at MIT's Sloan School of Management and a former chief economist at the International Monetary Fund. “The Europeans were able to approach China and pick up a lot of sagging from Vietnam.”
“It would create a massive non-US trading block,” he continued. “But I don't think Europeans are satisfied with all the Chinese exports poured into Europe. Where will these excess exports go?”
The possibility of European resistance to absorbing more Chinese imports will confront Chinese leaders with a troublesome challenge. They can adopt measures to prevent China from relying on exports by robbing demand among their population. Or, despite signing a spare contract, they failed during their first term, could ask for a deal with Trump.
Due to all the criticism of Trump's dull power, the economist says he is dealing with the real problem. It is China's rise as a radical trading force, as a place that places emphasis on its own companies. It has broken through American manufacturing in Trump's view. He argues that tariffs will regain it.
When he took office, President Barack Obama asked if one of his Democratic predecessors, Bill Clinton, had given too much to allow China to join the World Trade Organization. Obama imposed a 35% tariff on China from 2009 to 2012 for dumping tires on the US market. And when President Joseph R. Biden Jr. inherited Trump's first term tariffs in China, he left them there.
“The global trading system has been under pressure for a while, and that pressure is truly symbolized by the rise of China,” Professor Johnson said. “It was more harmful and destructive than in Japan.”
In 2024, Professor Johnson, along with Daron Acemoglu of MIT and James A. Robinson of the University of Chicago, was awarded the Nobel Memorial Prize in Economics for studying colonial institutions that were wealthier than other countries during development. Whether in Asia or Africa, “almost every country that escaped poverty did that through trade,” he said.
Therefore, it is unlikely that the world will be in the state of a car. From semiconductor factories in Taiwan to automotive parts suppliers in Canada, the nature of the global supply chain makes this economic isolation almost impossible in any case.
Economists say the countries that face the most pain from the trade war are low-income commodities with little leverage to deal with Trump. Some are in Africa, some of which Nigeria suffered a 14% tariff, while both Kenya and Ghana reached 10%.
The World Trade Organization estimated that Trump's measures will reduce global goods trade volume by 1% in 2025, in addition to previously announced tariffs. A full-scale trade war would cause even more damage.
Still, some optimists predicted that Trump's tariffs would accelerate integration of other countries through either bilateral trade transactions or regional trade agreements. They point out that the United States is the only country to withdraw from the trans-Pacific partnership by forging trade agreements between other large economies adjacent to the Pacific.
Even Brexit attracted the same grievances about globalization as Trump's Magazine movement, but it was not framed as a protectionist project. The Brexiteers argued that once it is freed from the bondage of the European Union, the UK could negotiate better trade deals on its own. Last week they praised Brexit for why the UK's 10% tariffs are half the European Union.
“They're the ones who are the ones who are the chairman of the Council of Economic Advisers during the Obama administration,” said Jason Furman, professor of economic policy at Harvard Kennedy School. “I see it as a turning point for the US at the heart of the global trading system,” he said.
