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Trump’s new world order

23 April 2025

Commentary
Edmund O’Sullivan
Former editor of MEED

Of all the things US President Donald Trump has done since returning to the White House, nothing offends economists more than higher tariffs.

But through history, most US presidents loved customs duties. Before 1913, there was no federal personal income tax and more than 90% of US government revenue came from taxing imports. Tariffs also protected America’s infant industries and laid the foundations for the US to become the world’s leading industrial power. Germany was persuaded in the late 19th century that it should follow America’s lead.

By then, Britain was the only major economy where free trade was enthusiastically supported. Making imports duty free allowed its manufacturing industries to import cheap raw materials and kept down the price of food. But it too became protectionist in response to the Great Depression, which started in 1929.

After the Second World War, Washington concluded the depression lasted so long because of beggar-my-neighbour trade policies. It championed the General Agreement on Tariffs and Trade (GATT), launched in 1947, to cut customs duties on a multilateral basis.

But the idea that a low-tariff world was unambiguously good only emerged following the end of Soviet Communism in 1991. One of the greatest barriers to a global free market had disappeared. The World Trade Organisation (WTO), which replaced the GATT in 1995, made tariff agreements legally enforceable. The WTO is perhaps the highest expression of the global free trade dream.

And yet policymakers remained sceptical. The EU has trimmed duties – they average around 5% – but not abolished them. And there are other ways of discouraging imports: manufacturing standards including sustainability criteria, state finance and hidden subsidies.

China has not become the world’s leading exporter because of the invisible hand of the market. Trump says it is cheating, and he has a point. Saudi Arabia is the Middle East’s leading exporter of manufactured goods as a result of cheap petroleum feedstock and finance to promote fertiliser and petrochemicals production.

Trump’s solution 

There is a lesson in all this: economics is not a science, and any leader who treats it as such will fail. And Trump is not the first modern US president to reject its dogma. Under President Joe Biden, Washington’s budget deficit and debt soared. That is something Trump says he was elected to remedy. Tariffs are part of his solution.

The global trade system invariably echoes geopolitical realities. Britain loved free trade because it made its empire the most extensive in history. The post-1945 economic system facilitated America’s economic dominance of the western hemisphere. The WTO made sense in a unipolar world.

Trump’s tariffs tell us globalism is now dead and multipolarity has arrived for us all.

Connect with Edmund O’Sullivan on X

More from Edmund O’Sullivan:

> Is this the end for Middle East studies?
> Trump’s foreign policy shakes global relations
> Between the extremes as spring approaches
> A leap into the unknown
> Middle East faces a reckoning
> Biden leaves a mixed legacy
> Desperate days drag on
> The beginning of the end
> The death of political risk
> Italy at centre of new reduced Europe

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Edmund O’Sullivan

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