The Trade War Didn't Happen. Here's Why and What's Next

Episode Summary

Executive Summary: The episode examines why global trade accelerated in 2017 despite fears of Trump-era protectionism. Guests argue the boom was driven mainly by stronger global growth, especially in China and the U.S., though fewer new trade barriers also helped. They caution that rhetoric, NAFTA renegotiation, geopolitical tensions, and other risks mean the protectionist threat is not gone.

Main Topics: Unexpected global trade rebound: The discussion opens with the surprising fact that trade volumes are growing much faster than expected, challenging predictions of a looming trade war after Donald Trump's election. Protectionism vs. global growth: Andrew Maida and Arancha Gonzalez agree that the trade boom is largely a result of stronger global economic activity, not a decisive defeat of protectionism. NAFTA as a test case: The renegotiation of NAFTA is framed as a major experiment: the U.S. is seeking to increase trade barriers through a deal, and its outcome may shape future trade policy. Trade, inequality, and domestic policy: Gonzalez argues that trade and growth gains are not evenly shared, and that education, healthcare, infrastructure, and safety nets are better tools than isolationism for addressing discontent. China's changing role in trade leadership: The conversation notes that China has become more vocal in defending open markets and international cooperation, especially at Davos and the UN, creating a role reversal with the U.S. Risks to the current trade upswing: Despite the positive numbers, both guests warn that geopolitical tensions, monetary tightening, natural disasters, and persistent protectionist rhetoric could still derail trade growth.

Key Arguments: Trade growth is running ahead of global GDP for the first time since 2014, suggesting trade is again supporting world growth rather than dragging on it. The main driver of the rebound appears to be stronger economic expansion in major economies, especially China and the U.S., which boosted imports and trade volumes. Protectionism has not vanished, but the feared global trade war has not materialized; however, NAFTA renegotiation and anti-China rhetoric keep the risk alive. Countries are adding fewer trade barriers than last year, which helped sustain trade momentum. 4% trade growth is strong relative to the recent past, even if it is below the high-single-digit boom years of the early 2000s. Trade policy alone cannot solve distributional problems; domestic investment in people and infrastructure is needed to make economies more resilient. China appears to be taking a more visible role in defending international cooperation, but this is still viewed cautiously and may reflect a broader shift in geopolitical dynamics. The WTO ministerial meeting in Buenos Aires is seen as an important moment to avoid letting the current trade recovery stall.

Data Points: Projected global trade volume growth: 4.2% - IMF projection for goods and services trade in the current year Previous year global trade volume growth: 2.4% - Comparison point cited by Andrew Maida, showing the near doubling of growth Trade growth vs. global growth: First time since 2014 - Trade is expected to outpace global growth for the first time since 2014 Last year's trade growth: 1.6% / 1.3% - Arancha Gonzalez cites very weak trade growth in the prior year(s) as a baseline Trade barrier increase rate: Slower than last year - WTO report noted countries were still adding barriers, but at a slower pace Timeframe referenced for historical trade boom years: 10-20 years ago - Speakers note that trade growth was much higher in earlier boom periods

Pivotal Quotes: "the trade war that Dan referred to, that everybody was worried about when it was looking like Donald Trump would get elected, has not come to pass" — Andrew Maida: Explaining why the feared protectionist shock has not yet happened "I think history has proved is that investing in people... is probably going to be more effective... than through trade isolationism or trade conflict" — Arancha Gonzalez: Arguing that domestic investment is a better response to inequality than trade restrictions "I don't think this very good news... is one that deserves to be killed either by action or by inaction" — Arancha Gonzalez: Warning policymakers not to let the trade rebound stall

Implications: Trade remains resilient for now, but its gains are fragile. Businesses and policymakers should watch NAFTA, U.S.-China tensions, and WTO talks closely while focusing on domestic policies that help more people benefit from globalization.