This is an audio transcript of The Economics Show podcast episode: ‘What Trump’s tariffs deadline has (not) achieved. With Dmitry Grozoubinski’
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We are in the build-up to “liberation day”, April the 2nd. Donald Trump says this is gonna be the biggest moment for tariffs. And in the meeting . . .
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Just literally in the last couple of minutes, we are hearing that President Trump has announced that there will be a 90-day pause on reciprocal tariffs for all countries, except . . .
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President Trump says he’s sticking with his July 9 trades deal deadline while renewing . . .
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By Wednesday at midnight, the president says he’ll jack up tariffs on products from dozens of nations across the globe unless they cut new trade deals with the US. Progress . . .
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Today was meant to be the president’s big deadline for countries to reach trade deals with the us. He punted that date to next month. Instead this morning . . .
Alan Beattie
July the 9th, tariff D-Day. The date has loomed large ever since President Trump threw down his 90-day deadline for US trading partners to sign new deals or face the reimposition of his reciprocal tariffs. But it’s been and gone. And what has actually happened? Did Trump’s tactics work? And what does the future of the global trading system look like at the end of this?
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This is The Economics Show. I’m Alan Beattie, the FT’s senior trade writer and author of the Trade Secrets newsletter. I’m joined today by Dmitry Grozoubinski. Dmitry is a former Australian trade negotiator and diplomat, and now the founder of consultancy ExplainTrade. He’s also the author of a book which feels very apt for today’s conversation, Why Politicians Lie About Trade.
Dmitry, welcome to the Economics Show.
Dmitry Grozoubinski
Thank you so much for having me, Alan.
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Alan Beattie
So for the record, everyone, we are recording this at 10.30am UK time on Thursday the 10th of July. I say that because it’s entirely possible that things might have changed by the time we finish recording, never mind the time the podcast goes out. So Dmitry, that (inaudible) deadline just passed. What’s your analysis of what actually happened?
Dmitry Grozoubinski
Doesn’t feel like a lot happened. What we got was essentially a series of revised threats and a new deadline of August 1st, where the Trump administration swears up and down that tariffs will come into effect while also saying that maybe they won’t, and while also saying that maybe you can negotiate some of them away while also saying that maybe some of them are here to stay forever, while also saying that some of the previous reasons that they gave for slapping tariffs on people have now been revised. All of this is coming together to turn into a continuation of what is truly, truly now vibes-based trade policy for the United States.
Alan Beattie
So we’ve seen this flurry of letters going out to a range of countries threatening to impose the tariffs that he more or less threatened to impose before. I was particularly entertained by the one to Thailand, which he sent to the king of Thailand, presumably under the illusion that Thailand is an absolute monarchy. Is this all just being run by him? Is it all just coming from his desk?
Dmitry Grozoubinski
It’s very hard to read those letters, and I confess when I first saw the ones to Korea and Japan, I had to triple check they weren’t a hoax or a rather lazy parody, and see any kind of traditional staff work behind them.
You know, the United States, like any government has a machinery that ordinarily creates polished international communications. But these are very much not just written in his voice, but frankly in his unique grammar style. So it is very hard to imagine that there is anything else there capable of saying to the president, Mr President, perhaps you shouldn’t capitalise that word, let alone telling him that perhaps he should reconsider some of his policies or rethink some of his diplomatic strategy.
Alan Beattie
These things that Trump is after with these countries, the one thing we know they’re not, which is treaties, right? They’re not legally binding treaties. What would you call them? They’re deals, agreements, compacts, concords understandings, nods and winks. How would you characterise them?
Dmitry Grozoubinski
I think he’s looking fundamentally for two things. One is on the more substance side, you could say concrete undertakings, he wants something that he can point to as demonstrations of progress. So he wants to be able to tell a story whereby his approach and his leadership is leading to changes in the world and addressing the grievances that he lays out, that ever-changing smorgasbord of reasons why the US, the world’s richest economy, the richest nation in human history, is being hard done by the trading system it’s built. He wants to be able to point to those.
Secondly, I think he is looking for, effectively, displays of submission. And so when you combine those two things, they don’t require a treaty. They’re not deals as such. They are ways for him to tell a story and they are ways for him to demonstrate that he is the apex predator.
Alan Beattie
I’m sure you remember during his first term there were a couple of things a bit like this. He did a deal with China, which was referred to as the phase one deal. We never got to phase two. And there was supposedly a deal with the EU, by which the EU agreed to buy a whole load of soyabeans and liquefied natural gas.
In the end, the US didn’t really get anything from that. Nonetheless, those deals kind of stayed there and he seemed kind of happy with them and seemed happy in calling them successes. Can the same thing happen again? Can, like, really the rest of the world just offer Donald Trump empty promises and have him accept them?
Dmitry Grozoubinski
Well, this is the $10,000 question, and this is why it’s causing so much uncertainty. There really is no way to predict whether he is going to remain fixed on maximalist demands, whether he will be satisfied with some fawning compliments, whether he is willing to accept these kind of cosmetic offerings, which shift the trade balance somewhat but in actuality it’s just, you know, China buys soyabeans from the US rather than someone else buying them, or Europe buys more natural gas from the US at a slight premium rather than buying it from someone else.
It is absolutely impossible to determine or to even truly look for any kind of structured framework to predict whether the outcome of any of these processes is going to be, as you say, a tokenistic offering that is accepted, whether he is happy with a Rose Garden ceremony or whether we really are going to see, you know, lasting tariffs like 50 per cent on Brazil.
You could say that so far he has been willing to accept quite tokenistic offerings in a lot of cases. With the USMCA, for example, what Canada and Mexico offered on fentanyl was rather cosmetic, but there is a gambler’s fallacy element here where just because it has worked three or four times does not guarantee it’ll work the fifth time. And if you are a business or you’re an investor trying to plan for the future, I can understand why that makes you very nervous and very cautious.
Alan Beattie
So let’s look at the couple of so-called sort of half-quarter deals he’s done so far. One with the UK where the UK offered some fairly small quotas in return for the blow being softened of steel and car industry. And one with China where the US, I think it’s fair to say, essentially backed down from some of its tariffs. What have we learned from those, if anything?
Dmitry Grozoubinski
I don’t know that you can take too many broad lessons from either of those because both of those were quite unique in terms of the factors involved. With the UK, you had a rather friendly government that was uniquely exposed on steel and cars, but for which the “liberation day” tariffs were only 10 per cent. I didn’t need to fight him on that.
Most other countries don’t have those factors involved. And we should note that because there was an anniversary coming up, the two parties seemed to be willing to kind of release one-third of a deal as done. From everything we can determine, part of what that deal involved was the UK saying we’re going to cut some additional tariffs and then agreeing to negotiate those tariffs, which is still going on to this day. So they punted a lot of what would normally be hard negotiation into the future. I don’t know that that is going to be replicable in other cases.
The Chinese situation is different. Again, to most external observers, it looked like China was simply winning that exchange. They were more prepared probably economically and they were certainly better positioned rhetorically and in terms of domestic politics to weather what was a, frankly, out-of-control, bilateral protectionism escalation. And so . . . and they had the muscle and the weight and things like critical raw material exports with which to really threaten the United States. Most countries are not in that same weight class and won’t be able to replicate nearly that scale of pushback and that sort of sense of threat in the White House.
Alan Beattie
Now you mentioned Peter Navarro, the White House adviser to President Trump on trade, and you know, as we’ve all observed, there’s a whole cast of characters around the administration. It’s never clear who’s actually determining policy. Do you think the debate between them actually makes any difference whatsoever, or is it simply Trump, on his own, deciding on his own what’s gonna happen?
Dmitry Grozoubinski
I think it absolutely makes a difference on the details and the margins. What doesn’t change is that fundamentally, Donald Trump likes tariffs. He has always liked tariffs. There are decades of his writings and sayings to indicate that he thinks tariffs are good and a useful policy tool for the US, that he feels like the existing order is unfair. And obviously they are a tool that he is able to deploy via the executive branch in ways that he can’t deploy most other policy tools. So they are hugely attractive to him.
And I think that is the bedrock of US policy. It is a kind of means-first approach where they begin by going, we’re gonna do tariffs, and then they build what those tariffs should be for on top of that. There are multiple overlapping objectives from revenue-generation to bringing companies back home to creating, negotiating leverage to address foreign barriers abroad, to either combating China or addressing Chinese oversupply, what have you.
And it’s those that constantly shift, but the bedrock policy of Donald Trump likes tariffs and therefore the US will do tariffs has remained absolutely ironclad, and all of their arguments are just kind of everything around that.
Alan Beattie
So, Dmitry, you were an Australian trade negotiator. Have you ever been in negotiations anything like this? It seems extremely unusual and not a very wise way to do them.
Dmitry Grozoubinski
I certainly haven’t. I don’t think that this is normal, but I would go one step further and I would say I don’t think this is particularly effective. And I think that ineffectiveness is a little bit masked by the fact that the US is just so economically powerful. The US consumer is so lucrative as a final endpoint. The US is such an important market player that not being good at this matters less than if they weren’t, if that makes sense. It doesn’t matter how bad I am at driving if I’m the only one on the road with a tank, and that’s kind of what the US is.
But consistently, the US is making a lot of foundational mistakes if their objectives really are to maximise their leverage and get more out of these negotiations. Just to name one example: an absolute cardinal rule of international negotiations is that you want to leave room for the other side to be able to paint the final conclusion as a victory. You know they’ll have to sell it at home. You know they’ll have to address domestic stakeholders, their domestic press, their domestic political rivals. So you always want to give them the ability, even if they’ve made some painful concessions, even if objectively the deal maybe skews the other way, to be able to point to things and go, this is actually a good thing that I’ve done here.
The Trump administration is consistently allergic to that. Everything is this kind of dominance display where every outcome or every step of progress is immediately heralded to the press as a triumph over a weak adversary. It almost becomes a kind of masculinity contest. And so they’re constantly making it much more difficult from the people that they need to do favours for them to do those favours.
Alan Beattie
You know, the other thing about these deals, which is unlike anything I’ve seen before, are these supposedly hard but very short-term deadlines. You know, I’ve been told by many, many officials over the years, we are not negotiating to a timetable. Setting these deadlines pretty much means you can’t get a meaningful deal. It also means that there will be continual focus on them throughout the negotiations. Does he even really want deals at all, or does he just want people to be watching him for 90 days?
Dmitry Grozoubinski
I think it’s important to unpack that deadline’s point because it’s a complex aspect of negotiations that it’s difficult to understand if you’re external to them.
Ordinarily, when we are negotiating a free trade agreement, let’s say Australia and the United Kingdom, we have two trade regimes that generally work pretty well. Trade is flowing. And we are looking to make things a little bit easier. We’re looking at where we can create some improvements, but we know those improvements will be potentially painful for the other side to give.
Under that circumstance, issuing these hard deadlines would be silly because the threat is marginal. You’re basically saying, you know, we need to get this done by the 3rd of May, or what? The status quo will remain in place, the status quo is working fine. That is how traditional sort of trade agreements work, so that when you hear deadlines in traditional trade negotiations, they’re often bilaterally agreed by the two parties. So the two leaders will come out and say, we’ve instructed officials that we wanna get this done by the end of December, and we’ve done that together. It’s kind of a joint undertaking to push both sides to make some hard choices, but in a kind of mutual way where the credibility of both is on the line.
What the Trump administration is doing is basically saying, give us concessions by this date or we will make trading conditions significantly worse. It is a hostage undertaking rather than a mutual attempt to improve the status quo a little bit, which is why I think they feel like they can do this kind of thing.
The problem for them is if you threaten to shoot a hostage and then you keep pushing the deadline back yourself or it’s not entirely clear you’re going to do it, you risk getting your bluff called again and again and again. And I think fundamentally at the moment, a lot of trading partners are looking at the United States and saying, we are fundamentally not convinced that you have the stomach to raise costs for your consumers in a long-term way.
Alan Beattie
Is a model emerging about how you deal with Donald Trump?
Dmitry Grozoubinski
I think it is a power-weighted model in a lot of ways. Most countries did what I think is quite sensible, which is that as soon as all of this started, they started actively engaging with the Americans to see if there might be a low-cost way to make all of this go away, at least as far as they’re concerned, or significantly mitigated.
It made a lot of sense to go, well, hold on, if there’s a cheap way to get all of this out of our lives, let’s see if we can find it. So they began with that engagement and that frankly ticked a box for the Trump administration because one of the theses that Trump operates under is that if I issue this threat, they will come and negotiate with me. This is a way to begin these conversations. They validated that it happened.
How countries then behaved in those negotiations really depended on their exposure to the US, their own political dynamics and their own kind of economic muscle. So you have a country like Vietnam that’s really, really exposed to the US that needs those exports and that doesn’t have the ability to meaningfully punch back on the US in any significant way. Locking the US out of the Vietnamese market probably wouldn’t harm the US all of that much, whereas US tariffs on Vietnam would hurt Vietnam a lot, and the US has a lot more room to escalate. You can appreciate why they would make concessions.
Countries like India, which have higher tariffs to begin with found that they had more room to retreat. If you already have low tariffs except in the products that are really sensitive for you, it’s much, much harder to find space where you can give the Trump administration things that don’t hurt you all that much. So countries explored where they might have leverage. Bigger players like the EU, Canada and China also had more room to punch back and started lining up their own counterblows.
Alan Beattie
The good old free market, free trade response to this is just do nothing, right? Tariffs hurt the country that impose them, and what you should do to Trump is just ignore him. Carry on trading and indeed trade with non-US partners. Has any country actually come near to doing that, that you’ve seen?
Dmitry Grozoubinski
Well, we haven’t seen it yet because a lot of these tariffs sort of haven’t in practice hit. I think what we have seen so far is countries draw some pretty sharp lines in terms of what is the most they are willing to do or willing to give with that as the alternative. So I think very few countries have completely gone, OK, we’re not gonna engage on this at all. We’re not gonna even discuss with the US what they might want to leave us alone. We are simply going to continue trading as usual and wait and either just endure this, diversify or wait for economic reality to unravel this scheme on its own. I don’t think many countries have done that.
I think what we have seen from countries like China, like the European Union, even Canada, is we will talk to you and we are willing to sort of explore making some concessions, but they’re going to be pretty modest. So you can choose whether you take what little we give you and we kind of roll on or you just hit us and we just kind of endure what you’re doing because we are not willing to pay you a higher ransom. I think probably the closest in this scenario is probably China, which has sort of given nothing and where the ultimate sort of end is they’re just kind of enduring these tariffs on the grounds that they don’t think they make a huge amount of economic sense for the US anyway.
Alan Beattie
And in terms of the political constraint that governments are facing, I remember we saw right at the beginning of the administration when Trump was threatening these huge tariffs against Canada and Mexico, both of which, very quickly, very promptly readied their own retaliation. Trump actually backed down and the popularities of those governments absolutely soared. And I remember in the UK when they signed this deal, you know, there were some people who said, oh, you’re just capitulating. You are just giving in, you are giving Trump what he wants.
But then I think quite a few people were sort of like, well, you know, we’ve managed to negotiate quite a good deal. And I think maybe the government got a bit of a boost from that. What do we know so far about whether you get rewarded or punished domestically, politically, from the way that you deal with Trump?
Dmitry Grozoubinski
I think it absolutely depends on the individual domestic context, but also on the rhetoric of the Trump administration vis-à-vis your country. The Canadians were undertaking these talks at a time when Donald Trump was increasingly seriously it feels like talking about annexing the country. The Carney administration was able . . . Well, the Carney candidacy was able to weaponise that to erase a huge lead by the opposition leader.
So what Donald Trump did was basically, as I talked about before, massively raise the cost of giving him what he wants. And in the Canadian context where they had significant ability to hurt the US, where US tariffs on Canada were also just going to be really painful for US auto producers, for example, they had a lot of room to fight back, to cause economic pain. And the political positioning was making it hard to give Trump too much of what he wants, though it’s interesting to see that, you know, recently the Canadians took their digital services tax kind of off the table. They pulled back on it in response to a Trump demand, and that doesn’t appear to have led to a huge backlash.
So I think often among the domestic public, there is a kind of perception that when you are dealing with the enraged polar bear in your living room, sometimes you do have to give it some of what it wants and you can do that without sort of completely selling out the country and that’s OK. So different voting publics appear to have different appetite for this, but you know, Trump’s rhetoric towards the UK was considerably more inclusive and conciliatory. The demands were lower. And a lot of the positive reaction in the UK was, I think, in part because trade experts, frankly, including myself, came out and went, hey, this is actually a really low price to rescue the hostages. And those were important hostages when it comes to cars and steel.
So the substance matters. But I think even more than that, how the US is perceived in the other country matters a lot. The perception of the public, of the two strengths of the two sides and definitely the rhetoric of how the Trump administration talks about these deals.
Alan Beattie
So just to finish this section, let’s take a test case. If you, Dmitry, were still a trade negotiator, if you were still an Australian trade negotiator, right? You’re negotiating on behalf of a sort of small, medium open economy, but not one hugely exposed to the US, more exposed to China actually to the US. What would you — and the prime minister comes to you, Anthony Albanese comes to you, Dmitry, and says, what should we do? What should our strategy be in the face of Trump’s threats? What would you tell him?
Dmitry Grozoubinski
Let me begin by saying that if the Australian prime minister is turning to me for advice, then something has gone terribly wrong in the Australian trading system. But if I had to give advice, I would say, listen, there are no good options here at all. We are being bullied by a stronger player, and that’s the way it is.
Australian options for retaliation are limited and US options for retaliation are significantly greater, so they have much more room to escalate. Their economy simply means more to us than ours does to them. I would say, first of all, do what you are doing, which is go over, engage with the US and find out what they want. See if there is something we are able to give them to make some of this go away, or at least to secure exemptions from what might be coming next. If that’s a price we’re willing to pay, consider paying it. Otherwise, a 10 per cent tariff Australia has been threatened with is bad, but comparatively manageable. It could be a lot worse.
We can endure it. I don’t think it is a good policy for the US in the long term, so I do not think these tariffs will be here 15 years from now. We can take them on the chin somewhat and look at opportunities to support our domestic industries that are excessively exposed to the US market and for whom that 10 per cent might be commercially damaging.
Alan Beattie
Let’s go to a break, but when we get back, I’m going to ask what does this mean more broadly for the future of the world trading system, the whole future o of globalisation itself.
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Alan Beattie
And we are back. So Dmitry, we’ve had the threats, the negotiations, the letters. We’ve had a new deadline. We might have this uncertainty carrying on indefinitely. What lasting impact will this have on the way that global trade works?
Dmitry Grozoubinski
I mean, I think where this will be felt most keenly is in investment and supply chain decisions. If you talk to businesses, often it is the uncertainty that is the killer even more than the measures. When Trump tweets out a 200 per cent tariff threat on something, people stop buying it. People stop putting in orders for weeks until they think the threat has faded. If you are trying to decide where to position a factory and there isn’t even a coherent logic for who might face tariffs anymore . . . the logic used to be, well, the US is trying to get factories to move out of China. So the logic was, well, you could move them to other parts of south-east Asia, but then based on those countries’ trade surplus with the US, they got hit with massive tariffs anyway under Peter Navarro’s formula. But then you move on a couple of months and we have the new tariff threat letters that are going in now and Brazil, which has a trade deficit with the US — the US sells them more goods than the Brazilians sell to the US — is getting hit with a 50 per cent tariff threat based on, it’s not entirely clear what.
When you can’t even build a structure for predicting where tariffs might go, it is so much harder to plan where to make investments on the assumption that you will be able to get the inputs you need and you’ll be able to get your outputs to the customers that want them. We are going to see, I think, a chilling effect on these big decisions. A lot of investors and a lot of companies are simply paralysed. Now, that can’t last for ever. Capital eventually needs to flow. Businesses eventually need to build things, but I think you are going to see a lot more caution, a lot more conservatism.
Ultimately, that means it drives up costs and it has really negative implications for development in those countries who saw a path to greater prosperity through making a strong pitch to host some of these supply chain components.
Alan Beattie
What lessons do other economies take from this? What lessons do the EU, for example, take about how they should now be running their trade policy?
Dmitry Grozoubinski
I think governments or bodies like the EU are taking a couple of conclusions away from this. One is that there is a danger of over-reliance on one market. Secondly, a lesson they’re taking is that they need to improve trade within their region and even domestically. You know, you’re seeing countries like Canada and India start to begin addressing their internal trade barriers.
You’re seeing a significant push to address regional trade barriers where countries are saying, well, if global supply chains are going to become more difficult, if it becomes harder or less predictable to be able to source individual components from anywhere in the world where they happen to be the best value, can we create regional nodes where we can more reliably trust that we will be able to get what we need because we are closer together, we are more intertwined by treaties and so on. And then potentially collectively negotiate as a bloc to raise the sort of parity with a market giant like the US.
Thirdly, and this is where there’s some scope for optimism, a lot of countries are looking at this as an opportunity to tell investors a positive return story or a positive potential story about their countries. The US has of recent been a fantastic investment destination with really high returns. It has sucked up a lot of the kind of loose capital in the world, as it were, with the US becoming a less sure bet. Countries are saying, well, what can we turn around and tell big investors, tell capital as a positive story? And what do we need to do about our hard infrastructure, our soft infrastructure, our treaties, our business climate, in order to get them to take a second look at us now that the US may not be offering them the returns they used to or the guarantees that they used to?
Alan Beattie
What I don’t think you’ve seen much of is co-ordination kind of at a higher level, at a global level or regional level between countries all getting together either to stand up to Trump collectively or indeed to build some new trading system or to strengthen the existing trading system. Do you think that’s fair? Do you think that’s fair to say there is a missing element here and that’s co-ordination, you know, on a large international scale?
Dmitry Grozoubinski
I think it’s missing, but I’m not surprised it’s missing, if that makes sense. I am fairly ruthlessly pessimistic and pragmatic about this. When I imagine such a coalition forming, what I immediately go to is how, as the Trump administration, I would respond to that. And if, you know, something like the Brics — Brazil, Russia, India, China, South Africa — and the expanded Brics all banded together and agreed, for example, that they wouldn’t negotiate with the Trump administration or they would set a collective tariff on the US or anything like that, my response as the Trump administration would firstly be to escalate the tariffs, but secondly, to begin trying to pick them off. To turn around to an individual member of that coalition and say, if you break ranks, you can get exempt while your friends get hit with massively high tariffs.
And I think about which global coalition would have the solidarity in the face of really high US tariffs when an individual is offered a sweetheart deal not to take it and I can appreciate why governments are looking around the world at other world leaders and going, hey, like, I just do not trust that the end result of this won’t be that I face higher tariffs, but a couple of members of my coalition who are the first to break ranks get sweetheart deals. So I think that is part of the challenge. There’s a, I don’t know, game theory, collective action, prisoner’s dilemma thing going on here. It’s also just really hard. Everybody’s negotiating with the Trump administration at the same time. Everybody is looking over one another’s shoulder to see what they’re getting or what they’re offering, and that’s not the kind of climate that’s conducive to building long-term collective frameworks of action, especially trying to do so from sort of a standing start.
Alan Beattie
If you think about these frameworks as being sort of not even really focused at the US, right, not confrontational, but collaborative. We should expand trade between ourselves, we should liberalise trade between ourselves. I know there has been some chatter about the European Union having some sort of arrangement, some sort of discussion and so forth with the Asia-Pacific regional group, CPTPP, and you know, if the US is attacking the multilateral system, then maybe you could have that as an alternative. Do you think there’s much scope to act there? Do you think there’s much scope for, you know, big countries, big groups of countries not to confront the US, but just to build frameworks outside it?
Dmitry Grozoubinski
I think there’s certainly some potential as long as you understand the limits of what’s possible through that framework. So the EU and the CPTPP could look at making trade between those two blocs easier, doing things like harmonising paperwork, creating some regulatory kind of standard equivalents. generally just facilitating trade between the two and facilitating supply chains that run between CPTPP members and the European Union. However, there are real limits to any kind of attempt to replicate multilateralism regionally or even between large groups.
So to name an example, something that you could never address in that way is the hot-button issue of subsidies. Because in a hypothetical agreement, if the EU and China got together and had a conversation about putting some limits on subsidies without the US in the room, any deal they would have would exempt the US. So the US would be free to subsidise as much as it likes while the EU and China have put limits on themselves. They would never agree to such a thing. There are certain things where the only way that it becomes viable is if everyone important is around the table.
Alan Beattie
It’s interesting that Trump has used, by and large, this real blunderbuss, old-fashioned blunderbuss of tariffs where there’s a lot of other tools at his disposable, you know, like financial sanctions using the dollar payment system or controls on technology that his predecessor Joe Biden used. If he gets bored with tariffs or they’re not doing anything, he could turn to all of these. And if he starts using this big array of possibly more targeted instruments, what do you think that will do to the global economy?
Dmitry Grozoubinski
I think it will crash markets hard. As soon as you start leveraging financial instruments, as soon as you start leveraging the dollar as a reserve currency, as soon as you start interacting with the flows of capital, you start messing with multitrillion dollar markets that are very sensitive and prone to panic in a place where the US is significantly more indispensable than it even is to global trade.
So I think if the US were to try to do this, and especially if they did it with the utter lack of finesse they’ve shown in trade, if you start firing blunderbusses around finance, things get really bad really, really quickly in ways that will impact consumers and will impact public and will impact savings and impact interest rates.
It doesn’t quite keep me up at night because I’m hoping he at least instinctively understands that too. But it would be dire.
Alan Beattie
So on that cheery and upbeat note, let me ask my very last question, which is a prediction question. Let’s imagine we’re at the end of the Trump term. Based on what you’ve seen so far, what do you think the global trading system looks like?
Dmitry Grozoubinski
I think what you would see is a lot of members or a lot of countries basically trying to keep what used to be in place alive as much as possible because they recognise that the kind of power-first model that the US is pushing under President Trump is not one they can replicate and not one they can benefit from. So they’ll be doing everything in their power to signal predictability and signal commitment.
At the same time, I think there will be a much broader awareness that there are now a lot of policy priorities that trump investor and supply chain confidence in terms of the priority list of governments. So there’ll be a much greater awareness that governments will need to do things or will want to do things for national security reasons that disrupt trade and run contrary to established WTO principles.
You will also see more kind of trade-disruptive policymaking, and what you will see is this kind of equilibrium emerge where more states are doing more things that are disruptive to trade while still trying to keep the fundamental edifice of predictability in place and while having, frankly, a lot more expectation that on individual issues, countries are going to do bilateral deals, going to take unilateral measures and generally just behave in ways that the system was built to try to curtail because they will feel that they have to.
Alan Beattie
So on that not entirely cataclysmic note, Dmitry, thank you very much.
Dmitry Grozoubinski
Thank you, Alan. Not entirely cataclysmic is what’s gonna be written on my tombstone.
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Alan Beattie
That’s all for this week. You’ve been listening to The Economics Show from the Financial Times. If you enjoyed the show, please do rate and review us wherever you listen. This episode was produced by Mischa Frankl Duval with original music and sound design from Breen Turner. Our executive producer is Flo Phillips. Manuela Saragosa is the FT’s acting co-head of audio. The broadcast engineer is Andrew Georgiades. I’m Alan Beattie. Thanks for listening.
