CROSSINVEST OUTLOOK 2017 ECONOMIC WAR: The Protectionists vs Globalisation
The USA has come full circle, all the way back to Lincoln’s economic stand from 169 years ago.
Lincoln introduced protective tariffs late 19th century on the back of fear that the US was losing their momentum to cheaper manufacturers, mainly Britain. While Lincoln toyed with tariffs, Britain embraced trade agreements, kicking off a period in which global trade grew at twice the speed of GDP, and Britain.
The British raj as a global (trade) leader came to an end post-WW1, the war effectively exhausting their capital. While the US’s momentum began during this time through manufacturing, its focus was more pinned on rebuilding the nation rather than making the most of a global leadership vacuum, leaving the world with no clear economic leader
between WW1 and WW2. Global trade slipped from around 30% to just 10% of GDP. The US took over the helm after WWII, by which time they had built sufficient infrastructure, trade superiority and capital. Over the subsequent 70 years, free trade has stood as the cornerstone of the global economy. By 2008, global trade represented 60% of GDP.