Protectionism is an age-old failed tactic

Trump’s ‘America First’ mantra has yet to bring tangible benefits

Protectionism is not yet a risk to the world’s economic growth. It is however a threat hovering over the globe. That’s the assessment of the IMF, which said yesterday it was maintaining its forecast for the global economy growing at 3.5 per cent this year and 3.6 per cent in 2018.

Although the fund stuck with its April forecast, the mix of growth has changed.

The United States, the world’s largest economy, is no longer leading growth. Instead, a combination of countries including the euro zone, Canada and Japan and China are set to be engines of economic activity, according to the IMF.

It may come as no surprise that the US has failed to keep momentum with the aspirations and election promises of US president Donald Trump, who has counted on 3 per cent growth for 2017.His much-touted “America First” election mantra has yet to translate into concrete benefits for the world’s biggest economy.

To date his major economic feats are pulling out of the Trans-Pacific Partnership trade deal, exiting the Paris Climate accord and preparing to enter new negotiations for the North American Free Trade Agreement with Canada and Mexico.

A combination of countries .... the euro zone, Canada and Japan and China are set to be engines of economic activity

Mr Trump’s foray towards protectionism flirts with the prospect of imposing tariffs on steel imports for national security reasons.

There is a precedent to such an action. Former US president George W Bush, another Republican, in March 2002 slapped tariffs of up to 30 per cent on steel imports from Europe, Asia and South America for an intended period of three years. Bush lost the fight when the World Trade Organization ruled the measure was illegal. Twenty-one months later the US backed down under pressure from trading partners such as Europe, who threatened retaliatory action.

As Maurice Obstfeld, the IMF’s economic counsellor and director of research, pointed at a press conference yesterday, protectionism risks are nothing new. The prospect of trade wars has intensified since the start of the global financial crisis, when many leaders, including those of G20 countries, sought to assuage domestic anger with populist messages about protecting local jobs and industries.

Populist rhetoric has died down in some countries with the election of global-focused leaders. But protectionism is still a threat to be wary of for the global economy.