Trade Wars Escalate at Record Pace as Globalization Retreats 

Trade wars are escalating faster than at any time since the 1930s as Donald Trump turns the screw on countries he thinks are “ripping off’ off the United States, which is expected to weigh on global growth and stocks if it persists. 

“We’ve been ripped off by every country in the world,” Trump said at a Cabinet meeting in the White House on Monday. Certainly, it seems that trade barriers are rising, and not solely because of the U.S., even if it’s leading the charge.

Not Just the U.S.

The number of import restrictions in force among G-20 nations has risen 75% since the start of Trump’s first term in 2016, according to data from Global Trade Alert reported in the Wall Street Journal. 

It notes some 4,650 import restrictions in force among leading economies as of March 1st, including tariffs, antidumping duties, quotas and other import controls. The number is almost ten times that seen in 2008.

Of course, it’s not solely the U.S. leading the attack – the European Union last year for instance imposed tariffs of over 35% on Chinese electric vehicle imports.

Tariff Wars Are Intensifying like the 1930s

But the action has clearly intensified since Trump took office for a second term. The latest salvos in the trade wars has included Trump slapping 25% tariffs on Mexico and Canada, while adding 20% levies on Chinese imports. He has also imposed 25% tariffs on steel and aluminum imports. China has responded with tariffs on U.S. agricultural, while the European Union is shaping up with its own retaliatory measures against U.S. motorcycles and whiskey. Meanwhile the U.S. has steadily ratcheted up controls on chip exports to countries like China.

The escalation has drawn comparisons with the 1930s, when the tariffs and legislation like the Smoot-Hawley Act killed global trade and saw tariffs on imports hit 20% on average. Major economies responded and by 1947 had reached an average of 22% globally. After the Second World War, the General Agreement on Tariffs and Trade (GATT) helped to lower tariffs to just 3% by 1999, by which time the World Trade Organization had replaced the GATT. Now the latest round of escalation could send average tariffs on goods imported to the U.S. back to 18%, according to Fitch Ratings.

Growth Hit

It’s expected to hit growth, and therefore potentially stocks. Fitch said it expects global economic growth to slow to around 2.4% this year, from 2.9% in 2024. The OECD also last week cut its global growth outlook for this year. “A series of recently announced trade policy measures will have implications for the economic outlook if sustained,” the OECD said. 

In the U.S., investors might expect tariffs to have an impact on corporate earnings this year. About 90% of 5,200 product categories are subject to import restrictions, up from around half before Trump took office in his first term. The auto industry is one that’s particularly expose. Ford (F) boss John Farley said tariffs would “blow a hole in the U.S. [auto] industry that we have never seen.” BMW (DE:BMW) said it will take a $1.1 billion hit from U.S. tariffs on Mexico and imported steel, and EU duties on China-made electric vehicles.

Trump Sows Confusion

It comes amid mounting confusion about what fresh tariffs could be imposed by the White House. Trump said on Monday he will soon announce tariffs targeting automobiles and pharmaceuticals, later adding lumber and semiconductor industries to his list of sectors due some levies.  

It was unclear whether this would be part of the “reciprocal tariffs,” which are set for April 2nd. “We’ll be announcing cars very shortly, We’ll be announcing pharmaceuticals at some point”, he said. Later he said he “may give a lot of countries breaks” on the reciprocal tariffs.  

When asked whether sectoral tariffs will also start that day, Trump said, “Yeah, it’s going to be everything.” Then he said, “but not all tariffs are included that day.” He then hinted that tariffs on cars would happen before April 2nd.  

Stocks had risen on Monday on reports that Trump was narrowing the focus of tariffs and potentially shelving sectoral tariffs. The S&P 500 SPX rose 1.76%, the Nasdaq Composite rallied 2.27% and the small caps rose 2.45%. 

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