Fixing Global Trade: Why Tariffs and Trade Wars Aren’t Enough

Our modern global trading system is broken. How can we fix it?

We seem to have moved beyond the free trade consensus of the globalization era. Few politicians today still publicly support the assumption that trade, unrestricted by national borders, makes everyone more prosperous. Under President Trump, the United States has wielded tariffs and industrial policy to reshape the international trade order to better serve American interests, and the Biden administration has upheld and doubled down on many of these. But these interventions do not yet add up to a new trade policy consensus.

This week's episode dives into a provocative new argument: in order to achieve freer trade, the world needs more trade interventions. What is global trade policy doing wrong? What new trade rules are needed to create a system that both harnesses the benefits of free trade and preserves nations' freedom to direct their economies? And what policy interventions might help foster this future of freer trade? Sophia discusses these questions and more with Michael Pettis, a nonresident Senior Fellow for Carnegie China and expert on China's economy.

Notes:

1. Michael Pettis and Erica Hogan, "Trade Intervention for Freer Trade," Carnegie Endowment for International Peace, October 3, 2024.

Video Chapters:

00:00 Global Trade Is Broken. Why?
03:29 Exporting Unemployment: Germany's Case Study
05:30 Explaining China's Trade Surplus
08:15 Impact of Trade Imbalances on American Consumers
10:53 Do Tariffs Work?
12:36 The Problem With Bilateral Tensions
14:33 Break
15:55 Solutions for Freer Trade
16:39 A New Bretton Woods
18:56 The Next Best Option: Unilateral U.S. Action
22:02 Political Receptivity to Trade Reform Today
22:38 What Causes Low Manufacturing Shares in Advanced Economies?
26:02 Reading Recommendations
26:37 Outro

Credits:

Host - Sophia Besch
Guest - Michael Pettis
Executive Producer and Audio Engineer - Heewon Park

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