Raghuram G. Rajan
Donald Trump’s reelection as U.S. president is sending shockwaves around the world, but his victory is just the latest episode in a continuing saga. The old Western consensus in favor of globalization started breaking down in the 1990s and early 2000s as emerging markets began realizing its benefits. It accelerated with the global financial crisis, the COVID-19 pandemic, and growing geopolitical tensions. Now, with Trump’s promises to increase import tariffs across the board, the richest, most powerful country in the world is turning against the global order it built, and it is not alone in doing so. The world is fragmenting, slowly but surely—global trade as a fraction of GDP has been flat since the financial crisis, and foreign direct investment has fallen. Meanwhile, the number of trade restrictions that countries have imposed annually has grown more than tenfold since 2010.
Why is the United States rejecting the system it created, and why is this pattern emerging across the industrialized world? Some reasons are well known, but they need to be knitted together. And as global challenges that require cooperation, such as climate change and migration, mount, countries will eventually want to draw together again.
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