Expert discusses the impact on the global economy and Russia.
The United States might extend its 90-day pause on introducing a new tariff system for dozens of countries. Although not stated directly, President Donald Trump`s message during a cabinet meeting was clear: «We`ll have to see what happens at that point.» Following the significant disruption caused by the White House in April, a period of calm has predictably settled over global trade.
However, tensions persist, and the consequences of the stress experienced by markets are difficult to predict. MK discussed the situation with Alexey Portansky, a professor at the Faculty of World Economy and World Politics at HSE University and a leading researcher at IMEMO RAS.
— Donald Trump`s 90-day delay on implementing increased tariffs against 75 countries ends very soon, on July 8th. According to Reuters, the US President promised to conclude 90 trade deals during this time. But so far, only one has been signed—with Great Britain. Why?
— Trump`s actions in the field of trade have primarily been marked by failures. It`s hard to point to a single positive example. The recent agreement with Great Britain isn`t a full-fledged one; it was issued by presidential decree and isn`t subject to ratification by national parliaments, meaning Trump can revoke it at any time. It fundamentally differs from the agreement London almost simultaneously signed with India in early May, which truly establishes a free trade area. During his first presidential term, Trump promised the then-British Prime Minister Boris Johnson a «magnificent trade deal.» But when negotiations began, all the contradictions existing in US-British trade emerged, and ultimately nothing came of it.
Regarding other countries, Washington is currently negotiating with about two dozen. Most of these countries` leaders adhere to international trade rules, WTO rules, unlike the Trump administration. On the other hand, the American market is consistently valuable to them, and they strive to maintain some trade relations at any cost. The US is too significant and powerful a partner to abandon. America`s economic and trade might was achieved long before the current president.
«Caused Bureaucratic Disruption»
— If the parties don`t reach an agreement by July 8th, will the draconian tariffs be imposed?
— I don`t believe that. Trump isn`t consistent with his word; he changes his mind frequently. In the tough tariff showdown with China, the US, as former US Commerce official Bill Reinsch put it, «blinked first.» Chairman Xi outplayed Trump several times. This applied to electronics tariffs, promises to «aggressively» revoke visas for students from the PRC, and so on. Ultimately, nothing came of the White House chief`s stern appeal to Beijing either: «Let them come here, and we`ll sign the deal.» Thus, Trump and his administration are losing credibility.
It`s worth noting that when forming his team, Trump violated the established American traditions for building the trade and economic bloc, which had worked in the country for many years. In the US administration, the main figure in international trade negotiations has always been the USTR (United States Trade Representative). This was typically a solid official, a high-caliber figure. For example, in 2005, it was Robert Zoellick, who later became President of the World Bank. During Trump`s first presidency, this function was performed by Robert Lighthizer, nicknamed the «Trade Czar,» who had worked in the Reagan administration. Despite being a Sinophobe, a person set against China, he nonetheless knew and respected international trade rules. This time, Trump initially intended to entrust the USTR post to him again, but the appointment didn`t happen. Apparently, Trump realized Lighthizer wouldn`t suit him now, and assigned the USTR role to Jamieson Greer, a relatively young man without relevant experience, formerly Lighthizer`s chief of staff. And today, US trade negotiations are typically led not by Greer, but by Treasury Secretary Scott Bessent, or Commerce Secretary Howard Lutnick, whom Trump recently criticized for poor results. Thus, Trump diluted the functions of the crucial institution of the United States Trade Representative. This formally untied his hands, but on the bureaucratic level, he clearly caused disruption.
The Example of President McKinley
— Nevertheless, can it be said that Trump, essentially single-handedly, managed to destroy the rules of international trade (Rules-based-System) that had been in effect since World War II and were created by America itself, and that as a result the world has returned to the system of the early 20th century, based on strength (Power-based-System)?
— The danger of breaking the Rules-based-System existed even before, due to deglobalization processes and the creation of interregional alliances like the failed Transatlantic Trade and Investment Partnership (TTIP), the Trans-Pacific Partnership (TPP), and the Comprehensive Regional Economic Partnership (RCEP). Simultaneously, the WTO`s function of generating new trade rules weakened. A blow to the WTO, for which the US is responsible, was also the suspension of the Appellate Body (AB)—the organization`s dispute resolution system—at the end of 2019. Without it, most trade disputes are effectively impossible to finalize.
The «golden age» of globalization in the 1990s is behind us. Back then, profit was paramount; today, it`s national security. Trade today is significantly influenced by geopolitics. A striking example is the Inflation Reduction Act signed by President Biden in August 2022, which deeply angered European leaders. It created a threat to EU industry as it provided enormous subsidies in the energy sector, particularly to companies producing, for example, batteries. This spurred some EU companies to relocate production to the US.
At the same time, all G20 members, including China, India, and Brazil, express support for the WTO. The existing problems force the international community to think about how to reform the organization to preserve the Rules-based-System. One hopes that after Trump leaves office at the end of his term, or earlier if he is impeached, countries will be able to fully return to observing WTO norms and principles.
— Is there a reasonable explanation for Trump`s actions? After all, they clearly haven`t contributed to improving the US`s reputation as a trading partner?
— He sincerely believes that all 13 previous administrations, starting with Roosevelt, were bad negotiators. He coined the term «reciprocal tariffs.» To the person on the street, this sounds natural: if, say, in country «X» the import tariff is 15%, and in the United States it`s 2%, then they should be equalized. In reality, this approach is untenable. There are countries, like Singapore and Hong Kong, which have zero tariffs. They don`t demand the same from others. A low tariff is associated with the state of a developed economy whose companies are actively involved in international value chains. When your exports contain a large share of imports—parts, machine components—this constitutes participation in value chains. For example, Mexico hosts several major assembly plants for Chrysler, Ford, GM. The manufactured goods can cross the border between the two countries several times. And if, according to Trump`s logic, you impose tariffs each time, the final product will simply become uncompetitive due to its high price.
Here`s another example of manipulation. During his campaign, Trump drew parallels between himself and the 25th US President, Republican William McKinley, who was nicknamed Tariff Man. In 1890, as a congressman, he proposed an act that raised tariffs by 30-40%. Literally in the same year, the Republican party suffered a crushing defeat in the congressional elections, and seven years later, when McKinley headed the country, he completely revised his stance and began to criticize protectionists. But Trump, addressing his audience, said: «Do you remember McKinley, our famous president? Under him, America prospered because there were high tariffs and low taxes.» But he failed to mention the end of the story, which is the main point.
Relations with China and the European Union
— China predictably became Trump`s main target, against which he imposed tariffs of 145%. However, Beijing did not capitulate; moreover, it hiked its tariffs on American goods to 125% and restricted rare earth metal exports to the US. After this, bilateral trade virtually stopped. However, following two rounds of negotiations—in Geneva in May and London on June 9th—the parties agreed to temporarily ease tariffs: to 30% on Chinese exports to the US, and 10% on American exports to China. Has tension eased?
— If it has eased, it`s temporary, as Trump`s and his administration`s overall stance against China is fundamental and long-term. I don`t see signs of serious reconciliation yet. Meanwhile, Washington and Beijing could well return to the provisions of the bilateral deal from February 2020. At that time, the parties signed its first part, and it was stipulated that the second stage would definitely follow. But Covid interfered. Since the second part of the trade agreement wasn`t signed, the first one fell through. And yet, precisely on its points, Beijing made many concessions, showing prudence and composure. The Chinese leadership was guided by the idea that the country has enough internal problems, and therefore it should maximize liberation from external problems. And they committed to purchasing $200 billion worth of American goods and services, meeting the US halfway, which had accused China of having a huge deficit in the American trade balance. At that time, the parties did a lot of work to develop a compromise. But the Trump administration ignores that experience. Therefore, negotiations are proceeding somewhat spontaneously; there`s no sense of a solid foundation—today they agreed on one thing, tomorrow everything can change.
The scale of bilateral trade is enormous, with trade turnover in 2024 reaching about $600 billion. More than half of Chinese exports to the US are components from which Americans produce final goods. Therefore, tariffs increase the costs for American businesses and threaten companies with bankruptcy. Joint production and logistics chains were formed over decades, and now Trump wants to restructure everything with an emphasis on domestic capabilities, promising businesses hothouse conditions. This is not serious!
— How are US relations with the European Union now? In late May, Trump announced that he was raising tariffs on European steel exports from 25% to 50% to strengthen the American steel industry. But European Commission head Ursula von der Leyen asked him to postpone the measure until July 9th, and he agreed.
— The European Union is economically weaker than China, so the situation is slightly different.
Trump`s phrase from 2018 is indicative: «The EU is as bad as China, only smaller.» The President and his subordinates are not at all embarrassed by the incident with the Inflation Reduction Act, which harmed the European economy. On the contrary, they intend to encourage the flight of production from Europe, because now America needs to compensate for high tariffs and damage to businesses.
The Old World is slightly more dependent on the American market than the United States is on the European one. Trump understands this perfectly and gladly uses it as leverage. Bilateral relations will be difficult. It`s hard to imagine a situation where Trump, as in the case of China, «blinks first» and concedes to Europe.
Breaking Production Chains
— What risks does this entire situation pose for the American economy itself?
— Trump publicly states that the trade balance needs to be corrected: it is negative for the US, and the main culprit is China. And Washington raises tariffs to correct the trade balance. However, in reality, the reasons for the imbalance are elsewhere—they need to be sought within the US. Christine Lagarde, Director of the IMF during his first presidency, told Trump this. Recall that as a result of the tariffs introduced in 2017–2020, the US lost 0.5% of its GDP and 245 thousand jobs, while the trade deficit grew by 41%. That is, the result was the opposite of what was intended. Now the situation will repeat itself, as the trade balance is adjusted by other means. Trump`s current populist steps can be explained by the fact that, firstly, he wants to quickly collect money from importers into the budget and thus lower taxes. Secondly, he intends to create hothouse conditions for the revival of American industry. In the context of established international production chains, doing this is foolish. And thirdly, he wants to obtain concessions from US partners—trade, economic, political—reminding them of the danger of losing access to the rich American market.
— What risks does this entire situation create for the world economy, and, consequently, for the Russian economy?
— Relatively recently, both the IMF and the OECD (Organisation for Economic Co-operation and Development) lowered growth forecasts for the GDP of several countries. In particular, in April, the IMF calculated that China`s economy would slow down to 4% in 2025 (a decrease of 0.6 percentage points compared to the January estimate). The report`s authors linked this to «uncertainty in trade policy and tariffs.» In the US, they expect economic growth to slow to 1.8% (0.9 p.p. lower than figures in the fund`s January report). In turn, WTO analysts, and not only them, predict a decrease in the volume of world trade. Trump`s tariff policy will inevitably lead to the breaking and forced restructuring of production chains and value chains. As a result, even if GDP grows in some places, ultimately the whole world will live poorer.
And Russia is no exception. Moreover, we still remain exclusively suppliers of raw materials to foreign markets and are heavily dependent on China. It is clear that in the context of a slowdown in the global, and in particular the Chinese economy, demand for Russian hydrocarbons will decrease. This will be a direct negative effect that our country will inevitably feel.
