Unfortunately, the United States has taken the lead in a retreat from global economic integration. U.S. trade policy is now focused on “friend-shoring.” Tariffs and other trade restrictions are designed to shift supply chains from China and its allies to benefit the U.S. and its allies. U.S. subsidies promote high-technology industries such as semiconductors and microprocessors. The U.S. has launched a subsidy war in its efforts to promote clean energy. The U.S. has also entered into regional agreements with its allies, e.g., the Indo-Pacific Economic Framework for Prosperity, that are fragmenting trade into regional trading blocs.
China has responded with its own countermeasures, boosting tariffs and trade restrictions on the U.S. and its allies. China pursues industrial policies to divert supply chains toward its own industries, imposing tight controls on exports from high-technology industries. China also pursues mercantilist policies through bilateral and regional trade agreements. BRICS members have all responded by boosting tariffs and trade restrictions on the U.S. and its allies.
Figure 1 shows trends in trade as a share of gross domestic product in three economies: India, China, and the United States. Prior to the financial crisis in 2008, trade as a share of GDP was rising in all of these countries. The financial crisis in 2008 marked the end of this rapid growth in international trade; since then, trade as a share of GDP has fallen in most of the world, including the U.S. The decline in trade as a share of GDP is especially evident in China and India.
Since the financial crisis, trade as a share of GDP in the rest of the world has stagnated. It is not surprising that retardation in the growth of
