current
Resurgent Protectionism
Global trade is facing increasing headwinds from protectionist measures, impacting supply chains and potentially exacerbating inflation.
Timeframe
near-term
Impact areas
Detailed Analysis
Despite a long-term decline in average tariff rates, protectionist interventions are on the rise, taking new forms and expanding into strategic sectors like semiconductors and vehicles. While traditional tariffs have fallen, non-tariff measures and subsidies are increasingly being used to restrict trade and encourage domestic production. This trend is fueled by geopolitical tensions, a desire for supply chain resilience, and national security concerns, leading to a 'splintering' of trade patterns along geopolitical lines.
Context Signals
Environment-related measures in trade policy reviews have almost doubled over the past decade, constituting a new wave of 'green protectionism'.
Global trade volume growth has slumped in recent years, plunging from an average of 5.8% year-on-year in the early 2000s to around 1% in recent years.
The WTO expects a rebound in global trade growth in 2024 and 2025 following a slowdown in 2023. But it is concerned about the risks to trade linked to geopolitical tensions.
Edge
Companies may need to diversify their supply chains and reduce reliance on single-source suppliers to mitigate the risks of protectionist policies.
The rise of protectionism could lead to the development of regional or bloc-based trading systems, potentially fragmenting the global trading order.
Increased government support for domestic industries could spur innovation and the development of new technologies in strategic sectors.
