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The Resilience of Globalization in the Era of Trade Wars
Award-winning author and leading scholar on the digital economy and the European Union, Anu Bradford, shares insights on the future of economic globalization, discussing the cost of trade protectionism, yet arguing that globalization in the era of integrated supply chains cannot be reversed.
Today, global companies are facing unprecedented geopolitical upheaval. We have entered a new era of deglobalization where roiling trade and technology wars are remaking the global economic order. We are witnessing the decoupling of the digital economy, the rupturing of the Transatlantic alliance, and the unraveling of global supply chains. Governments are retreating into protectionism and techno-nationalism as concerns over national security and self-sufficiency are replacing their commitment to global cooperation and economic openness. In reality, those goals remain elusive while tariffs have proven costly, even for the United States. Within weeks after revealing reciprocal tariffs against all trading partners on a so-called April 2 “Liberation Day,” President Trump had to retreat as the imminent tariffs were criticized for causing substantial damage to households and businesses while destabilizing financial markets. These costs were predicted to only rise as U.S. trade partners geared up for retaliation, risking a spiraling, all-out global trade war.
The radical U.S. tariff policy always rested on questionable assumptions. The administration counted on securing quick wins, expecting U.S. trade partners to capitulate and rush to negotiate trade deals that would favor the United States. Similarly, companies were expected to respond to tariffs by moving their manufacturing to the United States.
Contrary to these predictions, the early trade deals the Trump administration has negotiated with China, the United Kingdom, Canada, and Mexico are thin and accomplish little in terms of recreating a trade order favorable to the United States. Reshoring manufacturing is also unlikely to happen. Economists estimate that, at best, the share of manufacturing jobs in the United States will climb from 8% to 10%. This could hardly be celebrated as American manufacturing renaissance. Instead, tariffs breed deep uncertainty that deters trade and investment, halting reshoring plans.
Last week, the courts declared the U.S. reciprocal tariffs illegal, yet the administration remains defiant, appealing the ruling and showing no intention to reverse the course. Despite this defiance, globalization will be difficult to reverse. Today’s globally integrated supply chains are much stickier than the Trump administration has suggested. The President has insisted that companies like Apple will reshore its manufacturing to the U.S. The U.S. Commerce Secretary Howard Lutnick offered a striking visual of this in April, stating: “Remember the army of millions and millions of human beings screwing in little screws to make iPhones? That kind of thing is going to come to America.”
However, moving its supply chain to the United States would be all but impossible for Apple. Today, the company relies on 187 suppliers in 28 countries to manufacture its iPhone. The new iPhone models consist of 2,700 different parts. Less than 5% of those parts are currently made in America. Most of the supply chain is built around China, given the cost advantage and scale that China provides. Apple’s efficient supply infrastructure took decades to build, and it allows Apple to earn around $400 on each iPhone 16 Pro. Moving this sophisticated supply chain to the United States would require years, if not decades, of investment in infrastructure, automation, and training. According to various estimates, an iPhone would also cost as much as $3,500 if fully assembled in the United States. It is, therefore, highly unlikely that American workers will be “screwing in little screws to make iPhones” anytime soon.
The U.S. trade partners are also not powerless when faced with American tariffs. The United States is an important economy, but accounts for only 12% of global trade. For example, 13% of the European Union’s trade is with the United States, while 87% is with other nations. The rest of the world can continue to trade even if the United States retreats to protectionism.
Even if global supply chains cannot be undone, the American tariffs are costly and disruptive for everyone. They remove the foundation from the liberal trade order and usher in a world that is more uncertain, less stable, and prosperous for everyone. Uncertainty around the U.S. trade policy acts as perhaps the biggest tariff, as companies postpone large capital investments, not knowing how long-lasting the new tariff rates are.
The shadow of the tariffs will also likely be long. Trade restrictions tend to be sticky and will take years, if not decades to unwind because they generate new interest groups that defend those protectionist policies. Last time around, when peak globalization ended around World War I and the great depression, it took until the 1970s to rebuild that trade order.
The sad reality is that the ongoing trade war has no winners. It is costly for the U.S. trade partners as well as the United States itself. Globalization may not be reversible, but this new economic order is more fractured and less prosperous for everyone. Far from ushering in a Golden Age of American prosperity, it risks leaving the United States diminished in influence, armed with less leverage, and surrounded with fewer friends and allies. The key question is what, if anything, will cause the Trump administration to retreat, and how trust in the system — and the United States — can be rebuilt.
