Where the United States and global trade are heading

• Current U.S. economic problems cannot be reliably addressed through open trade
• Protectionism sentiment is growing among both Republicans and Democrats
• Import restrictions would have limited impact on the U.S. and other major economies
• A positive scenario is if U.S. pressure wins more respect for intellectual property rights

The centrality of the United States to the world’s trading system is often neglected. Without large American current account deficits absorbing global production and the ensuing circulation of dollars, there is no global economy, just a set of regional currency blocs. This centrality also means there will be a considerable global response to U.S. policy shifts.

President Donald Trump and others are right that the U.S. is the most open large economy and that much of the world can liberalize further. If, however, American demands for greater openness are rejected, mishandled or morph into protectionism, the world could become much more closed. A third possibility is that the status quo of roughly the last 20 years holds with only minor shifts. Of these, the single most likely outcome is at least a temporary retrenchment over the next three years, toward a more closed global economy.