Globalisation was once thought irreversible. At the turn of the century, as China joined the World Trade Organisation and the West welcomed Vladimir Putin as a “reformist” leader, liberals believed that the world would ceaselessly become more politically, economically and culturally integrated. “I hear people say we have to stop and debate globalisation,” declared Tony Blair in his 2005 Labour Party conference speech. “You might as well debate whether autumn should follow summer.”
What remains of those old assumptions has now been shattered by Donald Trump. If the 2008 crash was the “first crisis of globalisation”, as Gordon Brown put it, then Mr Trump’s tariffs are a darker sequel.
In 2008 the G20 was able to agree a coordinated stimulus programme to prevent a second Great Depression. Now, the world has fragmented into rival power blocs arming themselves for a global trade war.
Mr Trump’s plunge into protectionism – imposing the highest US tariff rates since 1909 – was predictable. It was in 1987, as he first contemplated a bid for the presidency, that he published an open letter accusing Japan and other nations of “taking advantage” of the United States. Tariffs, he proceeded to argue, would allow his country to “end our huge deficits, reduce our taxes, and let America’s economy grow unencumbered by the cost of defending those who can easily afford to pay us”.
Here is precisely the case that Mr Trump makes today. Those who believed that his extollation of tariffs was a mere negotiating tactic have been exposed as naive. Mr Trump should be taken both seriously and literally.
The consequences of free trade for ordinary Americans are worthy of debate. Though the US economy has thrived for decades, average real wages are little higher than in the late 1970s. Part of this story is the decline of manufacturing as American corporations have outsourced jobs and factories abroad. Once-proud communities have been left riven by opioid addiction – a crisis exacerbated by the US’s threadbare welfare state.
Tariffs can be justified as a targeted measure to support domestic industry – Joe Biden maintained or even increased those levied by Mr Trump against China. But the president has destroyed whatever possibility existed of a rational debate on trade policy. As the Democratic senator Bernie Sanders has warned, “a blanket and arbitrary sales tax on imported goods will raise prices on products that the American people desperately need”.
The Trump administration has offered no consistent rationale for its tariffs. Is the aim to raise revenue for the purpose of tax cuts – further enriching the wealthy – or to boost domestic manufacturing by reducing imports? It cannot be both.
Whatever the ultimate ambition, the world must live with the consequences. There is, contrary to some suggestions, nothing for the UK to celebrate. True, the 10 per cent tariff imposed on British goods is lower than that on the EU (20 per cent). But this remains a harsh penalty for a country that runs a deficit with the US – importing more than it exports. The 25 per cent tariff imposed on car imports threatens around 25,000 British jobs (one in eight UK-built cars are exported to the US). Though Keir Starmer hopes soon to agree a new trade deal with the US, the cost of a global recession will outweigh any gains.
But for the Prime Minister, there is opportunity in crisis. He now has the political space to re-examine his government’s fiscal rules and its taxation policy. Faced with the need to raise defence spending to 3 per cent of GDP and to support British industry, it is unthinkable that one or both will not need to change. As we have long argued, Labour’s past pledge not to raise income tax, VAT or National Insurance (on employees) – which account for almost two thirds of tax revenue – is unsustainable in this dangerous new era.
Mr Starmer also has a chance to lead a more profound reset of the UK’s relationship with Europe. The trade barriers that Mr Trump has imposed on us make those we imposed on ourselves – via Brexit – increasingly costly.
This is not the world that Labour wanted. It hoped that its election would herald a new age of growth and stability. But if he is prepared to shed his caution, Mr Starmer can find new purpose as the leader who stewards Britain through the storm.
[See also: What is Trump thinking?]
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This article appears in the 10 Apr 2025 issue of the New Statesman, Spring Special 2025