May 2025 – Virtual Conversation

6 May 2025 (18:00-19:00 UK time)

VIRTUAL CONVERSATION:
Economy and Trade - Trump, tariffs, and the death of globalisation: Are we entering a new era?

Greg Hands, former UK Trade Minister
Penny Naas, Lead, GMF Allied Strategic Competitiveness, German Marshall Fund of the United States (GMF)
Moderator: Alex Boyd

Introduction

Trump’s sweeping new tariffs may mark a historic turning point for global trade. Are we witnessing a temporary shift, or has the world crossed a rubicon, entering a new era of protectionism, economic nationalism, and geopolitical fragmentation? With rising inequality, fiscal pressures, and deepening questions about who truly benefits from globalisation, the trading system that defined the late 20th and early 21st centuries is under unprecedented strain.

This online seminar, featured former UK Trade Minister Greg Hands and Penny Naas, Lead, GMF Allied Strategic Competitiveness, German Marshall Fund of the United States, who explored whether we are seeing the start of a long-term retreat from global economic integration and what that could mean for the UK, Europe, and the world.

Are we heading for a disorderly unwinding of established trade models? Will new supply chains, alliances, and regional systems emerge in response? And how can policymakers and businesses adapt to a more divided, less predictable global economy?

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AI summary of Virtual Conversation

Why the trading order feels fragile

• Sudden tariff shocks are roiling markets. Boyd reminded the audience that only “a few weeks ago” President Trump unveiled “across-the-board… reciprocal tariffs,” which “trigger[ed] an immediate market panic and a large-scale sell-off in US securities and dollar-denominated assets.”
• Globalisation is bending, not breaking. Naas argued that, despite the headlines, “globalisation clearly is not dead… it may be slowing down, and it is clearly re-configuring,” pointing to Africa’s AfCFTA and rising investment flows as proof that integration continues outside the West.
• The world is splintering into hubs. Hands observed that the “rest of the world has finally woken up to the fact that the United States is moving out of the free-trade, rules-based system… I can see the world breaking up into… trading hubs.”

Greg Hands — a UK playbook for fragmentation

• Lean on agility, not Brussels alignment. Citing the newly concluded UK–India FTA as “an achievement to get the deal done” against long odds — and noting how the pact trims tariffs on whisky, cosmetics and aerospace but leaves visas and NIC rules contentious — Hands urged London to stay nimble rather than accept EU-style “dynamic alignment” on SPS standards that would “box the UK in” just as supply chains are reshuffling.
• Talk; don’t retaliate. Imitating tit-for-tat levies would, he warned, be “a terrible way of negotiating — effectively having a gun held to your head.” Instead, the UK should use the talks to win longstanding asks such as business-travel visas and mutual recognition of qualifications.
• Tariffs will back-fire on Washington. Drawing a parallel with Smoot-Hawley, Hands predicted that “it’s all going to end in tears… tariffs will raise costs for US consumers,” and that voters “don’t forgive politicians who make them poor,” potentially crushing Republicans at the ballot box.
• Step into the leadership vacuum. With the traditional US champion “AWOL,” he sees “a great opportunity for the UK to step up… and become that global leader” of a pro-trade coalition centred on the CPTPP.

Penny Naas — inside the Trump 2.0 tariff machine

• Layer 1 – 10% blanket duty: “An overall 10 percent tariff… primarily there to generate revenue for the US government” and finance a forthcoming tax package.
• Layer 2 – 25 % ‘national-security’ tariffs: Sector-specific 232/301 duties aimed at re-shoring nine industries — “steel and iron… autos, semiconductors, pharmaceuticals, critical minerals, lumber, trucks and truck parts.”
• Layer 3 – ‘Reciprocal’ tariffs on 57 deficit countries: Used as leverage for mini-deals covering six US demands (tariffs/NTBs, agriculture, digital rules, origin-cum-IP-cum-labour, economic-security screening and guaranteed US purchases). “Those will be negotiated… six items the government is looking for.”
• A bipartisan tariff consensus is emerging. In three decades, Naas “never heard Democrats… defend tariffs like I’ve heard them do in the past few months,” signalling that protectionism now stretches across party lines.
• Why scale and services count. After discussing AI start-ups, she warned that “life is moving fast… many countries are going to have to come together to have some kind of scale” for innovation, and that the “service industries” will define competitiveness in an AI-driven economy.

Strategic take-aways

• Expect fragmentation, not autarky. Trade flows are rerouting into four blocs — US, EU, China-centred and CPTPP — but overall volumes keep growing; businesses must map exposures across each hub.
• Engage Washington early and often. Naas noted that countries “that get in early… get a better deal,” as evidenced by carve-outs already secured by major US suppliers.
• Put digital and professional mobility at the centre of deals. Hands and Naas agreed that data flows, mutual recognition of qualifications and business-visa quotas are now core trade-policy assets, not after-thoughts.
• Diversify supply chains through pro-trade partners. Hands highlighted CPTPP members such as Vietnam as “right on the thrusting edge of global free trade,” positioning themselves to capture production diverted from US-China frictions.
• Prepare for policy whiplash. If US consumers feel the pinch, the tariff wall could tumble as quickly as it rose; keeping options open in multiple markets will let firms ride the next swing back toward liberalisation.

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