Economic security

COVID-19 Could Bring Down the Trading System

For three years, the administration of U.S. President Donald Trump has attacked the global trading system. Now other forces are battering international trade. The pandemic spread of COVID-19, the disease caused by the novel coronavirus, is stoking new pressure for protectionism, and the World Trade Organization (WTO) needs to prepare for more countries to capitulate under the strain.

If the trend is left unchecked, the world may repeat the experience of the 1930s, when industrial production fell by nearly 40 percent, unemployment soared, and economic activity remained anemic for the better part of a decade. Then as now, trade barriers did not cause the problems. America’s Smoot-Hawley Tariff Act did not trigger the Great Depression, and tariffs today will not have caused the COVID-19 depression. But such barriers could affect the recovery, especially given the modern importance of cross-border supply chains. What happens now will influence the shape the trading system will take for decades to come.