Conference Presentation, Panel
Globalization in the Crosshairs
Milken InstituteGillian Tett, Steven Ciobo, J. Bradford DeLong, John Hagel, Alejandro Ramirez Magaña, Stephen Schwarzman, Brad DeLong
- The administration intends to lower tariffs where U.S. rates are higher and raise them where they are lower to achieve reciprocity, aiming to resolve trade disputes within a timeframe where NAFTA could be resolved in approximately one year and major issues with China addressed as quickly as possible.
- Predictions indicate that protectionism will likely increase in the short term due to secular stagnation and political pressure, potentially hitting the global economy with a 3% contraction ($240 billion annually), though this may eventually pass to establish a new baseline.
- Economic restructuring forecasts include a shift away from low-wage labor as a key global driver due to advancing robotics, encouraging reshoring of manufacturing to industrial cores such as moving shoe production from Vietnam to near Boston, with China potentially being the last nation to industrialize via low-wage exports.
- Specific trade plans include stopping all subsidies to the car industry to avoid capital allocation distortions and accelerate fleet renewal, while Japan is expected to lead the renegotiation of the remaining 11 countries to finalize a TPP agreement with minor tweaks to enable its implementation.
- Strategic plans involve strengthening trade agreements with the European Union and Asia-Pacific rim to reduce reliance on the U.S. market, as the current U.S. market volatility is anticipated to be temporary following the completion of NAFTA renegotiations by the end of the year to avoid Mexican election complications.
- Risks associated with moving away from multilateral rules include an "insuperable administrative task" for tracking goods, creating a "noodle bowl" of rules that will struggle small- to medium-sized exporters, alongside a collapse in institutional trust caused by threat-based narratives and shrinking societal time horizons.
- Critical long-term risks and expectations highlight that public company return on assets may reach zero by 2030, driven by collapsing trust and pressure to adopt zero-sum views, while U.S. education rankings have steadily declined to 27th globally over the last 35 years, necessitating solutions alongside trade and technology issues.
- Governments may face reduced ability to expand purchases due to zero interest rates, potentially redirecting spending toward domestic goods, while the economy must transition from a model of scalable efficiency to scalable learning to address mounting performance pressures.
- Trade activity is driving economy and employment in Australia over the last 12 to 24 months, supporting a 26th year of continuous economic growth and optimism for a global trade outlook despite the unraveling of the original TPP.