- ‘Many countries will look at unreliable access to the US market and ask whether there are other markets to sell into, and whether there are other countries to source from,’ says Evenett, a professor at IMD Business School in Switzerland
- ‘The laws of economics and business do not get rewritten once a new president enters the White House. These realities hold, and they have to be worked with, not against,’ says expert
GENEVA
The US is significantly overestimating its leverage in global trade, a strategic error that will soon become evident, according to Simon Evenett, a leading trade expert and professor at IMD Business School in Switzerland.
As President Donald Trump ramps up his tariff wars around the world, Evenett warned that Washington’s protectionist policies risk undermining its influence and pushing other nations to seek more stable trade partners.
“What we see in Washington at the moment is a clear overestimation of the US’ leverage in the world trading system,” he told Anadolu.
“The US is an important and massive economy, but it is not the massive economy that it was after World War II or even in the 1990s. This reduction in its clout is something which I think will be made very evident in the weeks and months ahead.”
Evenett further emphasized that this evolving global economic dynamic might be difficult for many American nationalists and patriots to accept, given historical perceptions of US economic dominance.
However, he stressed that in a global marketplace comprising nearly 200 trading nations, no single country maintains overwhelming influence indefinitely.
“The US may have a lot less clout than it realizes,” he said.
“If that’s the case, then the alternative approach is to try and find common ground with your trading partners, not to keep picking fights with them.”
‘US will lose a lot of standing’
According to Evenett, one of the most significant global responses to the unpredictable US trade policies will be a strategic diversification of trade.
“Many countries will look at … unreliable access to the US market and ask whether there are other markets to sell into, and whether there are other countries to source from,” he explained.
“Countries and companies are thinking very hard about how to manage the risks … There will be a premium on trading relationships and suppliers who offer stable terms. Countries and firms that cannot make commitments to long-term stability and openness will be disadvantaged.”
He voiced concern that the US appears unaware of the potential consequences of its current strategy, saying the Trump administration does not seem to “appreciate the consequences of this line of decision-making.”
Beyond purely economic factors, Evenett highlighted that US credibility is at stake, and its international reputation might suffer significantly if it continues on its current trajectory.
“The US will lose a lot of standing as a credible, open, and reliable trading partner, and that cannot be good for their influence,” Evenett explained. “The more the US cuts its commercial ties with other countries, it is also cutting its leverage over those other countries.”
Evenett sees little potential benefit in this strategy, noting, “It is very hard to see how any of this is good, either from a purely economic point of view, from a geopolitical point of view, or even a foreign policy point of view. But still, that is the direction where US policy seems to be going. Maybe they can pull a rabbit out of the hat.”
He stressed that fundamental economic principles remain consistent regardless of who occupies the White House.
“I think my bottom line here is that I’m afraid the laws of economics and business do not get rewritten once a new president enters the White House. These realities hold, and they have to be worked with, not against.”
Fragmented trade war
Evenett characterized the current US trade approach as a fragmented trade war, rather than a singular global conflict.
The latest rounds of tariffs, targeting industries like automobiles, pharmaceuticals, and semiconductors, have ignited numerous bilateral disputes rather than one cohesive economic confrontation, he said.
“One is a long-standing dispute between China and the US, where I do not see much hope for any resolution in the short term,” he observed.
“Then there’s the US-EU disagreements, which are deeply felt and likely to become quite problematic, although to a lesser degree than the case of China.”
Evenett also pointed to trade tensions involving Canada, Mexico, and emerging markets such as India and Brazil, suggesting that these economic frictions could lead to broader global instability.
“The question before us is whether trade will become more regionalized, with countries choosing to trade with neighbors who they may have better trading relationships with?” he said.
“I think we will see a reorientation and diversification of trade away from jurisdictions with unpredictable trade policies that cannot commit to offering stable market access to their trading partners.”
Questionable claims and domestic consequences
Evenett also highlighted the domestic impact of the tariffs, noting that US consumers would ultimately face increased costs.
“If the US raises tariffs across many goods and for many trading partners, we will see higher prices in the US,” he warned.
“Families in the US will see more inflation and will have to adjust to this.”
While the current administration argues that tariffs could bring manufacturing jobs back to the US, Evenett expressed skepticism: “Most sophisticated companies source parts and services globally. Raising tariffs increases costs for those firms.”
He further dismissed claims that increased tariffs would attract substantial foreign direct investment into the US, citing data from Trump’s earlier tariff policies against China in 2018.
“I have examined publicly available US government data on the number of foreign firms establishing a presence in the US. There is a very small increase immediately after the initial tariff increases, which soon dies away,” he explained.
At the time, he continued, many companies pledged to shift production, but few followed through.
“This resonates today because we see a number of announcements from companies and from the White House of big investments in the US,” he said.
“The problem with those announcements is twofold: first, they don’t ask whether the investment is going to happen; and second, there’s no guarantee that the investments will be followed through," he said.
He also cited a 2024 Financial Times report revealing that approximately 40% of companies pledging investments under former President Joe Biden’s Inflation Reduction Act had paused their projects ahead of the November presidential election.
“Corporate promises about foreign direct investment, job creation, and manufacturing revival should be taken with some degree of skepticism,” Evenett advised.
“They are excellent public relations tools, and you can understand why companies use them, especially when you have a president who is desperate to secure investment from abroad, but they are not to be believed without further verification.”
