Foreword

When thinking about the outlook for the global economy, this quarter has been dominated by events around 'Liberation Day' – 2 April – on which President Donald Trump announced a slew of what he called 'reciprocal tariffs' varying from 10 per cent to 54 per cent depending on the country. These tariffs had nothing to do with the tariffs imposed on US goods by other countries; indeed, tariffs were imposed on the uninhabited Heard Islands and McDonald Islands! Rather, the size of each country's tariff was based on the size of the bilateral trade deficit the United States had with that country. Leaving aside the facts that bilateral trade deficits are a normal part of a healthy trading system and that the proposed policy flew in the face of obligations the United States had as a member of the World Trade Organisation, the announcement of these tariffs threatened to disrupt the whole global trading system and the global supply chains that had been built up over recent decades. To give a feel for how negatively these tariffs could affect the world economy, it just needs to be noted that they were on a par with the tariffs put into place by the Smoot-Hawley Act in 1930, which contributed to a collapse in world trade, as other countries retaliated, and prolonged the Great Depression.