While the nature and scale of that protectionism is a bone of contention between the two parties — as shown in Tuesday night’s Presidential debate — Mordy notes that the two parties take protectionism as a given. The debates we now see around the world about the degree of engagement or disengagement with the United States, he adds, could be in part a product of the US decision to pull back from the world.
Mordy has seen this debate play out most acutely in Mexico, where the left-wing MORENA party won handily in June and the MORENA candidate Claudia Sheinbaum was elected President. Mexico has been a favoured country for ‘near-shoring’ or ‘friend-shoring’ where manufacturing operations are moved from a supposedly less-friendly country, namely China, to a more friendly country.
Mordy notes, though, that Mexico has also become a backdoor for Chinese exports to circumvent US tariffs. Mexican imports from China are up nearly 50 per cent above their pre-pandemic levels. Mexico is deeply dependent on the United States but the debate that the country engaged in during its election was around creating more trade diversification and pulling back from the US relationship somewhat.
The Indian election was also a key story from 2024. Prime Minister Narendra Modi’s unexpectedly diminished majority spooked markets somewhat with Indian equities selling off briefly. However, the growth story in India remains strong. Modi has retained his hold on power and the country appears focused on enhancing its position globally, engaging more broadly with other countries — including the US. Key to the India story has been its massive investment in infrastructure, which now represents a huge percentage of its GDP. India’s internal investments and external bridge-building, Mordy says, reflect how trade an interconnectedness have helped enrich less developed nations and has stimulated global growth.
Tariffs and protectionism, Mordy notes, have been consistently proven as bad economics. While globalization has had some negative impacts, he believes that the broadly positive forces of integration and wealth creation have outweighed the costs. Tariffs, especially, function as a tax on domestic consumers and a self-inflicted economic wound. The trouble is, while protectionism is bad economics, its great politics, which is why the US seems so set on maintaining a protectionist stance.
