A recent report from the McKinsey Global Institute reveals that the trade war initiated by former US President Donald Trump did not lead to the collapse of global trade as expected. On the contrary, global trade has experienced remarkable growth, especially in the artificial intelligence sector, where exports related to AI have surged significantly.
The report, titled "Geopolitics and the Engineering of Global Trade," indicates that global trade has grown faster than the global economy, despite US tariffs reaching their highest levels since World War II. Both the United States and China achieved record levels in exports and imports.
Event Details
According to the report, trade between the United States and China has decreased by nearly 30%, with Chinese exports to the US losing about $130 billion. However, many supply chains have shifted to South East Asia, including countries like Vietnam, Thailand, and Malaysia, which have absorbed the increasing US demand.
The report also highlights that India has played a significant role in this shift, increasing its smartphone exports to the US by $15 billion, while American imports from China have dropped by 40%.
Background & Context
The trade war between the United States and China began in 2022 when Trump announced tariffs on over 50 countries. Trump viewed the chronic trade deficit as a threat to US national security. However, data shows that the US trade deficit reached $901.5 billion last year, a slight decrease from the previous year.
At the same time, the European Union faced dual pressures, with its trade deficit with China widening while its trade surplus with the US declined. European car exports to the US fell by 17%, while imports of Chinese cars to Europe increased by 50%.
Impact & Consequences
Data indicates that the trade war has not destroyed global trade but has reshaped it. The increasing demand for AI-related products has bolstered global trade, with AI exports accounting for about one-third of the overall growth in trade.
Moreover, major companies in the technology sector have heavily invested in building AI infrastructure, increasing demand for essential components such as chips and servers. Manufacturing hubs in Taiwan and South Korea have contributed to meeting this global demand.
Regional Significance
For the Arab region, these changes in global trade may lead to new opportunities. With the rising demand for technology and innovation, Arab countries could benefit from expanding their trade partnerships with Asian nations like India and Vietnam.
Furthermore, enhancing cooperation in technology and artificial intelligence could contribute to the development of local industries and increase the competitiveness of Arab countries in global markets.