For decades, free trade practices with smooth goods and services movement were given to companies planning to start or expand their business. This has changed in the last few years, as the first shock came in 2018 when the USA started to use tariffs to get favourable deals. The second and biggest shock came in 2020, with the post-COVID lockdown reopening. The third is the current one, with the USA again resting the system.
According to WTO, Regional Trade Agreements (RTA) were on the decline till 2017 standing at 292 in total. Due to changes that started in 2018, the outstanding agreements have increased to 373 in 2024 with 2020 witnessing the highest increase of 44.
Another element of world order that is in a reset is the political relations between “natural allies”. The USA is currently putting in effort to improve its relations with Russia along with bringing the war to an end. This step has caught many countries by surprise and in a huddle to review their own relations.
Third is the focus on creating and moving resources towards making global growth more environment-friendly and less taxing. With large countries like the USA focusing on fossil fuels and higher tariffs, the other countries might follow the same as the need of the hour changes. This would impact capacity utilisation and creation in a way that might create oversupply in some pockets and under in some.
All these elements are important to keep the uncertainty and disruptions to a minimum but seems the shocks have become larger and more frequent it is difficult. Though it is unlikely to end anytime soon a stable and predictable environment is necessary for growth and inflation to be stable.