The US was central to building the international trade system. Now it is the one putting it into question, be it with the increasing imposition of tariffs or with de facto subsidies such as the tax credits of the Inflation Reduction Act. Protectionism is increasingly understood as a matter of national identity and security at a time when political upheavals can have economic consequences. The pandemic has highlighted the weaknesses of global supply chains, and Europe has only recently had to experience what hard and near de-coupling – in this case of Russian gas and oil – can mean. But even if the founding principles of the international trading system are distorted, conjuring up the end of globalization does not do justice to the complexity of reality.

This is because despite the recent challenges, international trade has proven relatively stable. Sanctions or disruptions in supply chains do not automatically lead to less globalization. For example, global trade increased and not decreased in the wake of Covid-19, particularly with China. Its need to export goods such as solar panels or electric vehicles (EVs) and the fact that it does so below market price, will further accelerate the trend of tightening dependencies between the world and the PRC. The US sanctions imposed on China did not reduce global trade; they only extended supply chain routes. Moreover, the practice of tax evasion through investment in tax havens, followed by imports from these countries, are also an indicator of globalization – a type of it that calls into question the doctrine of global trade solely leveraging overall welfare.

Additionally, the shift from supposed free trade to more protectionism is not as clear-cut as suggested by the current trend towards more tariffs. With its tariffs against China, the US is violating the non-discrimination principle of the World Trade Organization (WTO). However, fragmentation was also possible within the WTO framework. The approximately 100 existing preferential trade agreements (PTAs) did not necessarily lead to greater liberalization. Instead, a deepening of trade relations between the involved partners was observed, including through institutional harmonization. Additionally, there has been a noticeable trend of trade diversion, where trade shifts towards the respective partners instead of the most efficient producers. The US has often, and sometimes seemingly arbitrarily, invoked Article 21 General Agreement on Tariffs and Trade (GATT) to impose protective tariffs on goods for declared national security reasons.

With the recently imposed tariffs on Chinese EVs, Europe is now following suit to the US. After all, China's production capacity is expected to increase up to 36 million cars by 2025. The US and Europe are therefore united in their concerns about the PRC – but so far it has not been enough for more than "frenemies" in the transatlantic partnership. Questions surround whether and to what extent China should play a role in global trade flows in the de-risking strategy. It is clear that the US and Europe should be allies ¬– just that they have yet to figure out what this partnership should entail.

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