August 31, 2018

Is Protectionism the New Normal?

The age of globalization began in the 1940s with the global post-war recovery; the Bretton Woods Treaty, the creation of the International Monetary Fund, the World Bank, and the General Agreement on Tariffs and Trade collectively provided enough stability to make widespread global trade possible. Decades of globalization have brought not only an increase in international trade, but an increasingly connected world, with goods, people, and information crossing borders, as well as the birth of multinational corporations. But the 2008 crisis may have signaled a turning point, after which the globalization train seemed to curve toward protectionism. Brexit, the election of Trump, and the current trade wars evidence an escalation of this shift. Does this mean that the age of globalization is over, or are we just veering temporarily into protectionist territory?

Protectionism has lately been the word of the day, and it seems the entire world is joining in. Reuters reports that the world’s top 60 economies have adopted more than 7,000 protectionist measures since the financial crisis, implementing more than $400 billion in tariffs.1 This was reported in November of 2017, and has clearly increased since then. In A.T. Kearney’s 2018 Foreign Direct Investment Confidence Index, 89 percent of investors surveyed said that their company is pursuing or considering implementing localization practices due to an ever-more protectionist market.2

The increasingly widespread language of protectionism seems hyperbolic and even aggressive, and has naturally raised fears of recession and inflation, but in reality, no governments want to disrupt trading or take measures that will be detrimental to their economic vitality. The protectionist stance is often applied as a disruptive tactic to bring parties to the negotiating table. Clearly, outdated and imbalanced trade agreements should receive scrutiny and be revised to reflect evolving markets. The threats of tariffs and other economically protectionist measures – many of them symbolic – levied by the U.S. are increasingly helping to set the stage for new negotiations, but may lead to higher market volatility in the short term. In the long run, we are optimistic that many of the imbalances will moderate, with globalization likely to benefit from this reset.

For us, the key to investing in this environment is maintaining global diversification. We are not aligned on one side or the other of any trading partnerships, and are not concentrated in any one sector or industry. Looking long-term, we anticipate the protectionist trend will ebb as new trade agreements are forged and we continue to build a connected, global community.


1 “World has racked up 7,000 protectionist measures since crisis: study” by Marc Jones; Reuters; November 14, 2017;

2 “Going Local to Survive Creeping Protectionism” by Paul Laudicina; Forbes Magazine; May 21, 2018;