Perhaps the most overused term of the entire COVID-19 crisis is “unprecedented.” Is it unparalleled from a healthcare standpoint? Of course. How about environmental? Yes. But from a business perspective? Absolutely not. Not only have we been here before multiple times, but we will almost certainly be here again. Economic downturns have always been part of the cycle, and they all have the same unintended consequence: a rise in protectionism with trade.
Even with the current economic strife, as most global economies still remain struggling with prolonged shutdowns and business closures, new tariffs and retaliations are popping up from the US, most recently with a 10% tariff on Canadian aluminum and a potential increase on European alcohol, hurting an already struggling hospitality sector. Such moves of course prompt retaliatory tariffs, leading to a frustrating – and costly – cycle.
On the surface, it’s quite understandable. As the virus first began to shut down trade in Asia and Europe, it directly affected importers across the ocean. A whopping 94% of Fortune 1000 companies experienced disruption in their supplies. As more operations grinded to a halt, there was an outcry to halt overseas manufacturing and sourcing, particularly as COVID-19 cases increased in North America. Now, as recovery lags, most leaders are staunchly focused on rebuilding their own economies.
Protectionism is the worst way forward
While protectionism is expected, it could be one of the worst moves the global economy can make. During the past few months, many comparisons have been drawn to the