The era of globalisation is about to come screeching to a halt

U.S. President Joe Biden
Joe Biden's 100pc tariffs on Chinese EV imports pose a risk to international trade - Win McNamee/Getty Images

Rishi Sunak had an interesting take on the Russia question this week: Keir Starmer’s policies would “embolden” Vladimir Putin, the Prime Minister claimed. It was quite the claim from the leader of a party that has repeatedly taken money from Russian donors and allowed Britain to become a refuge for dirty Russian money and Putin’s cronies.

Still, if one thing is clear from Putin’s vainglorious pow-wow with Xi Jinping this week, it’s that he already feels emboldened by the way things are shaping up on the global stage. China-Russia ties are “stabilising” for the world, Putin declared as thousands of Ukrainians in the Kharkiv region fled a barrage of Russian glide bombs, artillery and drones.

Putin was basically trolling the West during his high profile overseas state visit – with China no less – which tells you everything there is to know about our failure to defend Kyiv from Moscow’s terror.

While Putin engages in yet more deranged propaganda, and Xi indulges him further with talk of welcoming an “old friend”, Western companies are increasingly making their own minds up about Russia and China’s so-called “stabilising” effect.

Chinese President Xi Jinping, left, and Russian President Vladimir Putin
Chinese president Xi Jinping and Russian president Vladimir Putin have been emboldened to act against the West - Rao Aimin/Xinhua via AP

Reports that Microsoft has asked hundreds of employees in China to consider transferring outside of the country are another reminder of how quickly the walls are coming up between East and West.

Is the great era of globalisation that turned China into the workshop of the world effectively over? It’s still too early to say for sure but there is clearly a dramatic correction taking place – the big question is how severe and painful it will be.

Donald Trump has called it “decoupling”. Brussels prefers to talk more diplomatically about “de-risking”. With more than an eye on getting re-elected, Joe Biden has seemingly chosen to go in the other direction and turbo-charge the realignment into a full-blown divorce.

His decision to whack 100pc tariffs on electric vehicles from China is uncharacteristically bold for a man who has repeatedly shown himself to be a desperately weak international statesman.

After all, it was Biden’s woeful hesitancy over Ukraine – suggesting Western powers would tolerate a “minor incursion” – that at least partly encouraged Putin to go ahead with the invasion. Meanwhile, America’s wavering support for Israel is a gift to its many enemies around the world, not just a regrouped Hamas.

The tariffs are hypocritical, too, coming from someone who once accused Trump of harming American farmers and manufacturers with his trade war against China. Even worse, it risks being reckless. Biden’s tariff smackdown applies not just to electric cars but solar cells and lithium batteries – an attempt to prevent his Made in America green agenda from being undermined by cheap Chinese goods.

In total, $18bn (£14bn) of Chinese imports will be affected. However, it is the decision to quadruple the levy on electric cars that has shocked trade experts most because it effectively cuts off one of the world’s biggest car markets from the planet’s largest producer of electric vehicles in one fell swoop.

Some have dismissed the move as symbolic since very few of the electric cars found on US roads come from China – it accounts for just 2pc of America’s EV imports, according to the Washington-based think-tank CSIS – but that misses the point. Tariffs of this magnitude mean Chinese car manufacturers can kiss goodbye to any hopes they may have had of breaking into the US.

There are those that will argue China has brought this on itself with its growing anti-Westernism, which has spilled into outright hostility and attempts to seriously undermine Western interests.

Yet, in the end it may be American politics that turns deteriorating relations into a catastrophic trade war. Biden’s bet is that in taking an increasingly hardline stance against Beijing, he stands a better chance of defeating Trump in the polls.

Trump is having none of it, accusing the White House of dilly-dallying and promising to go much further by hitting Chinese cars with 200pc tariffs, as well as imposing a 10pc surcharge on imports from everywhere. It’s an unabashed appeal to Rust Belt voters from two candidates determined to prove they will erect an impregnable wall around American industry.

European leaders will be watching nervously. Biden’s actions mean that cheaper Chinese goods will increasingly be directed to the continent, forcing Brussels to ramp up its tariffs in a bid to prevent European markets becoming overwhelmed by Beijing’s dumping.

As all this plays out, the risk of a corporate exodus from China becomes much greater. Ultra-sensitive jobs in technology will move first.

Bankers and accountants will be next, then eventually the big manufacturers. If multinationals don’t go voluntarily, it may get to the point where the US government forces them out. If there’s one thing Democrats and Republicans agree on, it’s a need to lock China out of the West. That should send an icy chill through every major boardroom from Tesla and Nvidia to JP Morgan, Ford and Intel.

Perhaps it was always going to come screeching to a halt at some point. China was never going to become more democratic as Bill Clinton and David Cameron naively believed.

We should all mourn the passing of globalisation. On the current trajectory, the engine of prosperity that has propelled growth since the Cold War is about to be switched off, and that is bad news for the UK in particular, given we have always been one of the world’s most open economies.

It is not in anybody’s interests to see a return to the sort of blanket protectionism ushered in by Smoot-Hawley. That particular piece of US legislation cast a long shadow over the 1930’s by prolonging the effects of the Great Depression, torpedoing world trade, and even complicating international efforts to contain Hitler. What a grim legacy.