Consider what immediately preceded the coronavirus. Global steel and aluminium tariffs imposed by the United States in 2018 were a shock to the global trade system and produced almost immediate in-kind retaliation. The gradually escalating US-China trade war began to ramp up later that year, taking the average US tariff on Chinese imports from 3 per cent at the onset to almost 20 per cent now.

China’s exports to the US dropped 12.5 per cent last year, while China’s imports from the United States plunged 20.9 per cent in 2019 from a year earlier, according to data from China’s General Administration of Customs.

The US continues to weigh other substantial trade actions that will surely beget commensurate retaliation. Given all this, it is perhaps unsurprising that, last year, global trade suffered its worst performance ever outside a recession, growing by only 1 per cent.

These bilateral trade tensions and disputes are unfolding as the multilateral trade system is, to a large degree, simply breaking down. In the quarter-century of its existence, the World Trade Organisation has failed to conclude even a single round of multilateral trade negotiations and its dispute settlement function has been derailed by an impasse over appellate judges.

The US-China tech war overshadows ‘phase one’ trade deal

Meanwhile, technological advances ranging from automation to artificial intelligence and additive printing are weakening the economic rationale for maintaining far-flung supply chains. As automation increases, the importance of wage differentials decreases.

As the capabilities of additive printing advance, so does the ability of companies to keep operations onshore. As tariff walls grow, the cost associated with moving products across borders also grow. In these cases, the benefits of trade are waning, while the downsides mount.

As if these developments were not concerning enough, the coronavirus has added a layer of trade-dampening implications.

The painful experience of the epidemic is unlikely to be quickly forgotten by corporate risk managers or government officials pursuing greater national economic resilience. Also, the trade landscape has become more like a battlefield and technology is eroding the underlying economic rationale for trade.

Long-term implications

Ultimately, our age might come to be seen as the beginning of a new trade epoch as consequential as the post-war founding of our multilateral trade system. In a sense, the seven-decade-long “honeymoon for trade” — in which a rock-solid belief in trade’s benefits underpinned a steadily deepening trade and economic integration – might be coming to an end.

If we wish to ensure the sustainability of trade, the challenge will be to recognize and confront the new and sometimes uncomfortable realities of imbalanced trade outcomes, rather than rely on the assumptions, structures and conventional wisdom that have defined our approach to trade in the post-war era.

Two threshold questions cannot be avoided: is more trade always of benefit to an economy? And, is reliance on a single trading partner ever sustainable?

The tough questions we need to ask should not cause us to overlook or diminish the beneficial role trade can continue to play, both in terms of the economic benefits it can generate and the geostrategic stability it can help cement.

Ultimately, the most enduring legacy of the coronavirus might be in helping to necessitate a reconsideration and recalibration of our approach to trade.