Rest of World’s Growth Is at Trump’s Mercy
Growth in size of U.S. market gives him extra leverage in trade negotiations with other countries
3 min
Donald Trump will retake office in a global economy substantially transformed from eight years ago—one much more reliant on the U.S.
It means that the president-elect’s plans, including across the board tariffs , could pack an even greater wallop on other countries than the first round of “America First” economic policy. It also gives Trump much more leverage in negotiations over trade policy.
Strong growth since the pandemic has expanded the U.S.’s weight in the global economy. Its share of output among the Group of Seven wealthy nations is higher than at any point since at least the 1980s, International Monetary Fund data shows.
Growth in China, the world’s second-largest economy, has slowed. Germany, the largest European economy, is contracting. Many poorer economies are buckling under the weight of high debt.
U.S. gains in global output partly reflect the strong dollar, which pushes up the value of American output relative to that of foreign economies. But they also result from substantial increases in U.S. productivity compared with the rest of the world.
The changes in the global economy have made America, not China, the premier destination for foreign direct investment, enlarging the exposure that foreign companies have to the U.S. economy and changes in government policy. A booming U.S. stock market has attracted huge flows of investment dollars.
“The fact that much of the rest of the world is now struggling to generate demand on its own provides more reason for countries to try to reach some sort of accommodation with Trump,” said Brad Setser, a senior fellow at the Council on Foreign Relations.
Trump started imposing tariffs in 2018, primarily on China but also on Europe and other allies. Those tariffs fractured global trade, weighing on large exporting economies in Asia and Europe, while not obviously hurting the U.S., which is less reliant on foreign demand than its trading partners. Trump campaigned on a promise to impose at least a 60% tariff on China, and an across the board tariff of 10% to 20% on everywhere else.
America’s superior economic performance has been driven in part by energy independence and massive government spending, said Neil Shearing , chief economist at Capital Economics in London. Since the U.S. now exports more energy than it imports—including millions of barrels of oil each month to China—the nation as a whole benefits when energy prices rise, unlike for net importers such as China and Europe.
The upshot: America’s traditional role as the centre of gravity in the global economy has become even more pronounced in the years after Trump’s first-term tariffs, the pandemic, and Russia’s full-scale invasion of Ukraine.
U.S. influence over Europe’s economy is a case in point. The U.S. has cemented its position as Europe’s largest export market as trans-Atlantic trade surged in recent years and China’s imports from Europe stalled. The U.S. has replaced Russia as Europe’s major source of imported energy. Europe runs big trade surpluses with the U.S. but big trade deficits with China.
The result is access to the U.S. market is far more important for Europe than access to European markets for the U.S. That asymmetry will give Trump leverage in trade negotiations with Europe, according to economists.
Germany exports around 7% of its entire manufacturing value-added to the U.S., but Germany imports only around 0.8% of value-added in U.S. manufacturing, according to a September paper by researchers at Germany’s Ifo Institute for Economic Research.
“German business is vulnerable to Trump,” said Marcel Fratzscher , president of the Berlin-based economic research institute DIW Berlin.
Parts of Asia have benefited from the changes in supply chains sparked by Trump’s initial trade war with China. Many manufacturers, including Chinese ones, moved factories to places such as Vietnam and Cambodia. For the past two quarters, Southeast Asia’s exports to the U.S. have exceeded those to China.
But that now leaves them more exposed to across the board tariffs, a policy that Trump advisers say will be necessary to force manufacturing back to the U.S.
To be sure, Trump’s policies could create countervailing forces. Tariffs would decrease imports and potentially weigh on productivity, but tax cuts would drive up household and business spending, including, inevitably, on imports. Other countries could retaliate by placing tariffs on U.S. goods.
Meanwhile, a tight U.S. labor market has pushed up wages, which is good for those workers. But it could pressure employers to raise prices, in turn making them vulnerable to foreign competition.
Many economists are girding for a different type of trade war from Trump 1.0, when trade fell between the U.S. and China but was diverted elsewhere.
“As long as protectionism refers only to one country, China, the world can live with this,” said Joerg Kraemer , chief economist at Commerzbank. “The thing becomes difficult or dangerous if you implement tariffs on all countries. This would be a new era in global trade.”
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A divide has opened in the tech job market between those with artificial-intelligence skills and everyone else.
JPMorgan Chase has a ‘strong bias’ against adding staff, while Walmart is keeping its head count flat. Major employers are in a new, ultra lean era.
3 min
It’s the corporate gamble of the moment: Can you run a company, increasing sales and juicing profits, without adding people?
American employers are increasingly making the calculation that they can keep the size of their teams flat—or shrink through layoffs—without harming their businesses.
Part of that thinking is the belief that artificial intelligence will be used to pick up some of the slack and automate more processes. Companies are also hesitant to make any moves in an economy many still describe as uncertain.
JPMorgan Chase’s chief financial officer told investors recently that the bank now has a “very strong bias against having the reflective response” to hire more people for any given need. Aerospace and defense company RTX boasted last week that its sales rose even without adding employees.
Goldman Sachs , meanwhile, sent a memo to staffers this month saying the firm “will constrain head count growth through the end of the year” and reduce roles that could be more efficient with AI. Walmart , the nation’s largest private employer, also said it plans to keep its head count roughly flat over the next three years, even as its sales grow.
“If people are getting more productive, you don’t need to hire more people,” Brian Chesky , Airbnb’s chief executive, said in an interview. “I see a lot of companies pre-emptively holding the line, forecasting and hoping that they can have smaller workforces.”
Airbnb employs around 7,000 people, and Chesky says he doesn’t expect that number to grow much over the next year. With the help of AI, he said he hopes that “the team we already have can get considerably more work done.”
Many companies seem intent on embracing a new, ultralean model of staffing, one where more roles are kept unfilled and hiring is treated as a last resort. At Intuit , every time a job comes open, managers are pushed to justify why they need to backfill it, said Sandeep Aujla , the company’s chief financial officer. The new rigor around hiring helps combat corporate bloat.
“That typical behavior that settles in—and we’re all guilty of it—is, historically, if someone leaves, if Jane Doe leaves, I’ve got to backfill Jane,” Aujla said in an interview. Now, when someone quits, the company asks: “Is there an opportunity for us to rethink how we staff?”
Intuit has chosen not to replace certain roles in its finance, legal and customer-support functions, he said. In its last fiscal year, the company’s revenue rose 16% even as its head count stayed flat, and it is planning only modest hiring in the current year.
The desire to avoid hiring or filling jobs reflects a growing push among executives to see a return on their AI spending. On earnings calls, mentions of ROI and AI investments are increasing, according to an analysis by AlphaSense, reflecting heightened interest from analysts and investors that companies make good on the millions they are pouring into AI.
Many executives hope that software coding assistants and armies of digital agents will keep improving—even if the current results still at times leave something to be desired.
The widespread caution in hiring now is frustrating job seekers and leading many employees within organizations to feel stuck in place, unable to ascend or take on new roles, workers and bosses say.
Inside many large companies, HR chiefs also say it is becoming increasingly difficult to predict just how many employees will be needed as technology takes on more of the work.
Some employers seem to think that fewer employees will actually improve operations.
Meta Platforms this past week said it is cutting 600 jobs in its AI division, a move some leaders hailed as a way to cut down on bureaucracy.
“By reducing the size of our team, fewer conversations will be required to make a decision, and each person will be more load-bearing and have more scope and impact,” Alexandr Wang , Meta’s chief AI officer, wrote in a memo to staff seen by The Wall Street Journal.
Though layoffs haven’t been widespread through the economy, some companies are making cuts. Target on Thursday said it would cut about 1,000 corporate employees, and close another 800 open positions, totaling around 8% of its corporate workforce. Michael Fiddelke , Target’s incoming CEO, said in a memo sent to staff that too “many layers and overlapping work have slowed decisions, making it harder to bring ideas to life.”
A range of other employers, from the electric-truck maker Rivian to cable and broadband provider Charter Communications , have announced their own staff cuts in recent weeks, too.
Operating with fewer people can still pose risks for companies by straining existing staffers or hurting efforts to develop future leaders, executives and economists say. “It’s a bit of a double-edged sword,” said Matthew Martin , senior U.S. economist at Oxford Economics. “You want to keep your head count costs down now—but you also have to have an eye on the future.”
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