- There's new pressure to pivot from globalization, but doing so would be "impossible," Gary Cohn said.
- The US still needs commodities from other countries, the former advisor to President Trump added.
- Moving away from global trade would also create "astronomical" inflation, Cohn said.
Russia's invasion of Ukraine might be upending the international economic order, but don't count globalization out just yet, Gary Cohn, vice-chairman of IBM and former chief economic advisor to President Donald Trump, said Monday.
The Russia-Ukraine invasion, related sanctions, and their effects on inflation have amplified arguments about economic independence in recent weeks. While the West has rushed to distance itself economically from the Kremlin, much of Europe is still highly dependent on Russian energy. Other countries' reliance on Russian fertilizer and Ukrainian wheat also risk hunger crises around the world. The ties have prompted new calls for domestic economic strength and a turn away from globalization.
Actually ending the decades-long status quo is much easier said than done, Cohn said in a panel discussion organized by the Milken Institute. The US still leans on other countries for valuable commodities like nickel, cobalt, and aluminum. Unless the entire economy shifts toward sourcing key materials domestically, the country will have to rely on partners abroad, Cohn said.
"Those who want to end globalization, good luck. It's impossible," he said. "We could go through thousands of things in this country that we just assume show up every day, that we do not have or we do not manufacture."
Cohn's remarks on globalization came at the end of the discussion and followed calls by other panelists for the US to bolster domestic production. Such sentiment has swept through the economic and political field over the past decade as policymakers cheered efforts to move offshored jobs and industries back to the US. President Trump made such action a major element of his 2016 presidential campaign, frequently linking his "Make America Great Again" slogan to his plans to revive US manufacturing.
The US "should" reshore some industries, but the country is far from ready to transition from the global supply chain, Cohn said. Trying to wean the country off of foreign goods could also worsen the already massive gap between supply and demand that's driven prices sharply higher, he added.
"Do I think that a vast majority of things that come through ports in this country are going to stop coming through? I don't," Cohn said. "The inflation that would create in the system would be just astronomical."
Ditching globalization would also leave the US with a diminished ability to sell its goods and services to other countries, Cohn added. The US has imported more than it's exported for at least three decades, but exports have climbed steadily over the same period. Total exports have also staged a full recovery from the pandemic crash and hit a record high in the first quarter.
The US would dramatically shrink its export market if it were to pivot from globalization, Cohn said.
"Do we really want to create a microcommunity of 340 million?" he said. "There are people all over the world who should be our customers."