In countries that are recovering only sluggishly from the Great Recession, many of society's major challenges have been blamed on globalization. According to a popular view, the lowering of trade barriers in global markets and the increased flow of goods and labor across national borders have caused wage stagnation, fewer job opportunities, and widening income inequality, among other problems. Resistance to globalization has spawned a backlash in developed economies, with the United Kingdom's "Brexit" vote to leave the European Union and the outcome of the U.S. presidential election being two major recent examples. This is not a new phenomenon, however, and one does not have to look far to find other examples. The North American Free Trade Agreement (NAFTA) of the 1990s faced fierce opposition, epitomized by the presidential candidate Ross Perot's 1992 declaration that if it were enacted "there will be a giant sucking sound going south." Meetings of the World Bank, World Trade Organization, and International Monetary Fund were all marked by fierce anti-globalization protests throughout the 1990s and early 2000s.
Historically, a country's popular sentiment around globalization has varied in proportion to the health of its economy. The Great Depression of 1929-1939 presents a clear example; as the U.S. economy's performance worsened, legislators embarked on a program of increased protectionism that included the Smoot-Hawley tariffs, which were countered by tariffs raised by other countries. This type of trade war is widely regarded as having exacerbated the Depression.
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[Figure 1] Real U.S. mean household income by quintileEnlarge this image
Support for globalization is currently at another low point. In the United States, presidential candidates of both major parties were opposed to the Trans-Pacific Partnership (TPP), while one went further, labeling NAFTA the "worst trade deal in history" and making reducing immigration a major campaign plank. The unsatisfying pace of the economic recovery since the Great Recession, which ended in June 2009, and the displacement of workers due to the development of new technologies have caused stewing economic anxieties for many in the country, amplifying anti-globalist attitudes. The Great Recession was brutal for many middle- and lower-income households, and many middle-class families were forced into a lower standard of living during the recession and the subsequent anemic recovery. (See Figure 1.)
Things are finally starting to improve for many American households. In 2015 household income made a comeback, gaining 5.2 percent—the largest one-year increase on record, and the first statistically significant increase since 2007 (standing only 1.6 percent below its 2007 level). Real median household income has not yet regained its pre-recession peak, but we expect it to surpass its 2007 level next year. (See Figure 2.)
Americans have not been alone in their angst. Many in the U.K.'s middle class, especially in rural areas, saw their standard of living slip as well. The resulting backlash in that country has occurred alongside a corresponding increase in anti-immigrant sentiment. Indeed, resentment over high rates of immigration was a major factor in the outcome of the vote to separate from the European Union.
Brexit and political uncertainty in Europe have clouded Europe's economic outlook. There are elections scheduled for 2017 in the Netherlands (March), France (April/May), and Germany (around September). Moreover, Italy's prime minister resigned in early December, and new elections potentially could be called next year. Now the recent U.S. election has added to those risks. The outcome of the U.S. election could not only embolden right-wing populist parties in Europe, but it could also make the Brexit negotiations more complicated.
The perils of protectionism
Resistance to globalization is spreading and gaining attention, but it is highly misguided. Although freer trade and immigration do produce "winners" and "losers," their net effects have been unambiguously positive for developed economies. Six years after NAFTA's signing in 1994, the U.S. economy was booming, and the unemployment rate reached 3.8 percent—its lowest point in 30 years. NAFTA probably helped, and it certainly didn't hurt. Similarly, immigrants almost always provide a net benefit to a host economy. Although this is particularly true of high-skilled immigrants—a group that disproportionately creates businesses, earns doctorates in science and engineering, files patents, and wins Nobel Prizes—it is also true of low-skilled immigrants. These workers typically do not cause lower wages or outcompete the native-born for jobs. Instead, they take jobs native workers do not want, such as those in the agricultural and cleaning industries.
The effects of technological growth on a developed economy are virtually identical to those of globalization—but they occur on a much larger scale. On balance, both forces destroy jobs but create more than they eliminate. The effect is asymmetrical, however. Workers with lower levels of skills, education, and mobility tend to lose out, while higher-skilled workers generally benefit. However, all consumers, especially the poor, benefit from the better product quality and lower prices that result.
Because the costs of these effects in the form of lost jobs are easier to spot than diffuse increases in purchasing power and economic performance, it can be politically convenient to oppose free trade and immigration. But efforts to limit globalization—through such means as protectionist tariffs—both raise prices and damage the competitiveness of domestic industries that import raw materials. Instead of focusing on globalization itself, attention would be better spent on helping those hurt by globalization and technological advancement. There are plenty of ways to do it: increasing access to higher education and job training, growing wage insurance programs, and expanding negative income taxes (such as the U.S. earned-income tax credit), to name just a few. These types of policies produce much more socially beneficial results than attempting to halt globalization or technological growth.
The election of Donald Trump as the next president of the United States has the potential to upend the global status quo and to alter the economic outlook. In part, the degree of disruption will depend on the extent to which his protectionist talk carries through to his policies. If the Trump administration's actions mirror some of its more extreme campaign rhetoric—if it places significant barriers on trade or carries out mass deportations—then gross domestic product (GDP) growth and growth in trade will likely both diminish even as inflation increases, a condition known as "stagflation." On the other hand, if he pursues more pragmatic, "pro-growth" policies, then economic growth, interest rates, and inflation will all be higher. This latter outcome would benefit most, but not all, of the countries around the world.
Business software vendor Cleo has acquired DataTrans Solutions, a cloud-based procurement automation and EDI solutions provider, saying the move enhances Cleo’s supply chain orchestration with new procurement automation capabilities.
According to Chicago-based Cleo, the acquisition comes as companies increasingly look to digitalize their procurement processes, instead of relying on inefficient and expensive manual approaches.
By buying Texas-based DataTrans, Cleo said it will gain an expanded ability to help businesses streamline procurement, optimize working capital, and strengthen supplier relationships. Specifically, by integrating DTS’s procurement automation capabilities, Cleo will be able to provide businesses with solutions including: a supplier EDI & testing portal; web EDI & PDF digitization; and supplier scorecarding & performance tracking.
“Cleo’s vision is to deliver true supply chain orchestration by bridging the gap between planning and execution,” Cleo President and CEO Mahesh Rajasekharan said in a release. “With DTS’s technology embedded into CIC, we’re empowering procurement teams to reduce costs, improve efficiency, and minimize supply chain risks—all through automation.”
And many of them will have a budget to do it, since 51% of supply chain professionals with existing innovation budgets saw an increase earmarked for 2025, suggesting an even greater emphasis on investing in new technologies to meet rising demand, Kenco said in its “2025 Supply Chain Innovation” survey.
One of the biggest targets for innovation spending will artificial intelligence, as supply chain leaders look to use AI to automate time-consuming tasks. The survey showed that 41% are making AI a key part of their innovation strategy, with a third already leveraging it for data visibility, 29% for quality control, and 26% for labor optimization.
Still, lingering concerns around how to effectively and securely implement AI are leading some companies to sidestep the technology altogether. More than a third – 35% – said they’re largely prevented from using AI because of company policy, leaving an opportunity to streamline operations on the table.
“Avoiding AI entirely is no longer an option. Implementing it strategically can give supply chain-focused companies a serious competitive advantage,” Kristi Montgomery, Vice President, Innovation, Research & Development at Kenco, said in a release. “Now’s the time for organizations to explore and experiment with the tech, especially for automating data-heavy operations such as demand planning, shipping, and receiving to optimize your operations and unlock true efficiency.”
Among the survey’s other top findings:
there was essentially three-way tie for which physical automation tools professionals are looking to adopt in the coming year: robotics (43%), sensors and automatic identification (40%), and 3D printing (40%).
professionals tend to select a proven developer for providing supply chain innovation, but many also pick start-ups. Forty-five percent said they work with a mix of new and established developers, compared to 39% who work with established technologies only.
there’s room to grow in partnering with 3PLs for innovation: only 13% said their 3PL identified a need for innovation, and just 8% partnered with a 3PL to bring a technology to life.
Even as a last-minute deal today appeared to delay the tariff on Mexico, that deal is set to last only one month, and tariffs on the other two countries are still set to go into effect at midnight tonight.
Once new U.S. tariffs go into effect, those other countries are widely expected to respond with retaliatory tariffs of their own on U.S. exports, that would reduce demand for U.S. and manufacturing goods. In the context of that unpredictable business landscape, many U.S. business groups have been pressuring the White House to pull back from the new policy.
Here is a sampling of the reaction to the tariff plan by the U.S. business community:
American Association of Port Authorities (AAPA)
“Tariffs are taxes,” AAPA President and CEO Cary Davis said in a release. “Though the port industry supports President Trump’s efforts to combat the flow of illicit drugs, tariffs will slow down our supply chains, tax American businesses, and increase costs for hard-working citizens. Instead, we call on the Administration and Congress to thoughtfully pursue alternatives to achieving these policy goals and exempt items critical to national security from tariffs, including port equipment.”
Retail Industry Leaders Association (RILA)
“We understand the president is working toward an agreement. The leaders of all four nations should come together and work to reach a deal before Feb. 4 because enacting broad-based tariffs will be disruptive to the U.S. economy,” Michael Hanson, RILA’s Senior Executive Vice President of Public Affairs, said in a release. “The American people are counting on President Trump to grow the U.S. economy and lower inflation, and broad-based tariffs will put that at risk.”
National Association of Manufacturers (NAM)
“Manufacturers understand the need to deal with any sort of crisis that involves illicit drugs crossing our border, and we hope the three countries can come together quickly to confront this challenge,” NAM President and CEO Jay Timmons said in a release. “However, with essential tax reforms left on the cutting room floor by the last Congress and the Biden administration, manufacturers are already facing mounting cost pressures. A 25% tariff on Canada and Mexico threatens to upend the very supply chains that have made U.S. manufacturing more competitive globally. The ripple effects will be severe, particularly for small and medium-sized manufacturers that lack the flexibility and capital to rapidly find alternative suppliers or absorb skyrocketing energy costs. These businesses—employing millions of American workers—will face significant disruptions. Ultimately, manufacturers will bear the brunt of these tariffs, undermining our ability to sell our products at a competitive price and putting American jobs at risk.”
American Apparel & Footwear Association (AAFA)
“Widespread tariff actions on Mexico, Canada, and China announced this evening will inject massive costs into our inflation-weary economy while exposing us to a damaging tit-for-tat tariff war that will harm key export markets that U.S. farmers and manufacturers need,” Steve Lamar, AAFA’s president and CEO, said in a release. “We should be forging deeper collaboration with our free trade agreement partners, not taking actions that call into question the very foundation of that partnership."
Healthcare Distribution Alliance (HDA)
“We are concerned that placing tariffs on generic drug products produced outside the U.S. will put additional pressure on an industry that is already experiencing financial distress. Distributors and generic manufacturers and cannot absorb the rising costs of broad tariffs. It is worth noting that distributors operate on low profit margins — 0.3 percent. As a result, the U.S. will likely see new and worsened shortages of important medications and the costs will be passed down to payers and patients, including those in the Medicare and Medicaid programs,” the group said in a statement.
National Retail Federation (NRF)
“We support the Trump administration’s goal of strengthening trade relationships and creating fair and favorable terms for America,” NRF Executive Vice President of Government Relations David French said in a release. “But imposing steep tariffs on three of our closest trading partners is a serious step. We strongly encourage all parties to continue negotiating to find solutions that will strengthen trade relationships and avoid shifting the costs of shared policy failures onto the backs of American families, workers and small businesses.”
In a statement, DCA airport officials said they would open the facility again today for flights after planes were grounded for more than 12 hours. “Reagan National airport will resume flight operations at 11:00am. All airport roads and terminals are open. Some flights have been delayed or cancelled, so passengers are encouraged to check with their airline for specific flight information,” the facility said in a social media post.
An investigation into the cause of the crash is now underway, being led by the National Transportation Safety Board (NTSB) and assisted by the Federal Aviation Administration (FAA). Neither agency had released additional information yet today.
First responders say nearly 70 people may have died in the crash, including all 60 passengers and four crew on the American Airlines flight and three soldiers in the military helicopter after both aircraft appeared to explode upon impact and fall into the Potomac River.
Editor's note:This article was revised on February 3.
GE Vernova today said it plans to invest nearly $600 million in its U.S. factories and facilities over the next two years to support its energy businesses, which make equipment for generating electricity through gas power, grid, nuclear, and onshore wind.
The company was created just nine months ago as a spin-off from its parent corporation, General Electric, with a mission to meet surging global electricity demands. That move created a company with some 18,000 workers across 50 states in the U.S., with 18 U.S. manufacturing facilities and its global headquarters located in Massachusetts. GE Vernova’s technology helps produce approximately 25% of the world’s energy and is currently deployed in more than 140 countries.
The new investments – expected to create approximately 1,500 new U.S. jobs – will help drive U.S. energy affordability, national security, and competitiveness, and enable the American manufacturing footprint needed to support expanding global exports, the company said. They follow more than $167 million in funding in 2024 across a range of GE Vernova sites, helping create more than 1,120 jobs. And following a forecast that worldwide energy needs are on pace to double, GE Vernova is also planning a $9 billion cumulative global capex and R&D investment plan through 2028.
The new investments include:
almost $300 million in support of its Gas Power business and build-out of capacity to make heavy duty gas turbines, for facilities in Greenville, SC, Schenectady, NY, Parsippany, NJ, and Bangor, ME.
nearly $20 million to expand capacity at its Grid Solutions facilities in Charleroi, PA, which manufactures switchgear, and Clearwater, FL, which produces capacitors and instrument transformers.
more than $50 million to enhance safety, quality and productivity at its Wilmington, NC-based GE Hitachi nuclear business and to launch its next generation nuclear fuel design.
nearly $100 million in its manufacturing facilities at U.S. onshore wind factories in Pensacola, FL, Schenectady, NY and Grand Forks, ND, and its remanufacturing facilities in Amarillo, TX.
more than $10 million in its Pittsburgh, PA facility to expand capabilities across its Electrification segment, adding U.S. manufacturing capacity to support the U.S. grid, and demand for solar and energy storage
almost $100 million for its energy innovation research hub, the Advanced Research Center in Niskayuna, NY, to strengthen the center’s electrification and carbon efforts, enable continued recruitment of top-tier talent, and push forward innovative technologies, including $15 million for Generative Artificial Intelligence (AI) work.
“These investments represent our serious commitment and responsibility as the leading energy manufacturer in the United States to help meet America’s and the world’s accelerating energy demand,” Scott Strazik, CEO of GE Vernova, said in a release. “These strategic investments and the jobs they create aim to both help our customers meet the doubling of demand and accelerate American innovation and technology development to boost the country’s energy security and global competitiveness.”