Decades of progress freeing up global trade look like ending as both candidates in the looming United States presidential elections have policies imposing tariffs on imported products that could provoke global retaliation.
Both the Democrats and the Republicans have policies to impose import tariffs – and, while China is their primary target, all imports into the US could be impacted, leading to fears of global trade disruption.
Donald Trump, the Republicans’presidential candidate, is threatening to impose a 60% tariff on all imports from China and to add a 10% tariff on imports from the rest of the world.
US President Joe Biden had already moved on Chinese imports. In mid-May the White House slapped tariffs ranging from 25% on items such as steel, aluminium and lithium batteries to 50% on semiconductors, solar cells, syringes and needles and 100% on electric vehicles.
“Their actions and reactions will shape the rules of the 21st century,” said Gary Hufbauer, a Senior Fellow at the Peterson Institute of International Economics in an analysis for the East Asia Forum of the two presidential candidates.
Hufbauer said if Trump is elected, US industry will have greater protection from Chinese products and if Biden is re-elected, he will face political pressure to ban imports of manufactured products that contain significant Chinese components.
China will retaliate but, he said, neither candidate appears worried about that prospect or how it might damage to the fabric of global economic rules.
Hufbauer said tariffs could be extended to imports covered by 14 free trade agreements with 20 partners.
On the back of Biden’s tariff hike on electric vehicles, Trump has raised the ante with a promise to increase the tariff to 200%.
This is despite findings by the US International Trade Commission, a number of economists, as well as Biden’s 2019 criticism of Trump’s earlier tariff policies, that the higher costs will be paid by American consumers, not China.
Hufbauer said the era of global trade co-operation is over.
“Whether the fabric of global economic rules that has delivered astounding prosperity to the world will survive through the 21st century, remains to be seen.
“Much will depend on the decisions of other large economic powers, not only China but also the European Union and Japan, as well as middle powers, such as Australia, Brazil, Chile, ASEAN and South Korea.
“If others follow the US the world will become less prosperous and vastly more unpredictable.
“If they resist, the US risks being diminished and more isolated.
“Whatever emerges, history will see the Trump-Biden era as a turning point in world economic affairs,” he said.
William Reinsch, the Scholl Chair in International Business at the Centre for Strategic and International Studies, said the Democratic Administration trade policy has become very political.
This follows the intraparty battle that followed the proposed Trans-Pacific Partnership debate in 2015-16.
It proposed a 12-country free trade agreement based on Pacific rim countries but despite support from President Barack Obama, there was resistance from within his party, which caused some infighting.
Trump later withdrew the US from the agreement.
Reinsch said should Biden be re-elected, the US’s trade policy is unlikely to change.
“The reality is that, while the public continues to broadly support trade, the politics within the Democratic Party have not changed much.
“The two branches are still there and are still at odds. That means the administration’s trade policy, if it is returned to office, is likely to remain the same.”
