US trade policy after Trump

The presidency of Donald Trump, driven by his ‘America First’ agenda, became synonymous with a phenomenon of protectionist populism.

Trade protectionism in the form of tariff walls, exiting and re-negotiating trade deals, reneging on commitments to the World Trade Organization (WTO) and outright trade wars has been the essence of Trump’s foreign economic strategy.

This weaponised version of trade policy has formed a crucial part of his populist agenda and become the way to deliver on election promises to protect American workers hurt by foreign competition and correct what he sees as an unfair US trade balance.

But will the election of Joe Biden reverse this resurgence of American protectionism?

Undoubtedly, Biden’s trade agenda will diverge from Trump’s on several key aspects, including the revival of trade multilateralism by finally re-appointing the judges to the WTO Appellate Body and harnessing a multilateral answer to China’s unfair trade practices. Examples include intellectual property rights theft and subsidies to state-owned enterprises – something other nations similarly view as unfair.

Attempts will certainly be made to repair broken trade relations, including with China, but also with traditional US allies, like the European Union and Canada, which were both hit by Trump’s tariffs on a bizarre claim of national security.

Yet the election of Biden might not be enough to swing the pendulum back toward the glorious free trade era of the 1990s and early 2000s when the inexorable pursuit of new, deeper trade deals liberalising previously untouched areas, such as domestic regulations, was the order of the day.

The protectionist zeitgeist is unlikely to abate.

Most of the changes to US trade policy under the new administration will likely be tactical, ensuring the functioning of the existing rules-based system that suffered severe blows under Trump while avoiding big bold steps needed to re-energise free trade in world increasingly sceptical of its virtues.

The reasons behind the persistence of trade protectionism in the US are both domestic and international and can only be understood in the context of both economic interests and values.

On the domestic front, protectionism remains popular among low-skilled workers hurt by offshoring of production (globalisation losers), but also among left-wing progressives (largely globalisation winners) concerned with free trade’s boost to corporate power and impact on human rights and the environment.

Democrats facing the need to present a coherent message on economic policy would need to pander to both constituencies.

Winning the hearts and minds of working-class voters who have abandoned the Democratic Party in favour of populist promises won’t be possible without tending to their free trade grievances and making concessions on new trade deals.

It’s important to remember that many aspects of Trump’s trade policy enjoyed bipartisan support, with labour unions rallying in favour of re-negotiating the North American Free Trade Agreement (NAFTA) – now known as the US-Mexico-Canada Agreement (USMCA) – to incorporate stronger labour clauses protecting American workers vis-à-vis their Mexican counterparts.

At the same time, placating progressives in the Democratic Party energised by Bernie Sanders and his promises of trade policy reforms will also require channelling free trade scepticism from the newly elected president.

Furthermore, the coronavirus pandemic has made the calls for self-sufficiency in the name of public health commonplace, making deeper economic integration through global value chains less politically tenable.

Re-shoring of production, particularly in the districts severely hit foreign competition, something Trump previously promised, is likely as it will help the Democrats to garner much-needed support among working class voters and signal US readiness for future pandemics to the constituents exhausted by the mishandled COVID crisis.

Joe Biden’s recent embrace of the ‘Buy American’ slogan is telling.

All this suggests that while some of Trump’s tariffs might be rolled back once Biden assumes office, more trade deals that suffer from a bad image might be re-negotiated. The much anticipated US re-entry into the Transpacific Partnership Agreement (TPP) initiated by Obama (known as the CPTPP since the US withdrawal in 2017) might not eventuate.

It is instructive to remember that the TPP became an anathema to both Bernie Sanders and Hillary Clinton.

Any new trade deals – like those between the US and the UK – will be modest in scope and accompanied by measures aimed at mitigating job losses among American workers even in uncompetitive industries, including quotas of imports and non-tariff barriers, like minimum wage requirements.

On the international front, trade policy will continue to be viewed through a realist lens as a tool of economic statecraft in the world of great power rivalry between the US and China.

The politicisation of the US-China trade relationship in the areas of technology and digital trade will continue. Free trade could be freer for some (like the EU) than others.

For decades trade liberalisation was happening primarily within the western bloc, excluding the countries belonging to the Soviet-led Council for Mutual Economic Assistance (COMECON).

Economic and political competition with China and other non-democratic regimes could give the US a much-needed sense of national purpose in the globalised economy and is likely to resonate across the political spectrum.

But the re-coupling of free trade with broader societal values will mean its further politicisation.

This presidency gives Joe Biden a chance to eschew trade unilateralism of his predecessor and position the US once again at the helm of the rules-based order.

The end of trade wars and a return to multilateral practices will be welcomed by most and help the post-COVID economic recovery at home and abroad.

However, at the same time, the politicisation of trade policy will continue and the deep-seated American protectionism won’t go away – even after being stripped of its populist moniker.

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