What America’s presidential election means for world trade

In the 1990s presidential hopefuls fought over how much America should open itself up to commerce with other countries. Nowadays, the trade debate revolves around how much America should close itself off. Donald Trump is unquestionably the more radical of the two candidates, with a vision for tariffs that would turn the clock back nearly a century on economic strategy. Kamala Harris is less extreme but still sees a world in which America is best served by soft protectionism, featuring subsidies for favoured industries.

For Mr Trump the direction of travel is absolutely clear. In his first term in the White House he called himself a “tariff man”, arguing that levies on foreign countries were a way to maximise American economic power. He started with tariffs on washing machines and solar panels, then turned to steel and aluminium, before finally getting into a trade war with China. And that may have been a mere prelude for what he would do in a second term.

This is one of a series of forthcoming briefs about the policy implications of America’s election. Read the others here:

He has vowed to slap a tariff on all imports into America. Earlier in the campaign he said this universal tariff might be 10%; recently he has upped the ante to 20%. But his fiercest statements are focused on China, threatening tariffs of up to 60% on made-in-China goods. He has also mooted stripping China of its most-favoured nation status, a decision that would strike at the foundations of the already-weakened World Trade Organisation.

From a legal perspective, Mr Trump ought to have a fairly easy path to putting higher tariffs on China. He could deem China to be in violation of the trade deal signed during his first term (China’s imports from America have fallen far short of unrealistic targets), and then increase tariffs as punishment. The path to universal tariffs is more fraught, however. Some experts think that Mr Trump may declare America’s trade deficit to be a national emergency, allowing him to invoke the International Emergency Economic Powers Act. But companies would be likely to challenge that in court. So ultimately he may need to persuade Congress to write tariffs into law.

Many Republicans remain sceptical—rightly so—about the economic effects of tariffs. Yet Mr Trump will have one argument that will appeal to them: tariffs would help to pay for the tax cuts they want. America imports about $3trn-worth of goods a year, so a 10% tariff would, in theory, generate roughly $300bn of federal revenue. The trouble is that tariffs would weigh on American growth, especially as other countries retaliate. Mr Trump’s trade policies would take the economy on a contentious and risky path.

Ms Harris’s views on trade, as on many other topics, are cloudier. She is certainly not a champion of free trade. When Mr Trump renegotiated America’s trade deal with Mexico and Canada in 2020, she was one of only ten senators to vote against it, arguing that it was especially weak in its environmental protections. And like Mr Biden, Ms Harris displays no enthusiasm for traditional trade negotiations. At the same time she is most definitely not a “tariff woman”. She regularly describes Mr Trump’s universal-tariff idea as a national sales tax, and has made it the focal point of her criticism of Mr Trump’s economic plans, citing estimates that it would raise prices for the typical family by about $4,000 per year.

As for what she would do, Ms Harris’s positions appear to largely build on President Joe Biden’s approach to trade on two fronts. First, she is calling for subsidies to build up the country’s manufacturing muscle. In her platform she has called it the “America Forward” tax credit, saying it would direct tens of billions of dollars to help America succeed in the industries of the future, including clean energy—potentially similar to the industrial subsidies in Mr Biden’s Inflation Reduction Act that have worried other countries.

The second front is a willingness to take punitive trade actions against China “when it breaks the rules”, as she puts it. The implication is that she would continue to support tariffs on China, similar to the increases recently implemented by the White House against Chinese electric vehicles and semiconductors, among other things. To her mind, the distinction is that her tariffs would be strategic and targeted, whereas Mr Trump’s reflect a chaotic, blunderbuss approach.

All this should leave the world with a rather discouraging view of where America is headed on trade. Under Mr Trump America would build up its tariff walls. Ms Harris is less keen on walls but she is not about to build bridges.

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