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22 January 2020

Will Trump’s Trade Wars Reshape the Global Economy?


Once relatively staid, the global economic and trade system has been anything but since U.S. President Donald Trump took office.

The United States and China seem to have hit the pause button yet again on their on again, off again trade war that began last year. Trump launched the series of tit-for-tat tariff hikes over China’s perceived unfair trade practices, including forced technology transfers and the theft of intellectual property. After bringing the world to the brink of a global trade crisis and damaging producers—particularly U.S. farmers—the two sides appeared to be inching toward a deal over the summer. Negotiations then stalled again, and Trump returned to the threat of raising tariffs on a broad range of Chinese imports to the U.S. After a subsequent round of talks, however, Trump announced a limited “phase one” agreement that gives both sides more time to try to iron out their broader differences. That stopgap deal was finally signed today.

Trump’s unpredictable negotiating style and his willingness to brandish the threat of tariffs for leverage in trade talks cannot be particularly reassuring to European officials, who have yet to start their own trade negotiations with the U.S. Trump has already decried what he sees as unfair trade deficits with European Union countries, particularly Germany, and he imposed tariffs on steel and aluminum imports from some allies, without seeming to understand that the EU negotiates trade terms as a bloc. A U.S.-Europe trade war could do lasting damage to both sides.


Trump’s one clear-cut accomplishment on trade is the updated NAFTA deal known officially as the U.S.-Mexico-Canada Act, or USMCA. But it mainly recoups the self-inflicted losses from Trump’s withdrawal from the Trans-Pacific Partnership trade deal, or TPP—only on a smaller North American, rather than trans-Pacific, scale. That deal was finally ratified by the House of Representatives in December, after the administration made numerous concessions to House Democrats to ensure its passage; it is expected to be ratified by the Senate later this week. Trump has also trumpeted a recently agreed deal with Japan as a major success, although it too fell short of the terms Japan had agreed to under the TPP.

It does not help that with the global economic trade system in flux, the body charged with overseeing it is in crisis, exacerbated by the Trump administration’s hostility to multilateral institutions of all stripes. Trump has accused the World Trade Organization of violating U.S. sovereignty, and his administration seems intent on hobbling it due to practices Trump perceives as unfair to the U.S. Though the WTO is clearly in need of reforms, Trump might opt to sink the body rather than try to fix it.

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