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Global Trade and Economy Hang in the Balance

Dr. José Caballero

Dr. José Caballero

Dr. José Caballero is Senior Economist at the IMD World Competitiveness Center in Lausanne, Switzerland.

The 2024 US presidential election comes at a pivotal moment. The next administration may bring greater stability to a global economy endangered by increasing trade frictions and geopolitical risks. Conversely, it could usher in a new era characterized by unstable international institutions and a fragmented global order due to misuse of trade policies and an unwillingness to address international military conflicts.

The record so far: Biden and Trump’s international trade policies in context

It is now confirmed that the 2024 election will be a rematch between President Joe Biden and Donald Trump. The foundations of the Trump administration’s economic strategy were its ‘America First’ protectionist policies. For about 75 years, the USA led in building a system of rules-based trade globalization through institutions such as the World Trade Organization (WTO) and a series of bilateral and multi-lateral trade agreements. Focusing on reducing America’s trade deficits, Trump pledged to renegotiate existing agreements and assert America’s market influence, thus proposing a significant shift in US international economic policy.1 For example, the Trump administration imposed trade restrictions on allies, including tariffs on imports from Canada, the European Union, and Mexico.2 Tariffs were employed as “disciplinary” measures when US trading partners did not respond in a manner the administration deemed appropriate.3 However, Trump’s trade policies failed to achieve their objectives, arguably leading to loss of about 250,000 jobs in America.4

Businesspeople shaking hands with world map superimposed and cityscape in the background

The Biden administration has continued to implement some of these policies, highlighting a significant departure from globalization and trade openness.5 Without considering multi-lateral trading systems’ rules, the government has implemented protectionist policies to align trade with its domestic political objectives. Such intervention in trade policy involves strategically employing tariffs and subsidies.6 Furthermore, under Biden, frictions with China have intensified, with interactions becoming increasingly confrontational, making the achievement of mutual understanding extremely difficult. At the core of this issue is the fact that current policies hamper the balance between competition and cooperation.7 Importantly, this state of affairs challenges the effectiveness of multi-lateral institutions, including the WTO, because the US–China trade conflict serves as a political tool and is intricately connected to the stability and effectiveness of the global institutional order.8 Observers indicate that Biden, similarly to Trump during his administration, has been reluctant to reconstitute the WTO’s appellate body because this would lead to trade sanctions being imposed on the USA for its use of “illegal” restrictions on steel and aluminium imports.9

The way ahead: Potential global effects of election results

The election results could have a crucial impact on the global economy by increasing economic uncertainty, leading financial markets to swing.10 Furthermore, the USA’s relations with key allies such as Europe could be affected. However, while both presidential candidates share common ground on certain issues, including strategic competition with China,11 safeguarding domestic manufacturing, and securing access to critical technologies, they diverge significantly on topics of vital concern to allies.12 In the case of Europe, for instance, the areas of disagreement encompass climate action, the conflict in Ukraine, and the nature of the USA’s overall interactions with its allies. Biden is expected to be on the “positive” end of the spectrum in these issues, with Trump tilting towards the opposite. For instance, if re-elected, Trump is likely to target the European Union with punitive tariffs for old grievances including its hesitation to adopt a firm stance with regard to China.13

According to some observers, Trump’s inclination towards protectionism during his administration strained international relationships and destabilized the global trade system. His potential re-election thus may hasten the WTO’s decline.14 Others believe Biden’s cooperative and multi-lateral approach to trade could have the opposite effect.15 Whichever the case, as discussed above, the Biden administration’s adoption of policies implemented under Trump points in a different direction in terms of his approach to international trade.

There is also apprehension about Trump’s isolationist propensities.16 A new Trump administration could drive the USA towards withdrawing from global politics. Such concerns arise, for instance, owing to Trump’s declared willingness to encourage Russia to invade NATO members who he believes are delinquent in their financial contribution to the organization17 and his objection to the USA’s support for Ukraine.18 Although Biden’s stance differs, his re-election could also exacerbate global politics. Commentators question his administration’s current Middle East strategy, indicating that it is contributing to the region’s instability through, for example, Biden’s reluctance to advocate for an end to the conflict between Israel and Gaza and his decision to launch strikes against Yemen’s Houthis which have led to retaliation against US commercial and military ships, as observers point out.19

No matter who wins, the American presidential election could have far-reaching implications for the world’s economy with its potential to increase uncertainty in international trade and intensify current global power dynamics, which are already conflict-ridden.

Notes and printed references

1 Stiglitz, J.E., 2018. “Trump and Globalization.” Journal of Policy Modeling, 40(3), pp. 515–528

2 See for instance Swanson, A. and Austen, I., 6 August 2020. “Trump Reinstates Tariff on Canadian Aluminium.” The New York Times

3 Stiglitz, 2018

4 Pettis, M., 28 January 2021. “How Trump’s Tariffs Really Affected the U.S. Job Market.” Carnegie Endowment for International Peace

5 Schoenbaum, T.J., 2023. “The Biden Administration’s Trade Policy: Promise and Reality.” German Law Journal, 24(1), pp.102–124

6 Ibid.

7 Heer, P., 22 March 2022. “Why the U.S.-China Strategic Rivalry Has Intensified.” The National Interest

8 Lippert, B. and Perthes, V., 2020. Strategic rivalry between United States and China: Causes, trajectories, and implications for Europe. SWP Research Paper 4, German Institute for International and Security Affairs

9 Bacchus, J., 2022. Echoing Trump, Biden Embraces International Trade Lawlessness. Cato at Liberty Blog, Cato Institute, 12

10 Randall, D. and Krauskopf, L., 24 January 2024. “Analysis - Wall Street Maps Out 2024 Election Impact as Trump Vs Biden Looks Likely.” Reuters

11 See Kennedy, S., 3 January 2024. “U.S.-China Relations in 2024: Managing Competition without Conflict.” Center for Strategic and International Studies

12 Belin, C., Ruge, M. and Shapiro, J., 2023. “Brace Yourself: How the 2024 US Presidential Election Could Affect Europe.” Policy Brief, European Council on Foreign Relations

13 Leonard, J. and Cook, N., 7 February 2024. “Trump Team Targets European Union for Punishing Trade Steps.” Bloomberg

14 Salmon, F., 6 January 2024. “The 2024 Risk that Trumps All Others.” Axios

15 Greve, H., 2021. Joe Biden and a New Era of Multilateralism. GIGA Focus Global, Number 5, German Institute for Global and Area Studies

16 De Luce, D., 25 February 2024. “If Trump Wins, Will the U.S. Become Isolationist?” NBC News.

17 Elving, R., 18 February 2024. “Generations after Its Heyday, Isolationism Is Alive and Kicking up Controversy.” NPR.

18 Nye, J., 5 September 2023. “Is America reverting to isolationism?” The Strategist, Australian Strategic Policy Institute

19 Alzayat, W., 29 January 2024. “Biden’s Gaza Strategy Is an Illogical Disaster.” Time Magazine

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