Analysts: The damage after the Trump trade war will continue

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After four years in office, Trump has failed to deliver on his promise to eliminate the US trade deficit, and he has given a lasting blow to the multilateral economic system on which global trade is based, analysts say.

Even if Democrat Joe Biden were to win the presidential election, the United States will probably maintain a protectionist line and the confrontations with China will continue, the analysis reads.

The deficit has increased

One of Trump’s main themes in the 2016 election campaign was that the United States, as the world’s largest economy, had been exploited by its trading partners. He promised to shake up global trade agreements and get rid of the country’s trade deficit.

Although there has been much unrest around the global trading system, the US deficit has increased during his presidency. Analysts believe he has little to show for the effort.

“Trump’s trade policies have led to few concrete benefits for the US economy, while undermining the multilateral trading system, disrupting long-standing alliances with US trading partners and promoting insecurity,” said Professor Eswar Prasad of Cornell University.

While the US trade deficit with China – which was Trump’s main target – has actually shrunk, imports from Canada and Mexico have jumped and led to an increase in the overall deficit.

Dependence on suppliers

The increase in tariffs on imported goods, which Washington has imposed on many products, has protected American manufacturers, according to economics professor Gianluca Orefice at the University of Paris-Dauphine.

But the tariffs also increased production costs for American industry and clearly showed the extent of how dependent the United States has become on Chinese suppliers.

The global economic infrastructure is now in a deep state of change.

“His policy has obviously been deeply damaging to Europe and the World Trade Organization, and it will be difficult to repair,” said Edward Alden, a journalist and author who specializes in US trade policy.

Trump has refused to appoint new judges, which has paralyzed the World Trade Organization (WTO) dispute resolution system and prevented arbitrators from ruling the world’s multilateral trading system.

– Donald Trump has shown that he is able to break, but not able to build, says director Sebastien Jean at Cepii, a French research institute for international economics.

– When you look at what he got from China, it is tempting to say: All this for that? he adds.

Reputation as unreliable

The ceasefire in the trade war between the United States and China, which was achieved in January, left major unresolved points of conflict such as theft of intellectual property and forced transfer of technology.

Meanwhile, the Trump administration’s erratic statements and political decisions have resulted in the United States being perceived as an unreliable trading partner, says Prasad from Cornell University.

This has led some countries to bypass the United States and instead enter into bilateral or multilateral trade pacts. For example, the Pacific nations went ahead with an agreement after Trump withdrew the United States from the Trans-Pacific Partnership Agreement.

Before the election, Trump has highlighted his strength as a businessman and ability to enter into agreements, but he has shown little sense of intricate and intense multilateral negotiations. Instead, he prefers to complain about German cars and a French tax on the big technology companies.

“Trump’s four years in office have resulted in the weakening of the rules-based multilateral trading system, embodied by the World Trade Organization, which the United States helped establish,” Prasad said.

This can make it more difficult to achieve much in terms of cooperation and support to strengthen a global economy under pressure from the corona pandemic.

Small realpolitik difference

The American journalist Edward Alden acknowledges Trump for having succeeded in renegotiating the North American free trade agreement with Canada and Mexico, which has had the support of both Democrats and Republicans.

Cepiis Sebastien Jean also praises Trump for having managed to change the dynamics of China, which helped the EU change its policy towards Beijing. Among other things, several European countries joined forces with the United States to ban 5G mobile equipment from the Chinese manufacturer Huawei.

The Brussels-based think tank Bruegel believes that a victory for Biden will mean a reunion with a more polite American diplomatic style.

But the content may not change much.

“The difference between Trump and Biden when it comes to trade is smaller than when it comes to many other issues,” says Alden.

– Avoidable settlement

Both Democrats and Republicans have become more steep in their position vis-à-vis China in recent years. China is now seen as a challenger that must be curbed, as the liberal market economy has not developed as hoped.

“Under both candidates, the trade war is likely to spread,” said Vicky Redwood of the Capital Economics Research Advisory Center.

“The trade war was initially inevitable in terms of China’s economic growth and the use of government intervention rather than the introduction of market forces,” she says.

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