How Did Donald Trump Change U.S. Trade Policy and What Can We Expect from Joe Biden?

White House USA, Washington D.C. © Fotolia/kuosumo

White House USA, Washington D.C. © Fotolia/kuosumo

Almost no other country in the world has such a strong influence on the multilateral trading system as the United States. But with his “America First” policy, U.S. President Donald Trump increasingly undermined international trade law – at considerable cost to also the United States. Will everything go “back to normal” under Joe Biden?

U.S. President Donald Trump clearly broke with the trade policy of his predecessors. Under Trump, the United States withdrew from the Transpacific Partnership (TPP); the agreements with Mexico and Canada (NAFTA and USMCA, respectively) and South Korea (KORUS) were renegotiated. The Trump administration imposed tariffs on steel and aluminium, threatened to impose auto tariffs and set in motion a tariff spiral with China. Washington triggered a deep crisis in the World Trade Organisation (WTO), as the Trump administration blocked the appointment of new members of the Appellate Body as well as the appointment of a new Director-General.

President Trump seems to perceive trade as a zero-sum game. For him, a negative bilateral trade balance indicates that the respective trading partner is not playing by the rules. At the top of his agenda for the last four years stood China; however, Trump was also very critical of the trade policies of close partners such as the European Union (EU) and Japan. To achieve his goals, President Trump focused on bilateral and quid-pro-quo solutions rather than multilateral cooperation. More interested in “deals” than enforceable international trade law, his approach was very transactional.  His motto was “America First”.

The Key Pillars of Trump’s Trade Policy Agenda

President Trump's trade policy agenda was based on four pillars:

  • Rebalancing U.S. Trade Relationships by Supporting National Security: According to the Trump administration, trade policy should focus more on the national security interests of the United States. Washington saw no sense in concluding trade agreements that make competitors stronger or weaken the United States. With the argument of national security, his administration also justified tariffs on steel and aluminium and threatened to impose tariffs on automobile imports.
  • Re-Negotiation of “Outdated and Imbalanced” Trade Agreements:  and Negotiation of New Agreements “That Benefit All Americans”: The Trump administration wanted to negotiate fairer and more balanced trade agreements to promote U.S. jobs and prosperity. The existing free trade agreement NAFTA between the United States, Mexico, and Canada, now renegotiated as USMCA, was to become more beneficial to all sides. New trade agreements are currently being negotiated with the United Kingdom and Kenya. Negotiations with the EU sought to eliminate imbalances in trade that had existed for years, according to the Trade Policy Agenda, and to reduce the U.S. trade deficit with the EU. Additional goals were to build on the agreements concluded with Japan in 2019 and to conclude a “Phase Two” agreement with China.
  • Aggressive Enforcement of (U.S.) Trade Law: A rigorous application of national trade laws was also a priority of the Trump administration. Unfair trade practices should no longer be tolerated.  One such law is the Trade Act of 1974. Under Section 301 of that law, the president can take retaliatory measures, including imposing tariffs and quotas, if a country denies the United States its rights under a free trade agreement or takes measures that are unjustified, unreasonable, or discriminatory. Section 232 of the Trade Expansion Act of 1962 allows imports to be restricted if they endanger national security. The Trump administration levied 232 tariffs on steel and aluminium and 301 tariffs on Chinese imports. It also implemented more anti-dumping and countervailing measures than its predecessors. Both Section 232 and Section 301 had not been used much since the founding of the WTO in 1995. Section 301 had been used occasionally but accompanied by complaints to the WTO - most recently, before Trump took office in 2013, against Ukraine regarding intellectual property rights. Under Section 232, Ronald Reagan was the last U.S. President before Trump to take action in 1986.
  • Defending U.S. Interests at the WTO: The Trump administration is highly critical of the WTO, criticising that the WTO was no longer “able to keep up with modern economic challenges” and as such, should be reformed. Among other things, Trump criticised the dispute settlement system for overstepping its mandate and intervening in areas for which the WTO members themselves are responsible. As a response, the Trump administration was threatening the functioning of the entire organization by blocking the appointment of members to the appellate body and by refusing to engage in serious reform discussions. In filling the post of WTO director general, the United States is currently speaking out against the Nigerian candidate, supported by the majority of WTO members, and is instead supporting the South Korean candidate, who is considered more pro-United States.

How Does the Population Rate Trump’s Trade Policy?

Overall, a large majority of Americans now believes (according to a Gallup survey from February 2019) that international trade is good for the country. Overall, Republicans and Democrats are relatively united on this issue, but Democrats (79 percent) are more likely than Republicans (70 percent) to believe that trade is an opportunity for economic growth. Until 2011, Republicans’ supporters were even more positive about trade than Democrats. Opinion polls over the past four years do not indicate that Americans are very satisfied with Trump’s trade policy. In 2018, only 31 percent of respondents said they expected positive effects from special tariffs. In 2019, Trump’s trade policy was assessed no better than his overall performance as U.S. president.

The business community was and is extremely critical of the Trump tariffs. Farmers in particular, who suffered heavy losses as a result of China’s retaliatory measures, repeatedly demanded the abolition of the additional trade barriers.

What Trade Policy Does Joe Biden Foresee?

Joe Biden has not yet (as of December 2020) announced his nomination for Secretary of Commerce. He or she is responsible for section 232 measures. For the Office of the U.S. Trade Representative (USTR) he will nominate Katherine Tai, currently still the Democrats’ Chief Trade Counsel in the House of Representatives’ Ways and Means Committee. The USTR’s responsibilities include 301 investigations, among other things. Tai has held different posts at USTR in the past, including Chief Counsel for China Trade Enforcement, and speaks Mandarin. The first official 2021 Trade Policy Agenda of the Biden administration is expected in spring 2021, when the administration and the new USTR will have taken up their work.

As Vice-President under Barack Obama, Joe Biden had been a great advocate of the negotiations on the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP). It is questionable whether as president he will pick up this thread again and give trade policy a high priority. It seems certain that he will not prioritise trade agreements, at least in the first period of his presidency. His focus during his early presidency will instead be on immediate measures for the domestic economy. It is also certain that more attention will be paid to the concerns of labour unions and environmental organisations under Biden. It is therefore unlikely that Biden will quickly withdraw the tariffs on steel and aluminium that the respective unions advocate. Where necessary, Biden also wants to use tariffs, though not to “fake toughness”. Nonetheless, he made it clear that he too will consistently enforce U.S. trade law when U.S. jobs are threatened.

New trade agreements are not on Biden’s agenda for the time being. In principle, however, he wants trade agreements to be based on higher labour and environmental protection standards. Climate protection is important for Joe Biden: During the election campaign, for example, he advocated border adjustments for CO2.

Unlike his predecessor, Biden will focus more on multilateral solutions. It is to be expected that the United States will engage more in the reform debate on the WTO. It remains to be seen whether the new administration will also abandon the blockade of the Appellate Body.

President Trump wanted to bring jobs back to the United States. However, his trade policy also harmed his own economy. With Joe Biden, the past four years will not be erased, nor will all trade conflicts be resolved overnight. Joe Biden will also want to prove that he defends U.S. jobs, and his trade policy will also contain protectionist elements. But he will be more cautious in his use of tariffs and seek to close ranks with partners like the EU in his dealings with China.