What could a second Biden or Trump presidency mean for global trade?

In most policy areas, the current and the former occupant of the White House could not be more different. When it comes to trade, however, Messrs Biden and Trump–the contenders in the 2024 US presidential election–no longer seem like polar opposites. Both favour protectionist policies, neither is fond of major free-trade agreements, and they are similarly tough on China. Still, differences do remain in their approach to global trade and who is elected for a second term in November will have a significant impact on consumers and businesses alike.

Act one

No doubt, the Trump presidency upended global trade. On his first day in office, Mr Trump withdrew from the Trans-Pacific Partnership, a trade agreement between 12 Pacific Rim economies, and up until he left the Oval Office, the self-described “tariff man” acted upon his catchphrase.¹ From around 3% in 2018, US tariffs on roughly two-thirds of Chinese exports had reached, on average,19% in 2020.² In addition, US tariffs on European and Canadian steel and aluminium, once consigned to history, were reintroduced at 25% and 10% respectively.³ In short, under Mr Trump, the US’ approach to trade saw a shift towards protectionism, a policy where barriers to international trade are imposed to shield domestic industries from global competition.

Mr Biden has reversed some of his predecessor’s work–tariffs on EU countries, for example, have again been consigned to history.⁴ But much remains: to this day, most of Mr Trump’s tariffs on Chinese goods are actively promoted by the Biden Administration, and “de-risking” from China is championed.^5,6 When it comes to major trade agreements, despite hopes for an expanded arrangement with 13 Indo-Pacific economies through the existing Economic Framework, negotiations on the trade part of the deal have stalled.⁷ Further, the protectionist shift spurred by Mr Trump has only been accelerated by Mr Biden, albeit with a seemingly clearer goal. Indeed, the legislative backbone of the Biden Administration is designed to re-industrialise the US economy (while making gains in the green transition and purportedly protecting national security) – but all at the expense of other countries. The CHIPS act contains roughly $280bn of subsidies promoting semiconductor manufacturing in the US, while the Inflation Reduction Act, equipped with $400bn or so of subsidies, does the same but for green manufacturing.^8,9

With their track records in view, what could a Biden or Trump second term mean for global trade after the election in November this year?

Biden 2024: More of the same

In the case of a second Biden presidency, the answer is clearer and is spelled out by Mr Biden himself: “Let's finish this job!” he says in his re-election bid.¹⁰ And indeed, if Mr Biden stays in office, the Administration is likely to focus on implementing its legislative achievements from the first term. Businesses would have greater certainty in the subsidies for a return of US manufacturing, which is likely to embolden US government discrimination of other countries (ones the US has no FTA with) and, ultimately, stifle an open international trading system. Put simply, the US protectionist turn will keep up its current momentum.

Yet Mr Biden’s handouts to US businesses have already angered European allies.¹¹ In a second Biden presidency, managing transatlantic relations on trade and avoiding protectionism’s ratchet effect with the EU would be crucial. A key indicator of success would be whether the US and Europe can conclude an agreement on critical minerals (needed for the green transition and, today, largely supplied from China).¹² Without such an agreement, the US and Europe would compete for resources, leading to higher prices, geopolitical tensions, and, ultimately, hindered environmental goals. In turn, whether such an agreement is reached would reveal the fundamental choice of a second Biden presidency: to remain unconvinced by free-trade or actively to trade with allies, while being cautious on economic security.

This choice would also underpin whether the US joins large free-trade groups or expands the trade component of other economic partnerships during Mr Biden’s second term. His Administration has emphasised reviving international ties as a key priority, but in terms of trade, only bilateral agreements that, in reality, support US manufacturing have been pursued – for example, with Indonesia.¹³ When it comes to a wider commitment to trade cooperation, analysis by the Economist Intelligence Unit forecasts that even with Mr Biden in the White House, the US is unlikely to build significantly upon or expand its partnerships in the coming years.¹⁴ The economies hoping to benefit from a trade “pillar” of the Indo-Pacific Economic Framework initiative are likely to remain disappointed.¹⁵

Trump 2024: The same but more

Mr Biden’s attempts to engage with allies, despite his protectionist handouts and reluctance toward major free-trade agreements, is still far from Mr Trump’s all-around distrust of free trade. Indeed, in the case of a second Trump presidency, a 10% tariff on all goods imported to the US (higher for those from China) appears likely.¹⁶ This commitment is not merely reiterated at campaign rallies but is also supported by a series of Mr Trump’s to-be staff, such as his former chief trade negotiator, Robert Lighthizer, who sees a universal tariff as a means “to reduce America’s trade deficit and to rejuvenate American manufacturing”.^17,18 The expected 10% universal tariff is likely to weigh heavily on businesses and consumers, and poses considerable inflationary risks (a forecast suggests Mr Trump’s proposed tariffs could raise inflation up to 4% by the end of 2025).¹⁹ Additionally, it is likely to result in retaliation by other countries, with significant repercussions for global trade. One key actor that will likely respond differently in a second Trump presidency to revived tariffs is the EU Commission, which has, since Mr Trump’s time in office, reinforced its tools to protect its trade interests.²⁰ (Mr Trump has also pledged full reciprocity: to match any tariffs that countries might impose on US exports.) Mr Trump’s all-round tariffs approach would have serious implications on the US’ role in global trade. The US, once the main proponent of the multilateral free-trade system, would be turning its back on that system.

This possible reversal of the US’ role in global trade under Mr Trump would matter most with respect to engaging with China, notwithstanding that both he and Mr Biden exhibit similar concerns and both are unequivocal about the US’ reliance on the Asian giant and the need to disentangle. Their means of doing so, however, differ. While Mr Biden would work with allies, such as European countries, in reconfiguring supply chains to minimise risk from exposure to China (successfully or not), Mr Trump is not likely to seek wide cooperation. Yet Mr Biden has not shied from taking a tough stance; his administration has worked with allies to impose export restrictions on semiconductors and other sensitive goods – an approach that is likely to expand in scope and include certain protectionist elements, such as tariffs on Chinese EVs, in a second term.²¹ Mr Trump has gone further. If elected, he has threatened a 60% or higher tariff on all Chinese goods–a substantial escalation from his previous time in office–which would be hard to pass through Congress or posit as a matter of national security due to its scale and universal nature.²² Nonetheless, consumers and businesses would be taking a risk in not preparing for increased trade restrictions under a second Trump presidency, even if the levy doesn’t reach 60%. The would-be repercussions are clear: significantly more expensive goods and a serious macroeconomic toll, with a stock market in disarray.