America first, trade second?

What will be the impact of the next US President for global trade? And why does the outcome of the presidential election matter to German businesses – especially those engaged in the Asia-Pacific region?

Written by Arnd Nenstiel, Chairman OAV

It’s a “Truism“ that a Trump administration would set “America first” and multilateralism second. Still, also the record of Vice President Harris shows, that she tends to put American interests above free trade, in line with the position the Biden administration adopted in 2021. US Secretary of State Blinken described this approach as 'invest, align, compete,' emphasizing the need to bolster domestic capabilities, forge alliances with like-minded partners, and engage in strategic competition with China. This strategy has since evolved into a more structured competitive framework, with 'guardrails' in place to reduce the likelihood of conflict.

Like many renowned economists, I am also truly convinced: The free flowing of goods in global trade is beneficial for all of us. It simply enables countries to use their resources more efficiently. This also allows some countries to produce the same goods more efficiently, in other words, more quickly and at a lower cost. Therefore, they may sell it more cheaply than other countries might. In the end, consumers and industries benefit from free trade. Next generation trade deals also incorporate environmental and social standards and thus contribute to climate protection and justice.

Looking at the US elections, the crucial question is: Under what administration would protectionism rise and harm our economies, our wealth and global order?

Trying to come up with some perspectives, I looked at and compared statements, quotes and communication between the two candidates at campaign events or other occasions.

A Trump administration would put America first at all costs

Starting with the obvious: Trump’s record as President shows his protectionist approach, some facts:

• Former president Trump withdrew the US from the Indo-Pacific Economic Framework (IPEF) predecessor, the more ambitious Trans-Pacific Partnership (TTP), on his first day in office in 2017.

• He renegotiated a trade deal with South Korea, withdrew from trade talks with the European Union (EU) and imposed sweeping tariffs on steel and aluminum imports, including from EU countries and other allies.

• He imposed tariffs on $360 billion worth of Chinese goods (tariffs, which the Biden administration has maintained).

At recent rallies, Trump has argued that the global trade system undermines U.S. interests, stating, "We will no longer allow foreign countries to take advantage of the United States. Tariff for tariff, we’ll play their game and win."

His vision for a second term includes universal tariffs on most imports and policies to make the U.S. the "world's manufacturing superpower" by rebalancing trade to favor domestic production.

His election team continues to emphasize that trade policies will put "American jobs and American industries first." In his speech in Savannah, Georgia, Trump has touched upon economic topics: “Under my plan, American workers will no longer be worried about losing their jobs to foreign nations. Instead, foreign nations will be worried about losing their jobs to America,” he said.

In one of his latest speeches, Trump also promised, "We’re going to put a tariff on every country that charges us more than we charge them. It’s an eye for an eye, tariff for tariff. We’ll phase out the imports of Chinese-made goods — electronics, steel, and pharmaceuticals."

If reelected, he claims he would

• impose a “universal” tariff on most imports while adopting higher tariffs imposed by other countries on US products.

• end the Indo-Pacific Economic Framework (#IPEF) “on day one”

• drastically increase tariffs against China and outright ban US investments in China and Chinese purchases of US assets

A president Harris would likely put multinational trade agreements first –

as long as US interests are protected .

Harrisshows an ambivalent attitude towards free trade. While she emphasizes multilateralism, her track record shows a protectionist streak:

• As Senator, she opposed the Trans-Pacific Partnership (#TPP), concerned about the impact on American workers.

• She was one of ten senators whovoted against the U.S.-Mexico-Canada Agreement, an updated version of the North American Free Trade Agreement (NAFTA) negotiated by Trump and supported by Biden in 2019, arguing, "I won’t support a deal that doesn’t protect American workers and our environment."

• As Vice President, Harris supported the Inflation Reduction Act (#IRA), which conditions federal clean energy subsidies on avoiding business in countries like China and Iran.

• In 2022, the US government passed the CHIPS and Science Act, which pours hundreds of billions of dollars into US semiconductor manufacturing. It has also imposed a series of new restrictions to limit China's access to advanced technologies and pressured U.S. allies, including major semiconductor suppliers from Japan and the Netherlands, to impose similar restrictions.

Her campaign echoes these sentiments, with her trade advisors frequently stating that "Vice President Harris will always ensure that any trade agreement protects U.S. workers, while also advancing our goals on climate change and human rights."

In her rallies, Harris announces :

• to reform the World Trade Organization (WTO) to tackle climate issues, pledging, "We must reshape the global trading system to work for American workers and protect our planet."

• to shape trade agreements always in favor of American workers and values . “Trade can’t just be about profits for big corporations. It must reflect our values and support the future of American workers and their families.”

Overall, a Harris-Waltz administration is expected to continue Biden’s internationalist approach, with a focus on strengthening strategic ties while pursuing a measured disengagement (decoupling) from China – very much like the goals of the EU under EU Commission President, Ursula von der Leyen

Make free trade great again

The race is in its final stages now. As Chairman of  OAV - German Asia-Pacific Business Association  I would like to see a US administration, that acknowledges the great value of free trade, respects the rules of international treaties as well as the WTO and is committed to incorporate climate protection goals. The world needs reliable international supply chains, a secure environment for investments and innovative friendly framework conditions. This can only be achieved through partnerships and multilateral regimes. As trade does not only drive economies and create wealth, it also fosters global connections and unity. Thus, a US administration committed to free trade will not only contribute but benefit of a reliable economic and political framework for peace, sustainable prosperity and cooperation in climate protection among like-minded partners.