How might the presidential election results impact U.S. trade? Find out.
As President Donald Trump and Democratic presidential nominee and former Vice President Joe Biden continue their race for the White House, Americans are still coping with the challenges of COVID-19. This includes navigating a delicate economy both here and abroad. And in an increasingly connected world, the United States’ economic strength is affected by that of other countries.
The presidential candidates’ trade proposals offer valuable insight into how each would help steer the U.S. through geopolitical tensions.
Getting tough on trade
Since taking office in 2017, Trump has adopted an “America First” approach to trade policy. He has reworked existing deals, redefined trade relationships and increased tariffs on imported goods and materials. Ultimately, Trump’s aim has been to promote U.S. products and jobs by reorienting industry toward domestic sourcing, as well as to enhance protections for U.S. intellectual property rights abroad. But these have proved to be complex and challenging feats.
In January 2020, the Trump administration signed a “phase one” trade deal with China requiring China to buy at least $200 billion more of U.S. goods and services on top of its 2017 purchases. It also reduced tariffs to 7.5% on $120 billion of Chinese products, while maintaining a steep 25% tariff on approximately $250 billion of Chinese imports. Although it’s too soon to tell if these commitments will be met, the Tax Foundation reports that Trump’s numerous rounds of tariffs on Chinese goods have amounted to a total tax increase of about $80 billion.
Also on Trump’s trade agenda was the United States-Mexico-Canada Agreement (USMCA), which officially replaced the North American Free Trade Agreement (NAFTA) in July 2020. Compared to NAFTA, the USMCA increased the amount of North American-produced products in automobile manufacturing and more closely harmonizes wage standards. A 2019 report by the U.S. International Trade Commission noted that the USMCA is expected to boost U.S. manufacturing, agriculture and service industries – particularly auto manufacturing – and create 176,000 jobs within six years.
Same aim, different game
Biden shares Trump’s commitment to prioritizing U.S. manufacturing, vowing to crack down on tax code provisions that encourage outsourcing. In addition, he plans to continue putting pressure on China and promises no quick rollback on current tariffs. While Biden is likely to preserve existing tariffs in the near term, he may seek to relieve economic pressure by adopting more lenient conditions in the future.
Compared to Trump, Biden is advocating for a more globalized approach, hoping to build a united front with allies to establish a more balanced trade strategy that includes labor and environmental protections. As part of this push, he plans to negotiate the Trans-Pacific Partnership (TPP), tighten up labor and environmental provisions, and deploy an international coalition to counterbalance China’s expansion policies. He is also likely to prioritize a trade deal with the European Union.
No matter who wins in November 2020, one thing’s for certain: trade policy will continue playing a vital role in the U.S. economy.
Sources: Raymond James Equity Research; wsj.com; forbes.com; cnbc.com
All expressions of opinion reflect the judgment of Raymond James and are subject to change. There is no assurance the forecasts discussed will be realized.