Yves here. I feel like I’m overdue to comment on Trump’s win, but there is a tsunami of commentary about it and I wish I could write something that isn’t just rehashing widely held views. So please be patient.
In the meantime, the post below is a helpful high-level treatment of Trump’s plans to expand and extend the scope of tariffs and how that might affect the US and its trading partners.
Ironically, few commentators point out that one reason Trump favors tariffs is that Presidents can impose them without the consent of Congress….provided they are seen to pose a threat to national security. Does anyone see fit to challenge Trump’s authority if he begins to impose it widely?
However, the author also emphasizes that higher tariffs are a bipartisan issue, and that Harris is likely to raise them. So Trump may be more vocal and quicker to add to them than Team Dem would be.
Note that this piece does not talk about another economic issue that is coming, that the Biden Administration has had a very large budget deficit, and if Trump wants to have a balanced budget as he says, he will need to reduce spending, which will reduce the economy and reduce it. imports from trading partners in addition to the cost impact. Note, Trump may follow Reagan, by cutting tax revenue without cutting spending as much as promised.
Note, we do not think that deficit spending is a bad thing if it is done with an understanding of real economic constraints and how Federal efforts can increase economic capacity, making spending pay for itself by increasing productivity. None other than diehard neoliberal Larry Summers discovered that infrastructure spending would generate as much as $3 in GDP growth for every dollar spent. Given the poor state of US infrastructure (including our lagging behind international broadband standards), there seems to be more to do if one is so inclined.
By Renaud Foucart, Senior Lecturer in Economics, Lancaster University School of Management, Lancaster University. Originally published on The Conversation
Donald Trump’s victory in the 2024 election – and his threat to impose tariffs on all imports into the United States – highlights a critical problem in the global economy.
The US is a technological powerhouse, spending more than any other country on research and development and winning more Nobel Prizes in the last five years than all other countries combined. Its inventions and economic success are the envy of the world. But the rest of the world needs to do its best to avoid becoming too dependent on it.
And the situation would not have been much different if Harris had won.
Donald Trump’s “America first” approach has essentially been a bipartisan policy. At least since former president Barack Obama’s energy liberalism policy, the US has been trying to look more inward to maintain technological superiority while eliminating industrial outsourcing.
One of the biggest decisions Trump made in his first term was to accept higher tariffs on American consumers in order to protect the country’s producers by imposing higher tariffs on almost all trading partners.
For example, Trump’s 2018 tariffs on washing machines from around the world meant that US consumers were paying 12% more for these products.
President Joe Biden – certainly in a modest way – then increased some of Trump’s tariffs: up to 100% on electric cars, 50% on solar cells and 25% on batteries from China.
At a time of climate emergency, this was a clear decision to reduce energy shifts to protect US production.
When Biden signed a deal with Europe on tariffs, he started a perhaps more damaging battle by launching a subsidy race.
The US Anti-Inflation Act for example contains US$369 billion (£286 billion) of subsidies in areas such as electric vehicles or renewable energy. And the Chips Act committed US$52 billion to support the production of semiconductors and computer chips.
China, Europe and the rest of the world
This US industrial policy may have been inward looking, but it has clear global consequences. China, after decades of highly foreign-based growth, now has to deal with major problems of industrialization.
The country is now trying to promote more domestic consumption and alienate its trading partners.
Europe, despite tight budgets, spends a lot of money on funding competition. Germany, a country facing sluggish growth and serious doubts about its industrial model, has committed to matching US subsidies, for example offering 900 million euros (£750 million) to Swedish battery maker Northvolt to continue production in the country.
All those subsidies are hurting the global economy and could easily fund urgent needs like electrifying the entire African continent with solar panels and batteries. Meanwhile, China has replaced the US and Europe as the largest investor in Africa, following its interest in natural resources.
Trump’s incoming mandate may be an opportunity to adjust views.
One could, for example, say that the total invasion of Ukraine, and the thousands of deaths and the energy crisis that followed, could have been avoided if the Biden administration had been more clear to the Russian president Vladimir Putin about the consequences of the attack, and had given modern weapons to Kyiv before the war.
But the blame lies with Europe. Credit where it’s due, the strategic problem of over-reliance on Russian gas is something Trump had clearly warned Germany about during his first term.
There is a clear way forward: Europe can help China fix its overcapacity problems by negotiating an end to its tariff war on Chinese technologies such as solar panels and electric cars.
In exchange, Europe would regain sovereignty by producing more of its own clean energy instead of importing record amounts of liquefied natural gas from the US. It can also learn a few things from manufacturing with Chinese companies, and China can use its great power in Russia to stop the invasion of Ukraine.
The European Union can also work hard on what it does best: sign trade agreements, and use them as a way to reduce global carbon emissions.
This is not just about Europe and China. After decades of steady progress in all major aspects of human life, the world is going backwards.
The number of people facing hunger is increasing, bringing it back to 2008-9 levels. War continues in Gaza, Sudan, Myanmar, Syria, and now Lebanon. The world has not seen so many civilian casualties since 2010.
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The world is alone, and America will not come to save it.
We don’t know what will happen in the US. Perhaps Trump’s return in particular will be a continuation of the past decade. Perhaps excessive taxes or destroying the institutions that have made the US an economic powerhouse will make the US economy less efficient. But this is something the American people chose, and something the rest of the world has to live with.
For now, the only thing the world can do is learn to work together better, without becoming too dependent on each other.
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