Donald Trump secures second presidency: what next for global trade?

Even before his election victory, the fact Donald Trump was identifying his favourite word as 'tariff' – describing it as the “most beautiful word in the dictionary" – was sending tremors through the minds of politicians, economists and businesses across the world.

David Sapsted

8 November 2024

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Of course, nobody knows yet what the president-elect will actually do when he returns to the White House in January, but his threat to impose tariffs of at least 60% on Chinese imports, and of between 10–20 per cent on all other foreign goods, is casting a darkening cloud of protectionism over the global economy.

Impact on global growth

During his first stint as president from 2016–20, Mr Trump imposed tariffs on Chinese and other nations' imports, including from Europe, of $380 billion. Should he go ahead with his current, much more ambitious plans this time round, the London School of Economics and Political Science estimates they would result in a 0.68% reduction in China’s GDP and a 0.11% fall in the European Union. The analysis also predicted GDP drops in India, Indonesia and Brazil of 0.03%, 0.06% and 0.07%, respectively.The UK could also be badly affected with the government in London estimating the cost to the economy at £20 billion a year. According to research by the National Institute of Economic and Social Research (NIESR), tariffs inflicted by the nation's largest single trading partner would stifle economic growth and possibly lead to increases in interest rates. Ahmet Kaya, a NIESR economist, told the Guardian: "The UK is a small, open economy and would be one of the countries most affected."

Tit-for-tat tariffs?

Marco Forgione, director-general of the UK's Chartered Institute of Export and International Trade, said: “If you put a 20% universal tariff on goods entering the US, then it instantly becomes a very challenging market for us and there are absolutely concerns about the implications of such a move.“It would seem likely that there would be a response from the UK government and the truth is that nobody would win from getting involved in a tit-for-tat exchange of tariffs.” However, the government in London is hopeful that the affection Mr Trump has for Britain – especially for Scotland, where his mother was born – could pave the way for a trade agreement between the two countries. He was in the throes of doing such a deal when he was ousted by Joe Biden.Besides, according to Alan Wolff, a researcher at the Peterson Institute for International Economics, in Washington DC: “There are those among Trump supporters, according to press reports, who say that the tariffs are mainly a negotiating ploy. But that is not what the former president is saying. If we are to take Trump at his word, there is no telling what tariffs there will be.”

EU plans for trade concessions and tariffs

The EU, though, is taking no chances. According to a report in the Financial Times, Brussels has drawn up a two-part plan, the first stage of which would include concessions to purchase larger volumes of particular US products.If that did not work and the Trump administration continued to pursue tariffs on imports from Europe, the EU would retaliate with its own tariffs of up to 50% on certain iconic US goods, such as Harley-Davidson motorcycles and bourbon whiskey.EU trade chief Valdis Dombrovskis told the newspaper: “We believe the US and EU are strategic allies and especially in the current geopolitical context, it’s important that we work together on trade. We defended our interests with tariffs and we stand ready to defend our interests again if necessary.”

On foreign policy and immigration

But it is not just trade that is causing consternation around the globe. Mr Trump's general approach to foreign policy "remains erratic and inconsistent," according to the Berlin-based European Council on Foreign Relations. "Europeans are still licking their wounds from Trump’s first term."This time round, Mr Trump will not only have to formulate policies reflecting his long-term antagonism towards China, Iran and Nato – tied in with his apparent affinity with Vladimir Putin – but also the conflicts in Ukraine and the Middle East. Then there is the question of immigration and MR Trump's pledge to launch the largest deportation programme in American history, targeting the 10 million-plus illegal immigrants in the country.How practical this might be remains to be seen but, according to media reports in the US, the president-elect's advisers have also drawn up proposals to restrict legal immigration as well, though no details have emerged over what sectors might be targeted. But according to a recent Gallup poll, roughly 55% of US adults want to see a reduction in immigration, legal and illegal.

Climate change

Even more important to the world as a whole, though, could be Mr Trump's approach to action over climate change. A known sceptic who has branded efforts to boost green energy "a scam", he withdrew the US from the Paris during his first term as president and is now saying he will boost oil and gas production, particularly in Alaska, when he returns to the White House.It is also feared that he will reduce environmental protection measures in addition to imposing crippling tariffs on both electric vehicles and solar panels from China."You are looking at, overall, a 'drill baby drill' philosophy," Dan Eberhart, CEO of oilfield services company Canary, told Bloomberg News. "You are going to see offshore lease sales, you are going to see pipelines move much quicker, you are going to see fracking on federal lands and a mindset that is focused on lowering energy costs for consumers."Christiana Figueres, a former UN climate chief, accepts that Mr Trump's election "will be seen as a major blow to global climate action". But she adds: "It cannot and will not halt the changes underway to decarbonise the economy and meet the goals of the Paris agreement."Whatever happens after the reins of power change hands in the US on January 20, and whatever the views of global politicians, economists and businesses, the actions of the 47th president will not be able to be ignored.

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