US-China trade
Trump and trade, Part 1: How Trump hardwired 21st century US trade policy
Published 13 August 2024
President Trump’s first term in office was guided by trade. Many changes he and his team made, primarily using trade as a weapon in US foreign and strategic policies, remain in place even after he left the White House, and are now "hardwired" into Washington policymaking on a bipartisan, bicameral, and seemingly long-term level. This is the first in a series of articles examining Trump's trade policy.
As polls in the upcoming US Presidential election continue to tighten, trade watchers are paying keen attention to the lessons of President Donald Trump’s first term in office as well as statements made about his plans for a return to the White House. Trump represented a radical break with past US trade policy practices, but tapped deeply enough into prevailing domestic sentiment that many of his policies were continued under President Joe Biden and look set to continue regardless of who comes next into the White House.
Trade and economics are at the center of Trump’s agenda. His positions on many other topics have shifted over the years, but he has always been focused on trade. It is a polestar that predates his presidency. He took out a full-page advertisement in the New York Times in 1987 to protest what he saw then as unfair trade practices especially by Japan, which he viewed as crippling the US. He was already foreshadowing his later moves, as President, to impose higher tariffs.1
Once he became President, trade policy became one of "four points of the Trump policy compass."2 That trade compass has proven remarkably durable, with many of the changes he and his team made to US policies remaining in place even after he left the White House. Positions that the Trump administration took to reorient America’s long-term policymaking now appear to be “hardwired” into Washington’s decisions.
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There are several points worth noting in assessing the sharp shift in US approaches to trade and economic policymaking that started under Trump and largely continued under Biden. These include
- driving trade policy from the White House and Executive Branch;
- renewed use of unilateral trade tools;
- reformulation of trade policy to fit an economic war;
- changing relationships with economic friends and allies;
- the conflation of trade and national security interests; and
- a diminution of the global trade system and multilateral rulemaking.
Trump’s effectiveness in implementing his trade agenda was assisted by a peculiarity of the US political system. While the US Constitution gives explicit powers to Congress to manage tax (and, by extension, tariffs), there is significant room for a US president and the executive branch to maneuver on trade and economic issues. From Trump’s first full day in office in January 2017, when he unilaterally withdrew the United States from the Trans-Pacific Partnership (TPP) agreement, US trade policy was largely driven from the Oval Office without much pushback from Congress.3
Trade policy has continued to be run out of the Executive Branch under the Biden administration. Biden has, like Trump, issued a range of Executive Orders on trade and economic issues that bypass Congress. He has further centralized trade policymaking in the White House, with a much more limited role for the US Trade Representative’s (USTR) office. The US Commerce Department played a central role in the Indo-Pacific Economic Framework for Prosperity (IPEF), which required adjusting domestic US policy processes to allow Commerce to engage in international negotiations.
Second, Trump chose as his USTR a trade attorney and senior trade official in the Reagan administration, Robert Lighthizer, who has extensive knowledge and experience of the US political and policymaking system. Lighthizer, along with other advisors including Peter Navarro and to a lesser extent Wilbur Ross, was an architect of many US statutes and policies that had largely lain dormant for years or even decades. Once he was appointed USTR, Lighthizer was able to resurrect domestic tools such as Section 301 on unfair trade practices or Section 232 on national security.
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Again, many of these specific tools have continued in use by the Biden administration. Section 232 tariffs imposed on steel and aluminum are still in place,4 as are Section 301 tariffs against Chinese products. Biden announced new a Section 232 application for steel by proclamation on July 20, 2024.5 Section 301 tariffs have also been imposed on a new set of Chinese products in August 2024.6
An important third area of Trump’s original trade agenda was a significant reassessment of the purpose of trade policy. Tools like Section 301 or 232 were harnessed to achieve objectives stemming from a belief that the United States was engaged in an economic war, particularly with China. Trump’s argument, finessed and implemented by Lighthizer, viewed past practices, particularly the use of trade agreements and what they viewed as the failure by past administrations to properly enforce them, as having accelerated America’s decline.
While most of this reorientation of policy remained in place under Biden, one key Trumpian metric was dropped. Trump viewed the size of the bilateral trade deficit as a measurement for whether American was gaining from trade.7 Countries with large merchandise trade deficits with the United States were assumed to be using inappropriate trade practices.
Figures 1 and 2 show that, despite Trump’s reorientation of trade policies and focus on bilateral trade deficits, US trade flows have not consistently responded to the Trump administration’s policies, barring the pandemic’s skewing of trends.
Trump’s adjustments to trade policy included changing relationships with partners and allies. Trump has been called transactional in his dealings with foreign governments, including key figures in the international arena. His first term saw a shifting constellation of countries and leaders that were treated as friends.
The general disregard he expresses for longstanding alliances and partnerships in trade and economics also meant that most of Trump’s efforts were taken unilaterally, rather than through building up a coalition of like-minded partners. The use of Section 301, a unilateral determination of unfair trade practices by the United States, is a good example. For several decades prior to Trump, the Section 301 statute had remained on the books, but was not used by US administrations as it was replaced by multilateralism as a more powerful and longer-lasting solution to trade challenges.
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Trump and the architect of Section 301’s resurrection, Lighthizer, had no such qualms. Section 301 was used as justification for a range of tariff rate increases against Chinese imports in four tranches, starting in March 2018.8 Tariffs went up by as much as 25% on a wide array of products.
In January 2018, the average US tariff on Chinese goods was 3.1%. Within two years, the average had jumped to 21% before falling slightly in March 2020 to 19.3% following a bilateral Phase One agreement with China.9 Over the same period, China escalated its original 8% rate applied to American imports to 21.8% before settling at 21.3%.10 The revival of tariffs as a “legitimized” tool of trade policy continued under Biden.
A fifth change in policy under Trump fused national security with economics. The modern global trading system was set up in the wake of the Second World War and has always had exceptions to manage trade in times of war and conflict. However, Trump took the integration of national security and trade to whole new levels. The range of export controls, economic sanctions, investment screening, and use of national security as a justification for trade actions, have exploded. Biden has continued with similar policies.
Finally, while previous US presidents used the multilateral trading system, especially the World Trade Organization (WTO), as a way to manage global economic relations, Trump took a dim view of such efforts. His team focused particular attention on the dispute settlement mechanism at the WTO, extending and entrenching a growing antipathy to the global trade body that first took shape in the Obama administration. Accusing it of overreach, the US under Obama began blocking appointments of replacements for the appellate body. Trump accelerated the blockade, leading to its collapse.
While Biden showed more keenness to collaborate with others, his team has continued to hamper attempts to revitalize or reform the dispute settlement process at the WTO. The US, having been a supporter of using plurilateral solutions to get progress on key areas of interest at the WTO in 2017, has since declined to support outcomes there on topics like e-commerce and investment facilitation.
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Many of Trump’s actions were seen as radical departures from past US practices. His campaign slogan "Make America Great Again" was perhaps best expressed in his trade policy agenda, which put US national and security interests front and center, and weaponized access to the US domestic economy as a tool to achieve a range of broader goals. Although many had expected Biden to return to a more “normal” policy of working in concert with foreign countries in multilateral settings, Biden was content to leave a more muscular and unilateral set of trade policies in place, even expanding them in some cases. Trump’s unusual trade compass reset US trade policy and has already been more durable than anticipated.
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[1] That Time Trump Spent Nearly $100,000 On An Ad Criticizing U.S. Foreign Policy In 1987 (buzzfeednews.com)
[2] See Wilbur Ross and Peter Navarro, 2016, https://www.almendron.com/tribuna/wp-content/uploads/2018/03/trump-economic-plan.pdf
[3] Trump’s Stunning Victory—Now What for Trade?
[4] For the most recent Section 232 updates see https://www.federalregister.gov/documents/2024/05/20/2024-10725/revisions-of-the-section-232-steel-and-aluminum-tariff-exclusions-process
[5] https://www.whitehouse.gov/briefing-room/presidential-actions/2024/07/10/a-proclamation-on-adjusting-imports-of-steel-into-the-united-states-7
[6] The proclamation can be found at: https://www.whitehouse.gov/briefing-room/statements-releases/2024/05/14/fact-sheet-president-biden-takes-action-to-protect-american-workers-and-businesses-from-chinas-unfair-trade-practices/ The application of new tariffs was originally set to start on August 1, 2024, but has been slightly delayed pending a review of extensive comments received by USTR. See https://insidetrade.com/daily-news/ustr-delays-new-section-301-tariffs-chinese-goods
[7] Always expressed in terms of trade in goods. Despite Trump’s personal history in services, he has largely ignored the value of services trade
[8] See https://crsreports.congress.gov/product/pdf/LSB/LSB10553
[9] https://www.piie.com/research/piie-charts/2019/us-china-trade-war-tariffs-date-chart
[10] The total amount of Chinese exports subject to US tariffs from the conclusion of the Phase 1 agreement through 2023 was 66.4 percent, while 58.3 percent of American exports to China had higher tariffs. See https://www.piie.com/research/piie-charts/2019/us-china-trade-war-tariffs-date-chart
© The Hinrich Foundation. See our website Terms and conditions for our copyright and reprint policy. All statements of fact and the views, conclusions and recommendations expressed in this publication are the sole responsibility of the author(s).
Author
Deborah Elms
Dr. Elms is Head of Trade Policy at the Hinrich Foundation in Singapore. Prior to joining the Foundation, she was the Executive Director and Founder of the Asian Trade Centre (ATC). She was also President of the Asia Business Trade Association (ABTA) and the Board Director of the Asian Trade Centre Foundation (ATCF).
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