Trump’s Trade War 2.0: Experts Predict Increased Economic Decoupling with China
As the 2024 U.S. presidential election approaches, experts are concerned about the potential impact of a second Trump term on U.S.-China relations, particularly in terms of trade and economic decoupling. While Joe Biden had placed strategic competition with China at the forefront of his economic policy, many economists and trade experts believe that a second Trump administration would significantly increase tensions and destabilize trade relations between the world’s two largest economies.
Key Takeaways:
- Trump’s Return Spells Trouble for U.S.-China Relations: Experts predict the re-election of Donald Trump would escalate the trade war with China, leading to increased economic decoupling and potential global economic turmoil.
- Tariffs: The Nuclear Option?: Trump, known as "tariff man," is predicted to significantly raise tariffs on Chinese imports, possibly up to 60%, despite previous warnings about the negative impact on consumers.
- Tech War Escalates: The Biden administration’s CHIPS and Science Act, intended to bolster domestic semiconductor manufacturing, is expected to be continued, further restricting China’s access to technology transfers.
- Diplomacy Takes a Hit: Trump’s "go-it-alone" approach to diplomacy is expected to diminish communication channels between Washington and Beijing, further eroding relations.
‘Tariff Man’ Returns: A Potential Trade War 2.0
During his first term, Trump initiated a trade war with China, imposing tariffs on billions of dollars worth of Chinese imports. While Biden maintained these tariffs and even introduced new ones, experts anticipate Trump would take a far more aggressive stance.
"A Trump victory is highly likely to increase trade and economic hostilities between the U.S. and China, ramping up the trade and financial decoupling between the two countries," said Eswar Prasad, an economics professor at Cornell University.
Trump’s proposed increase in tariffs to over 60% has been described by economists as the "functional equivalent of the nuclear option" in international economic conflicts.
Stephen Weymouth, a professor of international political economy at Georgetown University, believes that while Trump’s intentions remain unclear, it’s "highly likely" that he would increase tariffs during a second term.
William Reinsch, Scholl chair in international business at the Center for Strategic and International Studies, warned that such aggressive action would likely trigger another trade war, potentially resulting in a complete cessation of goods exchange between the two countries. This, he highlighted, would come at "an enormous economic cost."
Beyond Tariffs: The Tech War Intensifies
Despite the potential for escalated tariffs, experts believe that the tech war would continue to be a driving force in U.S.-China relations, regardless of who occupies the White House.
The CHIPS and Science Act, which invests billions of dollars in domestic semiconductor manufacturing and research, was passed with bipartisan support. This suggests that the policy is likely to continue, further restricting China’s access to technology transfers and crucial semiconductors.
Chris Miller, author of "Chip War," expects that the U.S. will "ratchet up restrictions" on technology exports to China, even if a new administration emerges.
Diplomacy Dwindles: A Trump Second Term Presents a Diplomatic Threat
Experts believe that a second Trump term would not only intensify economic decoupling but also lead to a decline in diplomacy with China. This is a stark contrast to the current administration, which has emphasized diplomatic engagement and coordination with global partners.
Rorry Daniels, managing director of the Asia Society Policy Institute, noted that communication channels between the U.S. and China significantly shrank under Trump’s first term. The Biden administration, on the other hand, has actively sought greater coordination with "likeminded partners" like Japan and the Netherlands, to implement semiconductor restrictions on China.
Nick Marro, lead analyst for global trade with the Economist Intelligence Unit, acknowledges the Biden-Harris administration’s "more measured and cautious" approach has helped stabilize the relationship. However, he doubts that China will be pleased with either candidate.
Marro concludes, "There’s this feeling that, regardless of which party sits in the White House, US-China relations will remain on a crash-course throughout the remainder of this decade."
