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Talking Trade blog

US trade policy in 2021

Published 20 August 2020

This week, the Democratic Party in the United States officially nominated Joe Biden for the office of President. Next week, the Republicans will follow in their convention and renominate Donald Trump. Both men will appear on the ballot in November.

Trade and trade policy, like foreign policy, typically feature very little in US presidential campaigns.  When asked about the urgency of topics, voters normally are much more concerned about domestic issues than anything that happens overseas.

Hence, US presidential candidates tend to say little about their intentions on trade during campaigns as there appear to be few votes that can be gathered through such a conversation.

This time, things could be slightly different—perhaps the understatement of the year. 

Trade could be an important feature in the campaigns from now until November—at least on the Republican side. 

Donald Trump campaigned in 2016 on a radically different trade agenda as I noted in our September 2016 Talking Trade piece.  His two advisors, Peter Navarro and Wilbur Ross, had released a document that showed trade as one of four elements of a policy compass.    

The Trump economic plan, as I noted, placed blame for economic damage squarely at the feet of poorly negotiated trade deals and the failure to enforce them.  The “bad deals” included NAFTA, China’s entry into the World Trade Organization (an institution so flawed the US should plan a withdrawal), and the US-Korea free trade agreement (KORUS). 

The report spent a considerable amount of its short length noting the importance of trade deficits and reversing them. 

Tariffs were called out as a critical tool to meet the challenge of country “cheating.” 

This paragraph may appear especially striking in hindsight:  “China, Navarro and Ross admit, is a tougher nut to crack.  But soybeans, petroleum, motorcycles and raisins, plus a few other goodies should surely be sufficient as carrots when matched with ‘the strength and resoluteness of Trump.’”

In fact, Trump has, to a perhaps surprising degree, followed the outlines of this short document during his first 3.5 years in office. 

Note, again, this section from my piece that appeared in November 2016 immediately after the election: 

But one big area of difference can be found in trade policy.  Traditional Republicans have promoted the importance of trade and have argued strongly for the freedom of companies to explore new markets. 

Trump does not take this view.  In his campaign, he was inconsistent on so many policies that it is very unclear what policies he might actually implement in January.  But two points have been stable—no trade and no immigration. 

So, on trade, Trump and whatever might now be called the “Trump wing” of the party will be opposed to trade agreements (except for “really good ones” that are different from the current crop of deals). 

He made three big promises: to hike tariffs on China and Mexico; to “rip” up NAFTA, and to withdraw the US from the Trans-Pacific Partnership (TPP, now renamed the CPTPP after US withdrawal on Trump’s first Monday in office).  

Note that—in an otherwise wildly inconsistent presidency—Trump has delivered nearly all of what he set out to do in trade. 

Trade is the one area where Trump has strongly held beliefs that have not wavered across decades.  He has found officials that share his vision of a world where the US continues to dictate outcomes and allowed them to press ahead. 

As he faces a very tough re-election fight in 2020, Trump is likely to continue to escalate one area that matters to him—reversing the economic “war” that the US had been losing by pursuing aggressive policy actions. 

The President already had extraordinary leeway to maneuver on trade, as we noted in 2016.  The past years have shown that the presumed “guard rails,” like Congress, have been less effective in limiting actions than many anticipated.  His use of Executive Orders and options pulled out of the US policy “toolkit” of largely forgotten provisions, often dating back to height of the Cold War with the Soviet Union, has continued to rise. 

Trade, President Trump believes, is a big part of what got him into the White House.  Hence, expect it to remain dominant in the few months leading to the election.  His advisors will also be more eager than ever to lock in policy actions consistent with Trump’s views on trade.

This means that in roughly 150 days until inauguration day, trade will continue to drive a series of US actions, largely in line with Trump’s original intentions.  China has been, and continues to be, a tough nut to crack.  Expect additional escalation in the next 150 days as Trump shows his “strength and resoluteness.”

Come January 2021, what happens next?  Of course, it depends on who wins the seat in the Oval Office. 

If Trump is re-elected, it is especially important to review the trade portion of the policy compass.  A few new trade deals that create “wins” for the US, potential US withdrawal from the WTO, and increasing ratcheting up of tensions with China (and potentially others, including allies) must be part of the agenda.    

If Biden wins, trade remains in a weird place.  As our View from Washington commentators this week noted, the traditional role of trade in the two parties has undergone a sea change over the past four years.  Republicans, that used to be seen as reliably “free trade” have moved to match Trump’s more mercantilist views of the world.  Democrats have traditionally cared more about labor and the environment, but are also changing their positions to look at trade more holistically.

Both Wendy Cutler and Charles Freeman highlighted the importance of Congress for determining US trade policy in 2021.  A potential “action forcing” event is on the calendar in mid-2021: the expiration of US Trade Promotion Authority (TPA).  This requires Congress to provide a set of instructions to the Executive Branch about what are US trade objectives. 

However, neither thought that the parties, or a President Biden administration, might be ready or able to consider outcomes so quickly.  Trade has undergone a significant reset over the last four years.  Picking up the pieces and determining a “new normal” will take time.

© 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).

Dr. Deborah 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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