How Trump’s Trade Wars Have Reshaped the Global Economy

Once relatively staid, the global economic and trade system has been anything but since U.S. President Donald Trump took office.

Though it’s been overshadowed by the outbreak of the COVID-19 pandemic, the U.S.-China trade war has not been definitively resolved. In January, the two countries hit the pause button on the on again, off again dispute, which began in 2018 when Trump launched a series of tit-for-tat tariff hikes over China’s unfair trade practices, including forced technology transfers and the theft of intellectual property. After several rounds of talks stalled over the course of the following 18 months, the two sides signed a limited “phase one” agreement in January, giving them more time to try to iron out their broader differences. But the terms of the stopgap deal, particularly China’s required purchases of a range of U.S. products and goods, were already going to be difficult to achieve under normal circumstances. The economic impact of the coronavirus pandemic has called them even further into question, with no guarantees for an agreement in broader “phase two” talks.

Trump’s unpredictable negotiating style and his willingness to brandish the threat of tariffs for leverage in trade talks was also unsettling to European officials, who have yet to start their own trade negotiations with the U.S. Trump has decried what he sees as unfair trade deficits with European Union countries, particularly Germany, and he imposed tariffs on steel and aluminum imports from some allies, without seeming to understand that the EU negotiates trade terms as a bloc. A U.S.-Europe trade war could do lasting damage to both sides.

Trump’s one clear-cut accomplishment on trade is the updated NAFTA deal known officially as the U.S.-Mexico-Canada Act, or USMCA. But it mainly recoups the self-inflicted losses from Trump’s withdrawal from the Trans-Pacific Partnership trade deal, or TPP—only on a smaller North American, rather than trans-Pacific, scale. That deal was finally ratified by the U.S. House of Representatives in December, after the administration made numerous concessions to House Democrats to ensure its passage; it entered into effect in July. Trump has also trumpeted a deal with Japan as a major success, although it too fell short of the terms Japan had agreed to under the TPP.

It does not help that with the global economic trade system in flux, the body charged with overseeing it is in crisis, exacerbated by the Trump administration’s hostility to multilateral institutions of all stripes. Trump has accused the World Trade Organization of violating U.S. sovereignty, and his administration has effectively hobbled it due to practices Trump perceives as unfair to the U.S. Most recently, U.S.-China tensions have embittered the process for selecting a successor to the organization’s director-general, who stepped down Aug. 31 a year ahead of schedule, leaving it currently leaderless. Though the WTO is clearly in need of reforms, Trump seems to have opted to sink the body rather than try to fix it.

WPR has covered Trump’s trade wars in detail, and continues to examine key questions about future developments. What will Joe Biden’s presidency mean for the U.S.-China trade war? What impact will Trump’s assault on liberalized trade have on America’s role in the global economy? And will it have a lasting effect on the global trade regime? Below are some of the highlights of WPR’s coverage.

Our Most Recent Coverage:

After Trump, Biden May Change the Tone on Trade More Than the Substance

Much of America and the rest of the world is hoping for a return to some semblance of normality under President-elect Joe Biden. What might that mean on trade? Biden has been critical of Trump’s trade wars, but the changes under his administration are likely to be more incremental than transformational.

U.S.-China Trade War

The United States and China have hit the pause button on their dispute, but they are still far from resolving it. The concessions required to reach a “phase two” deal in the next stage of talks remain unclear, even as the coronavirus pandemic threatens the major pillars of the “phase one” agreement.

World Trade Organization

The body charged with overseeing the system of global trade has seen its dispute resolution mechanism grind to a halt as the United States blocks appointments to its Appellate Body. Already damaged due to Trump’s hostility to the multilateral trade regime, it is now leaderless, even as it faces new challenges due to the coronavirus pandemic.

U.S.-Europe Trade War

The two sides have already engaged in tit-for-tat tariffs, with both sides now threatening an escalation in their latest dispute over digital services taxes.

NAFTA 2.0 and the Mini U.S.-Japan Trade Deal

Trump entered office promising to radically overhaul NAFTA, the free trade agreement with Canada and Mexico. But after almost two years of bitter negotiations, the U.S.-Mexico-Canada agreement, or USMCA, is more of a rebranded deal than a brand new one. Meanwhile, the trade agreement finalized with Japan in October is not be all Trump made it out to be.

More WPR coverage of global trade issues.

Editor’s note: This article was originally published in May 2019 and is regularly updated.

Share this: