The much-awaited US Presidential election result is out finally. Contrary to all the stories in the media of a very close neck-to-neck contest, Donald Trump, the President-Elect, has proved all of them wrong by winning the White House race decisively with a thumping majority. Since US happens to be the world’s largest economy and its critical role in global political, economic, trade and environmental governance, the policies of the new US President would be keenly watched.
Donald Trump would be taking over the US President at a time when the world is facing turbulence on several fronts. The policy priorities of Trump administration would have significant impact on the geopolitical challenges due to the ongoing wars in Europe and Middle East, the crisis on climate front, the energy transition and almost a complete deadlock in trade negotiation at WTO.
The world is not new to Trump’s style of functioning and his “America’s First” policy. In his first tenure, he took many bold and disruptive measures that included pulling US out of the TPP (Trans-Pacific Partnership) and 2015 Paris climate agreements, initiated a mega trade war with China and implemented a slew of measures to sharply reduce both legal and illegal immigration.
Now the question arises how different is going to be Trump 2.0? The popular perception based on his election speeches says that in all probability Donald Trump may take more stringent measures on trade policy, climate change and immigration. China would again be at the center of his attack as he has already indicated that his policies would aim to eliminate dependence on China in all critical areas that include electronics, steel, and pharma. He has also vowed to triple the existing tariffs of roughly 18% average on hundreds of billion-dollar worth of Chinese goods.
Revoking China’s “most favored nation” status is also on his “to-do” list. Already, there is a clamor by US’ lawmakers to take decisive action against China’s non-market trade practices that include terminating China’s permanent normal trade relation status and preventing it from using third country to evade Section 301 tariffs. In this regard recently three Republican Senators introduced a bill to end the permanent normal trade relations with China. Another one by the House Budget Committee Chairman Jodey Arrington, who introduced a legislation to defend the American economy from non-market entities using third countries to avoid U.S. trade enforcement.
Renegotiating his own trade deal USMCA (US-Mexico-Canada Agreement) is also on his priority list of trade policy agenda. Trump administration signed the USMCA (replaced NAFTA) in 2018, which came into effect in January 2020. The USMCA includes a clause that requires a review by the three signatory countries at the six-year anniversary. However, he clarified that review would not undermine the renegotiated deal but make it much better.
On trade policy some other anticipated actions are – imposition of a “universal” tariff on most imports while matching higher tariffs imposed by other countries on US products, as well as additional tariffs on countries who seek an alternative to the US dollar. He has called this approach “an eye for an eye, a tariff for a tariff.” He has also vowed to end the Indo-Pacific Economic Framework (IPEF), an US led initiative involving 13 other countries from the Asia-Pacific region, on day one. He has called IPEF “TTP Two”.
The WTO continues to draw his rant as Trump has called the multilateral trade body a “disaster,” and threatened to withdraw from the body. He accuses China and other developing members of abusing WTO rules that give developing countries more flexibility. This doesn’t augur well for WTO as the organisation is facing serious existential crisis.
Climate change is another important international issue on which Trump’s agenda doesn’t sync with the commitment made by other countries in international negotiation. He has pledged to greatly expand domestic fossil fuel production, overhaul Biden’s clean energy initiatives, and withdraw the US from major global climate deals. Withdrawing the US from the 2015 Paris Agreement seems to be imminent.
He has promised to remove permitting delays and other curbs on fossil fuel production, as well as significantly increase domestic drilling efforts. This is aimed to reduce inflation and make the US fully energy independent. This is a big setback to clean energy mission and energy transition agenda. The Biden administration inked some of important agreements with EU, and Japan to secure the supply of critical minerals, with an objective to fuel the clean energy mission.
Finally, for India it is too early to arrive at any definitive conclusion how the policies under Trump 2.0 would impact it. In his first term Donald Trump didn’t spare India either and called it “Tariff King”. He has also removed India from the list of GSP beneficiary countries. Therefore, it is unlikely that India will be spared if he decides to increase the tariff across the board. The likelihood of India-US FTA under Trump 2.0 doesn’t seem to be feasible as his administration would like to negotiate on equal basis, which may not be comfortable for India.
While there is a popular perception that Trump stringent trade measures against China would create opportunities for India, but there is downside of it as well. With China facing high tariff wall in the US and EU, it might aggressively try to dump products in Indian market. India has to strategize to thwart any potential surge in import from China in such eventuality.
Deep Kapuria is the Chairman of The Hi-Tech Group of Companies comprising The Hi-Tech Gears, The Hi-Tech Engineering Systems, The Hi-Tech e-Soft, and Novus Hi-Tech Robotic Systemz. The Group has manufacturing, R&D and engineering facilities in India, Canada and USA. He is also the Past Co-Chair of Digital Economy and Industry 4.0 Task Force of B20, 2018 Argentina and Past Co-Chairman, CII National Committee on International Trade & Trade Policy.
