The aftermath of Trump’s election

To understand the likely trajectory of Donald Trump’s agenda on tariffs, sanctions, and China, among other trade-related policies, the Association of Foreign Press Correspondents-USA interviewed Hinrich Foundation Senior Research Fellow Keith M. Rockwell. The interview touches on a potential new era of "disruptive radicalism," and explained why the US-China relations are expected to worsen. The discussion was moderated by Patrícia Vasconcellos, White House correspondent for Brazil’s SBT network.  

Watch the webinar:

Key highlights from the webinar: 

Trump’s tariffs and the risks of retaliation 

Rockwell discussed Trump’s well-documented reliance on tariffs as both a revenue tool and a means of political leverage. During his first term, tariffs became central to US trade policy, with duties imposed on goods from major trading partners, especially China. A second Trump term would likely see an escalation in this approach, including across-the-board tariffs of 10% or 20% or highly targeted measures like a proposed 60% tariff on Chinese imports. 

Such policies could serve various purposes, from addressing trade imbalances to funding government initiatives like expanded tax cuts. However, Rockwell noted that trade deficits are driven more by macroeconomic factors than tariffs and using tariffs for fiscal purposes may create additional challenges. Broad tariffs could exacerbate inflation, making consumer goods more expensive — a politically sensitive issue given voter concerns about rising costs. 

Trump could also tie tariffs to broader policy goals, such as pressuring Mexico to address undocumented immigration or linking trade concessions to NATO commitments. This approach reflects Trump’s transactional style but raises the risk of retaliation. For example, the EU has prepared a list of US goods—including Levi’s jeans and Harley-Davidson motorcycles—to target with counter-tariffs if Trump imposes new duties. These retaliatory measures could impact politically sensitive industries, further complicating the economic landscape. 

The Reciprocal Tariff Act is complex in practice  

One of Trump’s more contentious ideas is the Reciprocal Tariff Act, which proposes matching tariffs imposed by trading partners. While the concept appeals to his preference for fairness in trade, Rockwell highlighted its impracticality. Implementing such a policy would require a unique tariff schedule for every trading partner and product, creating an unwieldy and chaotic system prone to fraud and mismanagement. 

Currently, the World Trade Organization rules ensure standard tariff schedules, simplifying trade relationships and preventing arbitrary policies. Moving to a reciprocal system would undermine this predictability and invite disputes. Furthermore, such tariffs would likely fail to protect industries that do not produce certain goods domestically. Rockwell highlighted the example of shipbuilding cranes, which are not manufactured in the US – raising tariffs on these imports would increase costs without benefiting domestic industries or creating jobs. Instead, Rockwell suggested that Trump could focus on targeted incentives to encourage foreign companies to invest in the US, building on trends already bolstered by Biden-era subsidies and lower energy costs. This approach, rather than broad-based tariffs, might achieve strategic objectives without the risks of retaliation or consumer backlash. 

The shift in US trade paradigm  

The US trade landscape has undergone a significant transformation in recent years, with public support for tariffs growing to 56% of registered voters. This shift has made advocating for free trade politically unviable, signaling a departure from traditional trade frameworks, Rockwell says. Trump is expected to use tariffs strategically as a negotiating tool to pursue sector-specific trade deals instead of comprehensive agreements, especially for sectors such as steel and agriculture. Despite differences in rhetoric, restrictive trade measures have remained consistent across administrations, with both Trump and Biden scrutinizing foreign investments, particularly those involving China, to safeguard national interests. While a trade agreement with the United Kingdom could be possible, Trump’s demands for market access, particularly for agricultural products, may pose significant challenges to such negotiations. 

Escalating US-China tensions 

Relations between the US and China are unlikely to improve under Trump. Instead they are expected to worsen. Rockwell predicted that existing tariffs on $360 billion worth of Chinese goods could increase, with Trump likely pursuing a 60% tariff on select imports. Unlike Europe, where fears of retaliation often temper trade policies, Trump appears less constrained, prioritizing economic decoupling over potential fallout. 

China’s dominance in sectors like electric vehicles was flagged as a critical area for US policy. Trump could encourage inward investment from Chinese companies, particularly in politically significant states, while simultaneously ramping up restrictions on Chinese exports.   

The Global South amid the shifts in global trade 

Countries like Brazil and India are emerging as influential players in global trade, leveraging protectionist measures such as local production requirements to strengthen their economies. Rockwell noted that local content requirements, while technically against WTO rules, have become a common strategy, reflecting broader dissatisfaction with the limitations of global trade norms. The discussion touched on efforts to reduce reliance on the US dollar in global trade, though Rockwell expressed skepticism about any immediate shifts. The dollar’s dominance, underpinned by trust in US financial systems and deep capital markets, remains secure for now. 

Europe’s economic and political vulnerabilities 

Europe faces a precarious economic and political situation, marked by instability in Germany and high energy costs. These challenges limit its ability to respond effectively to US trade policies. European leaders are also deeply concerned about US commitments to NATO, particularly in the context of the Ukraine crisis. On the trade front, Europe may negotiate agreements to increase imports of US goods like liquefied natural gas, but structural constraints within the European economy make proactive measures difficult. Europe’s vulnerabilities, both economic and political, may leave it in a weakened position to confront US demands under a Trump administration. 

Tough to rebuild global trust in the US   

The polarized political landscape in the US has had a significant impact on revitalizing industries and rebuilding trust in the country. The US remains divided on issues like green energy, with the Trump administration “historically being critical of renewable energy and supportive of the fossil fuel sector.” This ideological divide has caused political tensions and policy paralysis, making it difficult for the country to address crises or support its international allies effectively. Unfortunately, this polarization is not unique to the US, with similar trends appearing in countries across Latin America, Europe, and Africa, where political shifts are leading to less openness to opposing views. 

Implications for trade watchers 

Rockwell stressed the importance of understanding the intent behind tariffs, whether they aim to raise revenue, reduce trade deficits, or serve as leverage in negotiations. He recommended focusing on the broader connections between trade policies and other critical areas like defense and immigration. Tariffs are not a cure-all solution as they can create problems at the domestic front for both producers and consumers.  As tariffs and unilateral policies reshape the global economic order, understanding these shifts will be essential for stakeholders and analysts alike. 

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