The election of Donald Trump as President of the United States will have a profound impact on international trade law, the institutions that uphold it, and relations between the United States, China, and the European Union.
While the United States has just elected Donald Trump for a second term, the rest of the world still painfully remembers the period 2016-2020 as the beginning of trade retaliatory measures against China but also against the countries of the European Union, historical allies of the United States. But in 2024, what can we expect from him and his administration in trade terms? Will he continue Biden's policies, which are soft on allies and China, or should we prepare for an all-out trade war now?
Trump or the abandonment of economic liberalism
Donald Trump, unlike his predecessors and the candidate of the other camp, Kamala Harris, sees international trade as a zero-sum game. One man's gain is another man's loss – hence his obsession with trade deficits. While the 2016 campaign and subsequent term clearly placed China in the line of fire, the Republican candidate's 2024 campaign also targeted trade with allies and international trade institutions.
This vision of the world supported by the American president-elect risks accelerating the unravelling of international economic institutions, starting with the most central: the World Trade Organization. During his first term, Donald Trump deliberately blocked the appointment of American judges to the dispute settlement body's appeals court, thereby preventing the court from issuing legally binding decisions [1]. This policy was perpetuated by the Biden administration, which added the withdrawal of US support for the traditional position of transparency in terms of data sharing in e-commerce [2]. It also challenged the institution's conclusions calling Trump's invocation of "national security" when imposing tariff sanctions on steel and aluminium imports abusive [3].
The Republican candidate's statements on trade have varied during the campaign, but the best known include tariffs ranging from 10 to 20 percent on all imports of European origin, 60 percent on imports of Chinese origin, 100 percent on imports from non-dollar-denominated companies, and 100 to 200 percent on imports from American companies that have relocated abroad. Finally, the new American president proposes the "Reciprocal Trade Act" [4]. It would allow customs duties on any goods imported from a third country to be equal to those imposed by the third country in question on the same goods when imported from the United States.
These proposals provide for differentiated customs duties by country, which is contradictory to the spirit of the contemporary international trade order. If adopted, they would call into question the entire functioning of the international trade order which is based on the "most favoured country" clause. Given the keystone position that the United States occupies in the global economic system, it is unlikely that the world order and its institutions will escape unscathed. More concretely, we can expect a much more virulent trade policy, based on the law of retaliation – an eye for an eye, a tooth for a tooth – exactly what the creation of the World Trade Organization was initially intended to prevent.
Trump and the European Union: the end of alliance politics
Trump's policy towards the European Union is the one that differs most from what was practiced under the Biden administration. The last few years have been marked by a rapprochement between the United States and the European Union and its member states with a common objective: to stand together as actors sharing the same values. The creation of the “Trade and Technology Council” in 2021 is the most emblematic action taking this direction. The EU and the US have pursued common policies to defend their security interests, such as the sanctions imposed in parallel against Russia and any state seeking to assist it. Supply chain derisking policies on both sides of the Atlantic have reinvigorated trade between the two entities, with the EU accounting for 25% of US imports in 2023 and the US reaching 15% of European imports in the same year.
Trump is signalling the end of the trade privilege granted to allies in several respects: first of all, EU member states are affected by the tariffs that the president-elect wants to see affixed to all American imports. Then, the EU could suffer indirectly from Trump's desire to impose 60% customs duties on Chinese products. Indeed, the Chinese economy is currently suffering and remains very heavily dependent on exports for its growth. Given the similarity of European and American markets in terms of consumption, it is likely that China will seek to divert part of its American exports to the European Union, thus putting pressure on Brussels, with which relations are already strained by bilateral issues such as sanctions against exporters of electric vehicles from China.
However, unlike what happened during Donald Trump's first term, Europe has been preparing for a disaster scenario for several months: Ursula Van Der Leyen, the President of the European Commission, has surrounded herself with a team called the "Trump task force" [5] and Maros Sefcovik, the new European Commissioner for Trade and Economic Security, has said he is ready "to defend European interests in the event of a harmful scenario" [6] (i.e. the election of the Republican candidate and the introduction of customs duties of up to 20% on European products). In 2018, during trade tensions with the United States, particularly over the steel and aluminium issue, the EU sought to defuse the conflict by applying only a few retaliatory measures, without success. European leaders are now preparing for an open conflict in which they intend to take an active part if the hands across the ocean extended to the new president of the United States are not seized. In other words, if Trump persists in wanting to impose tariff measures on all imports, including those from the EU, it is very likely that a whole battery of measures and countermeasures will be launched – leading de facto to a form of trade war between allies with very volatile trends, breaking with the solid and gradual increase in reciprocal imports observable in recent years.
Trump and China: Act 2
During its first term, the Donald Trump administration imposed trade sanctions on a wide range of goods from China, ranging from 7.5% to 25%. Trade sanctions then gradually expanded under the Biden administration. Today, 60% of products from China are subject to sanctions.
However, Trump's proposal for his second term remains unprecedented: imposing customs duties of around 60% on all Chinese products. Studies of US-China trade have demonstrated the effectiveness of tariffs in US derisking policy: the taxed categories of goods are imported less than the others [7]. Given the extent of the goods affected by the sanctions, there has been a very significant overall drop in Chinese imports to the United States over the past few years. However, the U.S. market is so important to Chinese exports that the country has largely absorbed the sanctions by cutting margins – so prices in the target market have fluctuated little. With customs duties of 60% of the sale price, Chinese sellers will not be able to absorb the sanctions and with the increase in prices on American soil, exports are therefore likely to fall even further, and quite drastically.
However, compared to Donald Trump's first term, two things have changed on the Chinese side: on the one hand, the Chinese economy is in a much more difficult situation than in 2016 and on the other hand, its leaders know what to expect. Indeed, since the COVID years, the Chinese economy has been in difficulty: insufficient growth, collapse of the real estate sector, provincial government in difficulty, and sluggish domestic consumption. While economists agree on the need for China to diversify its sources of growth, the main lever that allows it to keep its head above water remains exports today [8]. The election of Donald Trump is likely to have a significant impact on Chinese trade figures but also on the organisation of exports: since the implementation of sanctions, China has transited some of its exports through other countries such as Mexico to liberate itself from American customs sanctions. This type of strategy will surely increase.
Finally, Chinese leaders already have experience of Donald Trump's first term and in particular of the difficult and rather humiliating signing of the Phase One agreement where China agreed to import quotas of American products in exchange for lower customs duties [9]. Given the aggressiveness and lack of concessions on the American side during Trump's first term, it is likely that China, too, will resort to a hardline policy as an answer to that of the United States, restricting exports of critical materials, launching all-out trade procedures at the WTO, and implementing damaging trade measures in retaliation for unilateral American actions.
Overall, one of the indirect effects of the election of the Republican candidate to the presidency of the United States could be to force China and the European Union to resume substantive discussions on supporting the international trading system to be put in place in the absence of the United States, and to find amicable solutions to their numerous trade disputes. In any case, the election of Donald Trump for a second term at the head of the world's most powerful nation is a promise of a (very) bumpy road for international trade and its players: international trade law and the institutions that support it are on the brink of a precipice and the United States promises a sharp increase in the number of trade barriers and disputes with the two other major players in globalisation, namely the European Union and China.
[1] Tom Miles, "U.S. blocks WTO judge reappointment as dispute settlement crisis looms", Reuters, 27/08/2018.
[2] Office of the United States Trade Representative, "USTR Statement on WTO E-Commerce Negotiations", 24/10/2023.
[3] Doug Palmer, "WTO says Trump's steel tariffs violated global trade rules", Politico, 12/09/2022.
[4] Official website of Donald Trump's 2024 campaign, "Cementing Fair and Reciprocal Trade with the Reciprocal Trade Act", 21/06/2023.
[5] Jakob Hanke Vela, "EU’s game plan for Trump trade war: ‘Hit back fast and hard'", Politico, 22/10/2024.
[6] European Parliament Multimedia Centre, "Commissioner-designate, Trade and Economic Security & Interinstitutional Relations and Transparency, Maros Sefcovik", 04/11/2024.
[7] Caroline Freund Et Al (2023), "US-China Decoupling: Rhethoric and Reality", VoxEU, CEPR, 31/08/2023.
[8] David Lawder, "IMF's Georgieva says China can no longer rely on exports for growth“, Reuters, 17/10/2024.
[9] Office of the United States Trade Representative, "United States – China Phase One Trade Agreement", 15/01/2020.
