Economists say Trump 2.0 may go “nuclear” on trade with China | Real Time Headlines

Experts told CNBC that if former President Trump is elected to a second term in the White House, he may take his trade war and economic decoupling policies to the next level.

While Joe Biden has also put strategic competition with China at the forefront of his economic policies, economists and trade experts widely expect Trump to further cut and undermine trade relations between the world’s two largest economies.

Eswar Prasad, an economics professor at Cornell University, said: “Trump’s victory is likely to intensify trade and economic hostilities between the United States and China, thereby exacerbating the trade and financial decoupling between the two countries.”

Trump is generally expected She will face off against current Vice President Kamala Harris after Biden dropped out of the race and endorsed her. Prasad and other experts said Harris’ approach to China could be similar to Biden’s.

Although Trump and Biden Both sides have adopted a protectionist stancePrasad, who previously served as head of the International Monetary Fund’s China and Financial Research Division, explained that their strategies and tactics vary widely.

“Trump relied on tariffs to block imports from China. While keeping these tariffs unchanged and even raising tariffs on some imported products, Biden focused more on restricting China’s access to technology transfer and computer chips,” he said.

Calls itself “customs officer” triggered a trade war with Beijing during his first term.He imposed a series of responsibilities on the United States $250 billion of Chinese imports, ignoring warnings that tariffs will result Raising prices hurts consumers.

After defeating Trump in 2020, Biden retained his predecessor’s tariffs and even increased his own, announcing Strict new responsibilities Valued at approximately US$18 billion Imported from Chinaincluding electric vehicles, solar cells, lithium batteries, steel and aluminum.

Experts told CNBC they expect Harris to largely continue Biden’s tariff policies. On the other hand, Trump has proposed increase interest rate Imports from China have dropped by at least 60%.

“I certainly don’t know whether Trump is willing to take such extreme measures, but I do believe he will probably increase tariffs to some extent in his second term,” said Stephen Weymouth, a professor of international political economy at Georgetown University.

Economist Stephen Roach said that raising tariffs during Trump’s second term would amount to the “nuclear option” in an international economic conflict.

William Reinsch, chair of international business at the Center for Strategic and International Studies, said the tariffs could trigger another trade war that would end most exchanges of goods between the two countries and impose “huge economic costs.”

Reinsch said even if Trump’s goal was not to decouple completely but to force Beijing to negotiate a more favorable trade deal, there was no reason to believe that would work.

The Trump administration has achieved “phase one trade agreement” With China in 2019, but with few terms It’s an honour Subsequent phases never materialized.

Some commentators said Trump’s selection of J.D. Vance as his running mate is further evidence that Republicans are serious about his tariff plans. The senator from Ohio has been a staunch supporter of tariffs on China, arguing that China is biggest threat facing the united states

“If I were a Chinese policymaker, this would be a choice that would alarm me,” said Arthur Dong, a professor of strategy and economics at Georgetown University.

In perhaps Biden’s biggest move, the administration signed CHIPS and the Science Act August 2022, on hold Nearly $53 billion Invest in domestic semiconductor manufacturing and research to increase U.S. competitiveness against China.

Chris Miller, author of “Chip Wars,” noted that the export controls and CHIPS bills were passed with bipartisan support in Washington, so no matter what happens in November, such policies will likely remain a priority.

“I expect that no matter who wins the election, the U.S. will move up a level or two of restrictions,” Miller said.

She said that the channels for the two countries to discuss policy issues were significantly reduced during the Trump administration, while the Biden administration emphasized its policy issues. diplomatic contacts effort.

The current government also seeks toLike-minded partners“For example, lobbying Japan and Netherlands Collaborate on semiconductor constraints.

“Not only does this help minimize the backlash to his trade policy actions, it also in many ways makes it more effective,” said Nick Marrow, chief global trade analyst at the Economist Intelligence Unit. He added that he expected future Any Democratic administration would retain this multilateral approach.

On the other hand, he said that Trump chose a more “go it alone” approach, allowing the United States to take measures against China faster.

While the Biden-Harris administration’s “more measured and cautious” approach to China trade and diplomacy has played a greater role in stabilizing relations, Marrow said he doubted Beijing was excited about either candidate .

“There’s a sense that U.S.-China relations will continue to be in disintegration for the rest of this decade, no matter which party is in the White House.”

—CNBC’s Zenith Wong contributed to this report