Opinion

Trump’s International Economic Legacy

If Donald Trump loses the United States presidential election in November, he will ultimately be seen to have left little mark in many areas. But in the US's relationship with China, the decoupling of economic links could continue, and that could force Europe into hard choices.

By: Date: September 29, 2020 Topic: Global Economics & Governance

This opinion post was originally published in Project Syndicate.

Project Syndicate logo

It would be foolish to start celebrating the end of US President Donald Trump’s administration, but it is not too soon to ponder the impact he will have left on the international economic system if his Democratic challenger, Joe Biden, wins November’s election. In some areas, a one-term Trump presidency would most likely leave an insignificant mark, which Biden could easily erase. But in several others, the last four years may well come to be seen as a watershed. Moreover, the long shadow of Trump’s international behaviour will weigh on his eventual successor.

In some areas, a one-term Trump presidency would most likely leave an insignificant mark

On climate change, Trump’s dismal legacy would be quickly wiped out. Biden has pledged to rejoin the 2015 Paris climate agreement “on day one” of his administration, achieve climate neutrality by 2050, and lead a global coalition against the climate threat. If this happens, Trump’s noisy denial of scientific evidence will be remembered as a minor blip.

In a surprisingly large number of domains, Trump has done little or has behaved too erratically to leave an imprint. Global financial regulation has not changed fundamentally during his term, and his administration has flip-flopped regarding the fight against tax havens. The International Monetary Fund and the World Bank have carried on working more or less smoothly, and Trump’s furious tweeting did not prevent the US Federal Reserve from continuing to act responsibly, including by providing dollar liquidity to key international partners during the COVID-19 crisis. True, Trump has repeatedly spoiled international summits, leaving his fellow leaders flummoxed. But such behaviour has been more embarrassing than consequential.

In a surprisingly large number of domains, Trump has done little or has behaved too erratically to leave an imprint

In contrast, Trump will be remembered for his trade initiatives. Although it has always been difficult to determine the real aims of an administration beset by infighting, three key goals now stand out: reshoring of manufacturing, an overhaul of the World Trade Organisation and economic decoupling from China. Each objective is likely to outlast Trump’s tenure, at least in part.

Reshoring looked like a costly fantasy four years ago, and it still is in many respects. As my Peterson Institute colleague Chad Bown has documented, Trump’s chaotic trade war with the world has often hurt US economic interests. But reshoring as a policy objective has gained new life after the pandemic exposed the vulnerability entailed by depending exclusively on global sourcing. Biden has endorsed the idea and ‘economic sovereignty’ – whatever that means – is now everywhere the new mantra.

US Trade Representative Robert Lighthizer claims that a “reset” of the WTO has been a high priority for the administration. If so, it has made some headway. The other G7 countries now share the long-standing US dissatisfaction with the WTO’s leniency toward China’s government subsidies and weak intellectual-property protection. There is also a recognition that some US grievances against WTO dispute-settlement procedures (and in particular the so-called Appellate Body) are valid. But whether the battle ends with a reset or a decomposition of the multilateral trading system remains to be seen.

The major watershed is US-China relations. Although bilateral tensions were apparent before Trump’s election in 2016, nobody spoke of a ‘decoupling’ of two countries that had become tightly integrated economically and financially. Four years later, decoupling has begun on several fronts, from technology to trade and investment. Nowadays, US Republicans and Democrats alike view bilateral economic ties through a geopolitical lens.

It is not clear whether Trump merely precipitated a rupture that was already in the making. He is not responsible for President Xi Jinping’s authoritarian assertiveness, and he did not devise the Belt and Road Initiative, China’s massive transnational infrastructure and credit programme. But it was Trump who ditched Barack Obama’s carefully balanced China strategy in favour of a brutally adversarial stance that left no scope for events to take a different course. Whatever the cause of decoupling, there won’t be a return to the status quo.

In US-China relations, it is not clear whether Trump merely precipitated a rupture that was already in the making

A Biden administration would also not find it easy to reach the candidate’s aim of restoring ties with US allies, like-minded democracies, and partners around the world. Until Trump’s presidency, much of the world had become accustomed to regarding the US as the main architect of the international economic system. As Adam Posen, also of the Peterson Institute, has argued, the US was a sort of chair for life of a global club whose rules it had largely conceived but still had to abide by. The US could collect dues but was also bound by duties, and had to forge a consensus on amendments to the rules.

Trump’s trademark has been to reject this approach and treat all other countries as competitors, rivals or enemies, his overriding objective being to maximise the rent that the US can extract from its still-dominant economic position. America First epitomises his explicit promotion of a narrow definition of national interest.

Even if the US under Biden were willing to make again credible international commitments, its outlook may change lastingly. Former Trump adviser Nadia Schadlow has argued that Trump’s tenure will be remembered as the moment when the world pivoted away from a unipolar paradigm to one of great-power competition.

It is by no means obvious that if Biden wins, he will be able to restore the trust of America’s international partners. For all its aberrations, Trump’s presidency may indicate a deeper US reaction to the shift in global economic power, and reflect the American public’s rejection of the foreign responsibilities their country endorsed for three-quarters of a century. The old belief among US allies and economic partners that Americans will “ultimately do the right thing,” as Winston Churchill reputedly said, may be gone.

Anyhow, Trump’s peculiar behaviour has made it easy for America’s allies to postpone hard choices. That seems particularly true of Europe. A Biden-led US might seem like a familiar partner to most European leaders. But if it asked them to take sides in the confrontation with China, Europe would no longer be able to put off its own moment of decision.

Recommended citation:
Pisani-Ferry, J. (2020) ‘Trump’s international economic legacy’, Bruegel Blog, 29 September


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint.

Due to copyright agreements we ask that you kindly email request to republish opinions that have appeared in print to [email protected].

Read article More on this topic More by this author
 

Podcast

Podcast

A rushed deal or a rush to judgement?

The Comprehensive Agreement on Investment (CAI) is supposed to improve market access for European companies operating in China and to ensure a level playing field, as well as reciprocity. Does it fulfil such expectations?

By: The Sound of Economics Topic: Global Economics & Governance Date: January 27, 2021
Read article More on this topic More by this author
 

Opinion

A Global Pandemic Alarm Bell

The appearance of new strains of the coronavirus in the United Kingdom, South Africa, and Brazil has given the world no choice but to design and implement a comprehensive global strategy. So, what's stopping that from happening?

By: Jean Pisani-Ferry Topic: Global Economics & Governance Date: January 26, 2021
Read about event
 

Upcoming Event

Feb
4
13:00

Carbon Border Adjustment Mechanism: Greening the EU trade?

Assessing CBAM from a trade perspective.

Speakers: Luis Garicano, Emily Lydgate and André Sapir Topic: Energy & Climate, Global Economics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read article More on this topic More by this author
 

Opinion

中國企業受累貿戰和疫情,但仍優於全球同業

總體上,中國企業的表現半喜半憂:相對全球同業表現較好,但收入下降和槓桿率升高帶來的風險也不容忽視。

By: Alicia García-Herrero Topic: Global Economics & Governance Date: January 21, 2021
Read article More on this topic More by this author
 

Opinion

RCEP對亞洲影響積極,無阻價值鏈重組

總體而言,雖然RCEP成員之間在市場准入上實際提升幅度有限(例如中國和澳洲),但這一協定的意義在於讓世界意識到,亞洲仍然依賴中國市場,亞洲國家不能錯過中國放寬市場准入的機會,即使幅度有限。

By: Alicia García-Herrero Topic: Global Economics & Governance Date: January 21, 2021
Read article More on this topic More by this author
 

Opinion

An EU - China investment deal: a second look

For the moment, it does not look like we have the basis for greater and deeper economic relations with China. However, dismissing China and the opportunities that it creates for global cooperation would also be a mistake.

By: Maria Demertzis Topic: Global Economics & Governance Date: January 19, 2021
Read article More on this topic More by this author
 

Opinion

Résilience : la nouvelle boussole

Pour surmonter le choc de la pandémie de Covid-19, l’économiste écarte, dans sa chronique, l’idée d’un repli protectionniste, mais suggère de passer d’un objectif de réduction des coûts à celui de la réduction des risques.

By: Jean Pisani-Ferry Topic: Global Economics & Governance Date: January 18, 2021
Read article More on this topic More by this author
 

Blog Post

A matter of life and death: governments must speed up vaccination

COVID-19 vaccination in Europe and the United States is moving too slowly and is failing to prevent avoidable death and economic disruption. More must be done to accelerate the campaign by targeting those most at risk.

By: Uri Dadush Topic: Global Economics & Governance Date: January 13, 2021
Read article More on this topic More by this author
 

Blog Post

The double irony of the new UK-EU trade relationship

The Trade and Cooperation Agreement signed between the European Union and the United Kingdom goes against six decades of UK efforts to avoid being economically disadvantaged in Europe. Tracking the evolution of the EU-UK relationship over the last 60 years can help in understanding this.

By: André Sapir Topic: European Macroeconomics & Governance Date: January 12, 2021
Read article More on this topic More by this author
 

Opinion

Europe's disappointing investment deal with China

Why rush a deal that is so inherently complex?

By: Alicia García-Herrero Topic: Global Economics & Governance Date: January 4, 2021
Read article More on this topic More by this author
 

Opinion

The Biden promise

In the eyes of Europeans, Joe Biden’s US election win brings the promise of major change with global relevance. From climate to multilateralism, to trade and managing global public goods, here is a take on how to understand this promise.

By: Maria Demertzis Topic: Global Economics & Governance Date: December 23, 2020
Read article Download PDF More on this topic
 

Policy Contribution

Deglobalisation in the context of United States-China decoupling

After decades of increasing globalisation, there now seems to be a slowing, or even a turn to deglobalisation, meaning decelerating trade and investment and reduced global value chains. This trend seems to have accelerated because of the United States’ push to contain China in the context of their strategic competition. So far, however, there is less evidence of deglobalisation in terms of financial flows.

By: Alicia García-Herrero and Junyun Tan Topic: Global Economics & Governance Date: December 21, 2020
Load more posts