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The News
US trade policy under a potential second Donald Trump presidency would be so unorthodox that it cannot be effectively modeled, Goldman Sachs said in a recent note to clients.
The bank’s economists said they had forecast volatility, and its ensuing economic impact would be comparable to Trump’s first term. But they said “sizing the potential uncertainty increase… is empirically impossible” because of the enormity of Trump’s trade proposals — notably his plans for a 10% tariff on all US imports, and 60% on Chinese products.
Goldman Sachs is not alone in forecasting a severe economic fallout if Trump retakes the White House, with other banks such as UBS and Wells Fargo also predicting that the former president’s policies could hurt both the Chinese and US economy.
SIGNALS
Trump may launch a ‘fast and furious’ trade war on China…
There are a number of reasons to believe Trump would follow through with his major proposed tariff hike if reelected, Bloomberg argued. His first trade war in 2018 did not damage the American economy as much as analysts had warned, which means resistance to more action may be low. And if Trump proceeds with the tax cuts he’s promised, the government will need alternative sources of revenue, leading economists to conclude that a “fast and furious” trade war against China is a real possibility. But this would also lead to “a hard-decoupling” of the two countries’ economies, an expert argued, accelerating an already-ongoing fragmentation of the world with China on one side and the US on the other.
… That could escalate into a global trade war
Trump’s proposed 10% baseline tariffs on all imports, including from allied and neighboring countries, may signal that he “considers all trade to be ‘unfair’ in some respect, or at least disadvantageous,” the Peterson Institute for International Economics argued, marking a notable shift to the approach of other US presidents who impose extra tariffs “selectively.” There’s reason to believe that foreign countries would retaliate, the think tank argued — the EU, Canada, and Mexico did so in response to Trump tariffs on steel and aluminum in 2018 — and in the worst case scenario, that could escalate into a global war on trade.
Harris could be more progressive than Biden on trade
The presumptive new Democratic nominee Kamala Harris is largely expected to continue with her predecessor’s “Bidenomics” on taxes and housing if elected, analysts noted. But when it comes to trade, there may be some wiggle room for Harris to veer away from Biden’s approach, which has also been tariff-heavy, an analyst told Politico. Harris previously declared she was “not a protectionist Democrat,” and she recently restated her criticism of Trump’s trade proposals, arguing they’d increase everyday costs for Americans.