Banks forecast economic fallout of Trump’s unorthodox trade proposals

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.

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.

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.