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Damage from Trump's trade wars won't heal quickly: Analysts

Mr Trump has shaken up the global trading system but the US trade deficit has grown under his presidency. PHOTO: AFP

PARIS • After four years in office, President Donald Trump has failed to achieve his promise to eliminate the US trade deficit, and instead dealt a lasting blow to the multilateral economic system that global trade is based upon, analysts say.

But even if Democrat Joe Biden wins the 2020 election as most opinion polls currently show, US trade policy is likely to maintain a protectionist streak and the confrontation with China is set to persist.

One of Mr Trump's main 2016 campaign themes was that the United States - the world's biggest economy - had been taken advantage of by its trade partners and he pledged to shake up global trade arrangements and eliminate the nation's trade deficit.

Mr Trump has indeed shaken up the global trading system but the US trade deficit has grown under his presidency, and analysts say he has little to show for his efforts.

"Trump's trade policies have delivered few tangible benefits to the US economy while undercutting the multilateral trading system, disrupting longstanding alliances with US trading partners, and fomenting uncertainty," said Cornell University professor Eswar Prasad.

While the US trade deficit with China - Mr Trump's main target - has indeed shrunk, imports from Canada and Mexico have jumped, deepening the overall deficit.

The import tariff increases that Washington has imposed on many products have "protected American manufacturers", according to University of Paris-Dauphine economics professor Gianluca Orefice .

But those tariffs also "raised production costs" for US industry and demonstrated the extent of the reliance on Chinese suppliers.

The global economic infrastructure is now in a deep state of flux.

"Obviously his policy has been deeply damaging with respect to Europe, to the WTO, which will be hard to repair," said Mr Edward Alden, a journalist and author who specialises in US trade policy and who is currently a fellow at the Council on Foreign Relations think-tank.

Mr Trump's refusal to appoint new judges has paralysed the World Trade Organisation's (WTO) dispute resolution system, hobbling the arbitrator of the world's multilateral trading system.

"Donald Trump has shown he is capable of breaking, but incapable of building," said Dr Sebastien Jean, director of CEPII, the main French institute for research into international economics.

"When one looks at what he got from China, one is tempted to say: All that for that?" he added.

The truce in the US-China trade war reached in January left unsolved major points of contention such as intellectual property theft and forced technology transfers.

Meanwhile, "the Trump administration's erratic statements and policy decisions have resulted in the US being perceived as an unreliable and untrustworthy trading partner", said Cornell's Prof Prasad.

This has led certain countries to go around the US and conclude bilateral or multilateral trade pacts, such as when Pacific nations went ahead with a deal after Mr Trump pulled his country out of the Trans-Pacific Partnership.

Mr Alden, however, does credit Mr Trump with successfully renegotiating the North American Free Trade Agreement with Canada and Mexico, an effort that was supported by both Democrats and Republicans.

Dr Jean also credits Mr Trump with changing the dynamic concerning China, which helped the European Union change its policy towards Beijing, including several European countries joining the US in banning 5G mobile equipment from Chinese manufacturer Huawei.

The positions of both Democrats and Republicans have hardened in recent years towards China, which is now viewed as a rival that needs to be contained as it has not evolved into a liberal market economy as had been hoped.

"Under either candidate, the trade war is likely to spread," said Ms Vicky Redwood at Capital Economics.

"The trade war was basically inevitable given China's economic rise and persistence with high levels of state intervention rather than adoption of market forces," she said.


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A version of this article appeared in the print edition of The Straits Times on October 20, 2020, with the headline Damage from Trump's trade wars won't heal quickly: Analysts. Subscribe