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Robert Lighthizer, Steven Mnuchin, and Liu He standing in front of U.S. and Chinese flags. Chinese Vice Premier Liu He, right, with U.S. Treasury Secretary Steven Mnuchin, center, and U.S. Trade Representative Robert Lighthizer, left, in Beijing, May 1, 2019 (AP photo by Andy Wong).

Will Trump’s Trade Wars Reshape the Global Economy?

Friday, June 19, 2020

Once relatively staid, the global economic and trade system has been anything but since U.S. President Donald Trump took office.

Though it’s been overshadowed by the outbreak of the COVID-19 pandemic, the U.S.-China trade war has not been definitively resolved. In January, the two countries hit the pause on the on again, off again dispute, which began in 2018 when Trump launched a series of tit-for-tat tariff hikes over China’s perceived unfair trade practices, including forced technology transfers and the theft of intellectual property. After several rounds of talks stalled over the course of the following 18 months, the two sides signed a limited “phase one” agreement in January, giving them more time to try to iron out their broader differences. But the terms of the stopgap deal, particularly China’s required purchases of a range of U.S. products and goods, were already going to be difficult to achieve under normal circumstances. The economic impact of the coronavirus pandemic will now call them even further into question, with no guarantees for an agreement in broader “phase two” talks.

Trump’s unpredictable negotiating style and his willingness to brandish the threat of tariffs for leverage in trade talks cannot be particularly reassuring to European officials, who have yet to start their own trade negotiations with the U.S. Trump has already decried what he sees as unfair trade deficits with European Union countries, particularly Germany, and he imposed tariffs on steel and aluminum imports from some allies, without seeming to understand that the EU negotiates trade terms as a bloc. A U.S.-Europe trade war could do lasting damage to both sides.

Trump’s one clear-cut accomplishment on trade is the updated NAFTA deal known officially as the U.S.-Mexico-Canada Act, or USMCA. But it mainly recoups the self-inflicted losses from Trump’s withdrawal from the Trans-Pacific Partnership trade deal, or TPP—only on a smaller North American, rather than trans-Pacific, scale. That deal was finally ratified by the U.S. House of Representatives in December, after the administration made numerous concessions to House Democrats to ensure its passage; it has since been ratified by all three countries and will enter into effect after they meet their prerequisite obligations under the deal. Trump has also trumpeted a deal with Japan as a major success, although it too fell short of the terms Japan had agreed to under the TPP.

It does not help that with the global economic trade system in flux, the body charged with overseeing it is in crisis, exacerbated by the Trump administration’s hostility to multilateral institutions of all stripes. Trump has accused the World Trade Organization of violating U.S. sovereignty, and his administration seems intent on hobbling it due to practices Trump perceives as unfair to the U.S. Though the WTO is clearly in need of reforms, Trump seems to have opted to sink the body rather than try to fix it.

WPR has covered Trump’s trade wars in detail, and continues to examine key questions about future developments. What impact will Trump’s trade wars have on the upcoming U.S. election? What will they mean for America’s role in the global economy? And will they have a lasting effect on the global trade regime? Below are some of the highlights of WPR’s coverage.

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Our Most Recent Coverage:

U.S.-China Tensions and Pandemic Fallout Collide in the Race to Lead the WTO

When the World Trade Organization’s director-general, Roberto Azevedo, announced in May that he would be leaving his post at the end of August, cutting his second term short by a year, it created an opportunity for the WTO to reinvent itself—if it can find the right leader. But that won’t be easy.

U.S.-China Trade War

The United States and China once again appear to have hit the pause button on their dispute, but they are still far from resolving it. The concessions required to reach a “phase two” deal in the next stage of talks remain unclear, even as the coronavirus pandemic threatens the major pillars of the “phase one” agreement.

World Trade Organization

The body charged with overseeing the system of global trade is seeing its dispute resolution mechanism grind to a halt as the United States blocks appointments to its Appellate Body. Already damaged due to Trump’s hostility to the multilateral trade regime, it is now under new strain due to the coronavirus pandemic.

World Politics Review

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U.S.-Europe Trade War

The two sides have already engaged in tit-for-tat tariffs, and the United States is said to be readying another round, this time targeting automobile imports.

NAFTA 2.0 and the Mini U.S.-Japan Trade Deal

Trump entered office promising to radically overhaul NAFTA, the free trade agreement with Canada and Mexico. But after almost two years of bitter negotiations, the U.S.-Mexico-Canada agreement, or USMCA, is more of a rebranded deal than a brand new one. Meanwhile, the recently agreed deal with Japan might not be all Trump has made it out to be.

More WPR coverage of global trade issues.

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Editor’s note: This article was originally published in May 2019 and is regularly updated.