The US presidential election will have a substantial impact on global trade policies, particularly tariffs, which have been a focal point for recent administrations. Both US-based companies and international trade partners are closely monitoring potential shifts in policy that may affect everything from supply chains to pricing strategies. Given the current climate, this article explores the potential impacts of the election, the strategies each administration may use, and how US trade policies have evolved over the last few years.
The Importance of Trade and Tariffs in the US Economy
The US government, particularly the executive branch, has broad authority over tariffs and trade policy. Under Section 232 of the Trade Expansion Act and Section 301 of the Trade Act, administrations can adjust tariffs based on national security or economic concerns. The significance of this authority has been evident in recent administrations, where tariffs have been used as tools for broader economic and political goals. This influence is not likely to diminish under any future administration, regardless of party.
Historical Overview: Recent Tariff and Trade Policies
Trump Administration: Protectionism and Tariff Use
- The Trump administration marked a departure from previous trade policies with its “America First” approach. Tariffs on steel, aluminum, and various Chinese goods were implemented, aiming to support US industries and reduce trade deficits.
- Trade disputes, particularly with China, led to billions of dollars in tariffs, affecting global supply chains and resulting in reciprocal tariffs from other countries.
Biden Administration: Retaining and Refining Tariffs
- Despite initial criticism, the Biden administration has retained many of Trump’s tariffs, especially those targeting Chinese goods. Recent increases in tariffs on semiconductors and electric vehicles indicate a continued focus on protecting strategic sectors.
- Biden’s approach emphasizes collaboration with allies to counteract unfair trade practices, particularly in technology and environmentally critical industries.
Potential Trade Approaches of the 2024 Presidential Candidates
Republican Stance: Higher Tariffs and Reduced Globalization
- With a focus on reducing dependency on foreign imports, a Republican administration is likely to maintain or even expand tariffs. Donald Trump’s proposed tariffs, if implemented, would include a broad 10% tariff on all imports and a significant 60% tariff on Chinese goods.
- Beyond tariffs, potential strategies may include limiting Chinese investments in the US and reducing reliance on the World Trade Organization, aligning with a broader strategy to promote self-reliance.
Democratic Stance: Strategic Trade Partnerships and Environmental Focus
- The Democratic platform, conversely, emphasizes cooperation with allies and promoting environmental and labor standards. Although Harris has expressed opposition to certain trade deals like the Trans-Pacific Partnership, her stance suggests a balanced approach with targeted tariffs on key industries rather than broad protectionism.
- Nearshoring with allied nations and investing in renewable industries are expected priorities under a Democratic administration.
Non-Tariff Strategies in Trade Policy
Regardless of the outcome, non-tariff strategies are likely to play an essential role in trade policy. Legislative measures such as the Uyghur Forced Labor Prevention Act highlight the growing trend toward addressing ethical and environmental standards in trade. These tools enable the US to address concerns without relying solely on tariffs, which can have disruptive economic effects.
Impacts on US Businesses and International Trade Partners
For US Exporters and Importers
- If sweeping tariffs are implemented, US-based companies may shift to domestic sourcing to minimize exposure to tariffs. First-sale rules, allowing companies to reduce dutiable values, may also gain traction as companies seek relief from higher tariff costs.
- Strategies like duty drawback, which allow companies to recoup tariff costs for goods that are re-exported, can offer significant savings but require careful documentation and planning.
For International Trade Partners
- The election results could prompt multinational corporations to re-evaluate their supply chains, shifting distribution channels, and sourcing strategies in anticipation of policy changes. These shifts could impact the global economy, especially in regions highly dependent on US trade agreements.
USMCA and Regional Trade Implications
The US-Mexico-Canada Agreement (USMCA), subject to review every six years, will require early strategizing by all participating nations. Trade partners are expected to weigh in on issues like auto rules of origin and energy policies. The election’s outcome may influence how each administration navigates these discussions, with Republican platforms likely favoring more assertive negotiations and Democrats focusing on labor and environmental safeguards.
As the election wraps up today, companies must prepare for shifts in trade policy that could alter global supply chains and pricing strategies. By staying informed and agile, businesses can anticipate and adapt to new trade policies, whether through tariff management strategies or by restructuring operations. For US trade partners, the election’s outcome will likely shape the future of international trade relationships and economic stability, underscoring the far-reaching influence of US policy on the global stage.