Trump’s return to power to change world trade

​​​​​​​By Sevgi Ceren Gokkoyun and Dilara Zengin

NEW YORK/WASHINGTON (AA) - President-elect Donald Trump’s return to power will change world trade as his import tariffs and protectionist policies are expected to create a new balance.

Trump complained about bureaucracy in his first term despite making ambitious policy changes. For his second term, his presidential campaign centered around his “America First” strategy. He is poised to fulfill his promises much quicker this time around with the support of the Senate and the House of Representatives, both of which now have a Republican majority.

“The most beautiful word in the dictionary is tariff,” Trump said, and it is his “favorite word,” during an interview with Bloomberg in October, as he plans to impose a 60% tariff on Chinese imports and a general tariff of 10% - 20% on other imports to the US, which account for $3 trillion annually.

His protectionism is expected to isolate the US in global trade, as the changes could lead to long-term fluctuations in the American economy while weakening economic ties with US-allied countries and prompting them to retaliate.

Retaliation from major US trade partners, such as the EU, could lead to global trade and supply chain disruptions, giving rise to global inflation.

Trump’s economic team, however, rejects the idea that additional tariffs would increase inflation in the US.

The trade war with China had a major effect in Trump’s first term and it is estimated to deepen in his second due to rising tariffs on the country, tightening export restrictions and expanding measures, especially in the technology sector.

The US trade deficit against China was around $387 billion in 2018 but fell to $252 billion last year, largely due to the effect of tariffs.

Furthermore, the White House’s potential disagreements with Beijing could also escalate supply chain disruptions.

As for other Asian countries, Trump aims to reduce the trade deficit via tariffs, as the US has a trade deficit with not only China but with Vietnam at $102.9 billion, Taiwan at $47.5 billion, Japan at $66.2 billion, India at $45.6 billion and Malaysia at $25.5 billion.

The chip war between the US and Asian countries, meanwhile is estimated to escalate in Trump’s second term, as the President-elect accuses Taiwan of taking over almost the entire chip business in the US, while South Korea and Japan are also key players in the industry.

Vietnam’s electronics exports may be targeted, as Chinese electronics products go through Vietnam to the US since 2018, while India could also be under the radar due to the large share of Chinese-made products in the country’s technological exports.

As for the EU, the region’s increasing dependence on the US market made it vulnerable to the potential shocks of Trump’s protectionist policies. The US trade deficit with the EU amounted to $125 billion last year.

“They don’t take our cars, they don’t take our farm products, they sell millions and millions of cars in the United States,” Trump said at an event in Pennsylvania on Oct. 29, regarding the EU. “No, no, no, they are going to have to pay a big price.”

The EU’s policies, such as support for Ukraine and green transformation, do not exactly align with the upcoming Trump administration’s possible steps, which could endanger the strategic partnership between the region and the US, as protectionist trade policies may increase.

Trump’s tariffs on the EU could force Brussels to retaliate and force a trade war.

Especially in high-export-dependent sectors for the EU, such as the automotive business, stricter conditions may appear in trade agreements or the EU may take measures to prevent sectors from being further affected.

Germany, Europe’s largest economy, ran a $87 billion trade deficit with the US last year and is estimated to be further affected by Trump’s protectionism.

As for Canada and Mexico, the US ran a trade deficit of about $41 billion and $162 billion, respectively, and tariffs are estimated to affect the two countries neighboring the US.

Trump is estimated to weaponize tariffs to pressure Mexico on immigration and take an aggressive stance in the 2026 review of the United States-Mexico-Canada Agreement (USMCA), which replaced the North American Free Trade Agreement (NAFTA) in 2020.

Higher tariffs on Mexican and Canadian imports to protect American industries could strain US ties with those countries.

*Writing by Emir Yildirim in Istanbul