Joe Biden has not targeted the former president’s trade policy, but it would be a disaster for the US.
It’s a shame we had to wait for investment analysts to explain the effects of Donald Trump’s trade plans. The campaign of Joe Biden should ram it down Americans’ throats every day. May the impact of Trump in American democracy being first on Biden’s mind is natural. But it is displacing what worries more voters. The conclusion, according Moody’s Analyticsthe thing is Trump’s policies would trigger a recession in mid-2025. Unemployment and inflation would skyrocket. The bottom half of the US income distribution would be hardest hit.
But that’s only half of it. Moody’s bases its forecast on Trump’s plan to impose tariffs of 10% on all imports and 60% on products from China. Those are already quite expensive. The average family would pay 1,700 dollars (1,590 euros) more per year in higher prices, according to the Peterson Institute for International Economics. A Republican spokeswoman insisted that this was a falsehood: “The idea that tariffs are a tax on American consumers is a lie promoted by subcontractors and the Chinese Communist Party“he stated. The Republicans have come full circle. Now it is communist to defend trade.
The Democrats are not that far away. The two big points of consensus in the US today are that globalization is toxic and that the US is in a zero-sum competition with China. This is partly what’s holding back Biden from fully addressing Trump’s trade war plans. But Trump is making it increasingly easier for Biden. Earlier this month, the former president presented a “all-tariff policy” in which import duties would completely replace income tax.
It is impossible to arrive at an optimal tariff that can compensate for the suppression of tax revenues. The higher the rate, the greater the disruption to trading. It would be like a dog chasing its tail. The economic costs of returning to a 19th century fiscal policy would fall on workers and their families.the type of people who increasingly favor Trump. The beneficiaries would be the rich, who would pay a much smaller portion of their income on the assets. A Moody’s study in this regard would surely predict a depression.
To Trump’s latest plan we should add the “total decoupling” from China that is driving Robert LighthizerTrump’s former trade representative and his likely next treasury secretary. There is also Trump’s announced plan to replace Jerome Powell as chairman of the Federal Reserve from the USA. All this adds up to higher financing costs, rampant inflation and a decisive shift towards deglobalization. In summary, Trump is presenting an increasingly larger target for Biden to shoot at. The American president could point out during the first presidential debate that both will hold on Thursday night.
The question is what a second Biden term would mean for the global economy. The American president has not yet clarified the difference between “elimination of risk” and “decoupling”. This is because It is very difficult to draw the dividing line. If any Chinese trade surplus can theoretically be invested in its growing war machine, why stop at semiconductors and artificial intelligence technology? Until Biden can specify clearer parameters, it will be difficult to reach a common position with the EU on China.
In summary, Both Biden and Trump promise to move in the same direction. But Trump would do it in leaps and bounds. The irony of Trump’s position is that he is the candidate who promises end US involvement in the “forever wars” in Ukraine and the Gaza Stripand it could even be considered leave Taiwan (although it is impossible to predict where his capricious attitude would take him). However, his plans to disengage from the global economy would make conflict with China more likely.
The only point in favor of developing cold war the thing is China is deeply committed to the global status quo. On the other hand, the United States barely had the power of economic blackmail over the Soviet Union during the first Cold War. A shortcoming of the current foreign policy debate is that very few discuss the advantages of maintaining US influence over China.. The focus is on the degree and speed of the American withdrawal. In that sense, Trump is very much the destabilizer.
What we know about Trump’s plans is that they would cause a recession. What we think he would be very tempted to do could lead to depression. The economic consequences of Trump would be a disaster. The unforeseen geopolitical consequences could be even worse. Biden’s US is sleepwalking towards a Cold War with China. Trump is embracing the nightmare. The best thing Biden could do to benefit his prospects is explain what that would mean for the economy of Middle America.
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