• President Trump has threatened and imposed a variety of new tariffs for his second term in office, from universal baseline tariffs to country-specific tariffs.
• We estimate that the imposed tariffs on China would reduce long-run GDP by 0.1 percent, the proposed tariffs on Canada and Mexico by 0.3 percent, the proposed expansion of steel and aluminum tariffs by less than 0.05 percent, and the proposed tariffs on motor vehicles and motor vehicle parts by 0.1 percent—before accounting for foreign retaliation.
• The first Trump administration imposed tariffs on thousands of products valued at approximately $380 billion in 2018 and 2019, amounting to one of the largest tax increases in decades.
• The Biden administration kept most of the Trump administration tariffs in place, and in May 2024, announced tariff hikes on an additional $18 billion of Chinese goods, including semiconductors and electric vehicles.
• We estimate the 2018-2019 trade war tariffs imposed by Trump and retained by Biden reduce long-run GDP by 0.2 percent, the capital stock by 0.1 percent, and employment by 142,000 full-time equivalent jobs.
• Academic and governmental studies find the Trump-Biden tariffs have raised prices and reduced output and employment, producing a net negative impact on the US economy.

2025 Trade War Timeline

President Trump signed an executive order on January 20, 2025, instructing certain cabinet secretaries to develop reports on trade practices and recommendations for tariffs due by April 1, 2025. Since then, several new tariffs and tariff investigations have been threatened, initiated, and/or imposed.

Country-Specific Tariffs:

• Canada, Mexico, China: President Trump signed three executive orders on February 1, 2025, to impose tariffs on Canada, Mexico, and China using International Emergency Economic Powers Act (IIEPA) authority. The 10 percent tariffs on all imports from China took effect on February 4, 2025. The tariffs on Canada and Mexico received a 30-day suspension and are scheduled to take effect March 4. On February 27, Trump said the tariffs on China will increase by another 10 percent beginning March 4.
• China Retaliation: China announced retaliation on about $13.9 billion worth of US exports at rates of 10 percent and 15 percent which took effect on February 10.
• Reciprocal Tariffs: President Trump signed a presidential memorandum on February 13, 2025, to develop a plan for increasing US tariffs in response to other countries’ tariffs, tax policies, and any other policies including exchange rates and unfair practices. The recommendations are due April 1, 2025.
• European Union: President Trump announced plans on February 26, 2025, to impose tariffs of 25 percent on imports from the European Union. The authority to impose these tariffs has not been specified.

Product Specific Tariffs:

• Steel and Aluminum: President Trump signed two proclamations on February 10, 2025, to expandthe existing Section 232 tariffs on steel and aluminum. The orders end all existing exemptions for the tariffs, expand the list of derivative articles, and raise the tariff rate on aluminum from 10 percent to 25 percent. The changes are scheduled to take effect March 12, 2025.
• Autos: President Trump announced on February 14, 2025, that he plans to impose tariffs on auto imports beginning on April 2, 2025. He said on February 18 the rate on autos would be “in the neighborhood of 25 percent” while the rates on semiconductors and pharmaceuticals would be “25 percent and higher.” The authority to impose these tariffs has not been specified.
• Copper: President Trump directed the Commerce Department on February 25, 2025, to begin a Section 232 national security investigation for copper imports; the findings of the report are due by November 22, 2025.
• Semiconductors and Pharmaceuticals: President Trump said on January 27, 2025, he would announce new tariffs on computer chips, semiconductors, and pharmaceuticals. On February 18 he announced the rates on semiconductors and pharmaceuticals would be “25 percent and higher.” The authority to impose these tariffs has not been specified.

2025 Trump Tariffs: Economic Effects

President Trump has imposed and threatened a variety of tariffs. We model the following policies:

• A 20 percent tariff on all imports from China and ending de minimis treatment of all imports from China.
• A 25 percent tariff on all imports from Mexico.
• A 25 percent tariff on all imports from Canada (excluding energy resources under HTS codes 2709, 2710, 2711, and 2716, which face a 10 percent tariff).
• A 25 percent tariff on all imports from the European Union.
• Expansions to the Section 232 steel and aluminum tariffs
  • Ending the country exemptions for the existing steel and steel derivatives tariffs, which increases imports subject to the tariffs from $5.5 billion to $34.6 billion (excluding interactions with tariff rate quotas)
  • Ending the country exemptions for the existing aluminum and aluminum derivatives tariffs, which increases imports subject to the tariffs from $6.1 billion to $18.5 billion (excluding interactions with tariff rate quotas)
  • Increasing the tariff rate on aluminum and aluminum derivatives from 10 percent to 25 percent
  • Expanding the steel and aluminum derivatives list to other steel and aluminum derivative articles, which increases steel imports subject to tariffs by $38.1 billion and aluminum imports by $6.2 billion
  • Excluding the expanded articles outside chapters 73 and 76 (Note: We exclude due to lack of data on the steel and aluminum content of these products. The excluded imports totaled $99.8 billion in 2023; however, the tariffs would not apply to the full import value. For example, the tariffs would apply to the metals content of tennis rackets, fishing reels, and some types of furniture.)

• A 25 percent tariff on autos, which we illustrate by applying the tariff to imports of motor vehicles and motor vehicle parts under HTS codes 8703 (valued at $224.4 billion in 2024) and 8708 (including, where possible, parts related to 8703 only, valued at $61.8 billion in 2024).
• Tax Foundation will model additional tariff proposals when more details become available.

We estimate that before accounting for any foreign retaliation, the tariffs on Canada, Mexico, China, and motor vehicles would each reduce US economic output by 0.1 percent; the tariffs on the European Union would reduce US economic output by 0.2 percent; and the expansion of the steel and aluminum tariffs would reduce US economic output by less than 0.05 percent.

China has announced it will impose retaliatory tariffs on about $13.9 billion worth of US exports effective February 10. Certain US exports of coal and liquefied natural gas (totaling $3.2 billion in 2024) will face a 15 percent tariff, while exports of oil, agricultural machinery, and large motor vehicles (totaling $10.7 billion in 2024) will face a 10 percent tariff. Because the retaliatory tariffs are currently limited, we do not model their macroeconomic or revenue effects.

If imposed on a permanent basis, the tariffs would increase tax revenue for the federal government. We have modeled each tariff in isolation; however, if tariffs are imposed together, and tariff rates stack on top of existing tariffs, the revenue raised would be lower as imports would fall by a greater amount. Revenue is lower on a dynamic basis, a reflection of the negative effect tariffs have on US economic output, which reduces incomes and resulting tax revenues. Revenue would fall more if foreign countries retaliated, as retaliation would cause US output and incomes to shrink further.

We estimate the following 10-year conventional and dynamic revenue effects:

• China Tariffs: $373.8 billion conventional, $323.1 billion dynamic
• Canada Tariffs: $470.6 billion conventional, $406.6 billion dynamic
• Mexico Tariffs: $662.6 billion conventional, $572.4 billion dynamic
• European Union Tariffs: $786.3 billion conventional, $679.2 billion dynamic
• Expanded Steel and Aluminum Tariffs: $123.9 billion conventional, $123.5 billion dynamic
• Motor Vehicle and Parts Tariffs: $404.7 billion conventional, $349.8 billion dynamic

To estimate ending de minimis treatment, we rely on Congressional Research Service (CRS) estimates that de minimis imports from China totaled nearly $45 billion in fiscal year 2021. We use CRS data to construct a baseline of de minimis imports from China and assume that most de minimis imports would face the existing Section 301 tariff rate of 7.5 percent. We assume a higher elasticity for ending de minimis (-1.5) than we do for our broader tariff modeling.

Altogether, the tariffs would reduce after-tax incomes by an average of 1.7 percent in 2026. Factoring in how incomes would shrink further on a dynamic basis as tariffs reduce US economic output, we estimate after-tax incomes would fall by 2.2 percent.

We estimate the average tariff rate on all imports would rise from its baseline level of 2.5 percent in 2024 to 13.8 percent if all the tariffs President Trump has proposed as of February 27, 2025, were imposed. The average tariff rate on all imports under Trump’s proposed tariffs would be the highest since 1939.

2024 Campaign Proposals

Tariffs featured heavily in the 2024 presidential campaign as candidate Trump proposed a new 10 percent to 20 percent universal tariff on all imports, a 60 percent tariff on all imports from China, higher tariffs on EVs from China or across the board, 25 percent tariffs on Canada and Mexico, and 10 percent tariffs on China.

We estimate Trump’s proposed 20 percent universal tariffs and an additional 50 percent tariff on China to reach 60 percent would reduce long-run economic output by 1.3 percent before any foreign retaliation. They would increase federal tax revenues by $3.8 trillion ($3.1 trillion on a dynamic basis before retaliation) from 2025 through 2034.

2018-2019 Trade War: Economic Effects of Imposed and Retaliatory Tariffs

Using the Tax Foundation’s General Equilibrium Model, we estimate the Trump-Biden Section 301 and Section 232 tariffs will reduce long-run GDP by 0.2 percent, the capital stock by 0.1 percent, and hours worked by 142,000 full-time equivalent jobs. The reason tariffs have no impact on pre-tax wages in our estimates is that, in the long run, the capital stock shrinks in proportion to the reduction in hours worked, so that the capital-to-labor ratio, and thus the level of wages, remains unchanged. Removing the tariffs would boost GDP and employment, as Tax Foundation estimates have shown for the Section 232 steel and aluminum tariffs.

We estimate the retaliatory tariffs stemming from Section 232 and Section 301 actions total approximately $13.2 billion in tariff revenues. Retaliatory tariffs are imposed by foreign governments on their country’s importers. While they are not direct taxes on US exports, they raise the after-tax price of US goods in foreign jurisdictions, making them less competitively priced in foreign markets. We estimate the retaliatory tariffs will reduce US GDP and the capital stock by less than 0.05 percent and reduce full-time employment by 27,000 full-time equivalent jobs. Unlike the tariffs imposed by the United States, which raise federal revenue, tariffs imposed by foreign jurisdictions raise no revenue for the US but result in lower US output.

Tariff Revenue Collections Under the Trump-Biden Tariffs

As of the end of 2024, the trade war tariffs have generated more than $264 billion of higher customs duties collected for the US government from US importers. Of that total, $89 billion, or about 34 percent, was collected during the Trump administration, while the remaining $175 billion, or about 64 percent, was collected during the Biden administration.

Before accounting for behavioral effects, the $79 billion in higher tariffs amount to an average annual tax increase on US households of $625. Based on actual revenue collections data, trade war tariffs have directly increased tax collections by $200 to $300 annually per US household, on average. The actual cost to households is higher than both the $600 estimate before behavioral effects and the $200 to $300 after, because neither accounts for lower incomes as tariffs shrink output, nor the loss in consumer choice as people switch to alternatives that do not face tariffs.

Historical Evidence: Tariffs Raise Prices and Reduce Economic Growth

Economists generally agree free trade increases the level of economic output and income, while conversely, trade barriers reduce economic output and income. Historical evidence shows tariffs raise prices and reduce available quantities of goods and services for US businesses and consumers, resulting in lower income, reduced employment, and lower economic output.

Tariffs could reduce US output through a few channels. One possibility is a tariff may be passed on to producers and consumers in the form of higher prices. Tariffs can raise the cost of parts and materials, which would raise the price of goods using those inputs and reduce private sector output. This would result in lower incomes for both owners of capital and workers. Similarly, higher consumer prices due to tariffs would reduce the after-tax value of both labor and capital income. Because higher prices would reduce the return to labor and capital, they would incentivize Americans to work and invest less, leading to lower output.

Alternatively, the US dollar may appreciate in response to tariffs, offsetting the potential price increase for US consumers. The more valuable dollar, however, would make it more difficult for exporters to sell their goods on the global market, resulting in lower revenues for exporters. This would also result in lower US output and incomes for both workers and owners of capital, reducing incentives for work and investment and leading to a smaller economy.

Many economists have evaluated the consequences of the trade war tariffs on the American economy, with results suggesting the tariffs have raised prices and lowered economic output and employment since the start of the trade war in 2018.

• A February 2018 analysis by economists Kadee Russ and Lydia Cox found that steel‐​consuming jobs outnumber steel‐​producing jobs 80 to 1, indicating greater job losses from steel tariffs than job gains.
• A March 2018 Chicago Booth survey of 43 economic experts revealed that 0 percent thought a US tariff on steel and aluminum would improve Americans’ welfare.
• An August 2018 analysis from economists at the Federal Reserve Bank of New York warned the Trump administration’s intent to use tariffs to narrow the trade deficit would reduce imports and US exports, resulting in little to no change in the trade deficit.
• A March 2019 National Bureau of Economic Research study conducted by Pablo D. Fajgelbaum and others found that the trade war tariffs did not lower the before-duties import prices of Chinese goods, resulting in US importers taking on the entire burden of import duties in the form of higher after-duty prices.
• An April 2019 University of Chicago study conducted by Aaron Flaaen, Ali Hortacsu, and Felix Tintelnot found that after the Trump administration imposed tariffs on washing machines, washer prices increased by $86 per unit and dryer prices increased by $92 per unit, due to package deals, ultimately resulting in an aggregate increase in consumer costs of over $1.5 billion.
• An April 2019 research publication from the International Monetary Fund used a range of general equilibrium models to estimate the effects of a 25 percent increase in tariffs on all trade between China and the US, and each model estimated that the higher tariffs would bring both countries significant economic losses.
• An October 2019 study by Alberto Cavallo and coauthors found tariffs on imports from China were almost fully passed through to US import prices but only partially to retail consumers, implying some businesses absorbed the higher tariffs, reducing retail margins, instead of passing them on to retail consumers.
• In December 2019, Federal Reserve economists Aaron Flaaen and Justin Pierce found a net decrease in manufacturing employment due to the tariffs, suggesting that the benefit of increased production in protected industries was outweighed by the consequences of rising input costs and retaliatory tariffs.
• A February 2020 paper from economists Kyle Handley, Fariha Kamal, and Ryan Monarch estimated the 2018–2019 import tariffs were equivalent to a 2 percent tariff on all US exports.
• A December 2021 review of the data and methods used to estimate the trade war effects through 2021, by Pablo Fajgelbaum and Amit Khandelwal, concluded that “US consumers of imported goods have borne the brunt of the tariffs through higher prices, and that the trade war has lowered aggregate real income in both the US and China, although not by large magnitudes relative to GDP.”
• A January 2022 study from the US Department of Agriculture estimated the direct export losses from the retaliatory tariffs totaled $27 billion from 2018 through the end of 2019.
• A May 2023 United States International Trade Commission report from Peter Herman and others found evidence for near complete pass-through of the steel, aluminum, and Chinese tariffs to US prices. It also found an estimated $2.8 billion production increase in industries protected by the steel and aluminum tariffs was met with a $3.4 billion production decrease in downstream industries affected by higher input prices.
• A January 2024 International Monetary Fund paper found that unexpected tariff shocks tend to reduce imports more than exports, leading to slight decreases in the trade deficit at the expense of persistent gross domestic product losses—for example, the study estimates reversing the 2018–2019 tariffs would increase US output by 4 percent over three years.
• A January 2024 study by David Autor and others concludes that the 2018–2019 tariffs failed to provide economic help to the heartland: import tariffs had “neither a sizable nor significant effect on US employment in regions with newly‐​protected sectors” and foreign retaliation “by contrast had clear negative employment impacts, particularly in agriculture.”

2018-2019 Trade War Timeline

The Trump administration imposed several rounds of tariffs on steel, aluminum, washing machines, solar panels, and goods from China, affecting more than $380 billion worth of trade at the time of implementation and amounting to a tax increase of nearly $80 billion. The Biden administration maintained most tariffs, except for the suspension of certain tariffs on imports from the European Union, the replacement of tariffs with tariff-rate quotas (TRQs) on steel and aluminum from the European Union and United Kingdom and imports of steel from Japan, and the expiration of the tariffs on washing machines after a two-year extension. In May 2024, the Biden administration announced additional tariffs on $18 billion of Chinese goods for a tax increase of $3.6 billion.

Altogether, the trade war policies currently in place add up to $79 billion in tariffs based on trade levels at the time of tariff implementation. Note the total revenue generated will be less than our static estimate because tariffs reduce the volume of imports and are subject to evasion and avoidance (which directly lowers tariff revenues) and they reduce real income (which lowers other tax revenues).

Section 232, Steel and Aluminum

In March 2018, President Trump announced the administration would impose a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum. The value of imported steel totaled $29.4 billion, and the value of imported aluminum totaled $17.6 billion in 2018. Based on 2018 levels, the steel tariffs would have amounted to $9 billion and the aluminum tariffs to $1.8 billion. Several countries, however, have been excluded from the tariffs.

In early 2018, the US reached agreements to permanently exclude Australia from steel and aluminum tariffs, use quotas for steel imports from Brazil and South Korea, and use quotas for steel and aluminum imports from Argentina.

In May 2019, President Trump announced that the US was lifting tariffs on steel and aluminum from Canada and Mexico.

In 2020, President Trump expanded the scope of steel and aluminum tariffs to cover certain derivative products, totaling approximately $0.8 billion based on 2018 import levels.

In August 2020, President Trump announced that the US was reimposing tariffs on aluminum imports from Canada. The US imported approximately $2.5 billion worth of non-alloyed unwrought aluminum, resulting in a $0.25 billion tax increase. About a month later, the US eliminated the 10 percent tariff on Canadian aluminum that had just been reimposed.

In 2021 and 2022, the Biden administration reached deals to replace certain steel and aluminum tariffs with tariff rate quota systems, whereby certain levels of imports will not face tariffs, but imports above the thresholds will. TRQs for the European Union took effect on January 1, 2022; TRQs for Japantook effect on April 1, 2022; and TRQs for the UK took effect on June 1, 2022. Though the agreements on steel and aluminum tariffs will reduce the cost of tariffs paid by some US businesses, a quota system similarly leads to higher prices, and further, retaining tariffs at the margin continues the negative economic impact of the previous tariff policy.

Tariffs on steel, aluminum, and derivative goods currently account for $2.7 billion of the $79 billion in tariffs, based on initial import values. Current retaliation against Section 232 steel and aluminum tariffs targets more than $6 billion worth of American products for an estimated total tax of approximately $1.6 billion.

Section 301, Chinese Products

Under the Trump administration, the United States Trade Representative began an investigation of China in August 2017, which culminated in a March 2018 report that found China was conducting unfair trade practices.

In March 2018, President Trump announced tariffs on up to $60 billion of imports from China. The administration soon published a list of about $50 billion worth of Chinese products to be subject to a new 25 percent tariff. The first tariffs began July 6, 2018, on $34 billion worth of Chinese imports, while tariffs on the remaining $16 billion went into effect August 23, 2018. These tariffs amount to a $12.5 billion tax increase.

In September 2018, the Trump administration imposed another round of Section 301 tariffs—10 percent on $200 billion worth of goods from China, amounting to a $20 billion tax increase.

In May 2019, the 10 percent tariffs increased to 25 percent, amounting to a $30 billion increase. That increase had been scheduled to take effect beginning in January 2019, but was delayed.

In August 2019, the Trump administration announced plans to impose a 10 percent tariff on approximately $300 billion worth of additional Chinese goods beginning on September 1, 2019, but soon followed with an announcement of schedule changes and certain exemptions.

In August 2019, the Trump administration decided that 4a tariffs would be 15 percent rather than the previously announced 10 percent, a $5.6 billion tax increase.

In September 2019, the Trump administration imposed “List 4a,” a 15 percent tariff on $112 billion of imports, an $11 billion tax increase. They announced plans for tariffs on the remaining $160 billion to take effect on December 15, 2019.

In December 2019, the administration reached a “Phase One” trade deal with China and agreed to postpone indefinitely the stage 4b tariffs of 15 percent on approximately $160 billion worth of goods that were scheduled to take effect December 15 and to reduce the stage 4a tariffs from 15 percent to 7.5 percent in January 2020, reducing tariff revenues by $8.4 billion.

In May 2024, the Biden administration published its required statutory review of the Section 301 tariffs, deciding to retain them and impose higher rates on $18 billion worth of goods. The new tariff rates range from 25 to 100 percent on semiconductors, steel and aluminum products, electric vehicles, batteries and battery parts, natural raphite and other critical materials, medical goods, magnets, cranes, and solar cells. Some of the tariff increases go into effect immediately, while others are scheduled for 2025 or 2026. Based on 2023 import values, the increases will add $3.6 billion in new taxes.

Section 301 tariffs on China currently account for $77 billion of the $79 billion in tariffs, based on initial import values. China has responded to the United States’ Section 301 tariffs with several rounds of tariffs on more than $106 billion worth of US goods, for an estimated tax of nearly $11.6 billion.

WTO Dispute, European Union

In October 2019, the United States won a nearly 15-year-long World Trade Organization (WTO) dispute against the European Union. The WTO ruling authorized the United States to impose tariffs of up to 100 percent on $7.5 billion worth of EU goods. Beginning October 18, 2019, tariffs of 10 percent were to be applied on aircraft and 25 percent on agricultural and other products.

In summer 2021, the Biden administration reached an agreement to suspend the tariffs on the European Union for five years.

Section 201, Solar Panels and Washing Machines

In January 2018, the Trump administration announced it would begin imposing tariffs on washing machine imports for three years and solar cell and module imports for four years as the result of a Section 201 investigation.

In 2021, the Trump administration extended the washing machine tariffs for two years through February 2023, and they have now expired.

In 2022, the Biden administration extended the solar panel tariffs for four years, though later provided temporary two-year exemptions for imports from four Southeast Asian nations beginning in 2022, which account for a significant share of solar panel imports.

In 2024, the Biden administration removed separate exemptions for bifacial solar panels from the Section 201 tariffs. Additionally, the temporary two-year exemptions expired and the Biden administration is further investigating solar panel imports from the four Southeast Asian nations for additional tariffs.

We estimate the solar cell and module tariffs amounted to a $0.2 billion tax increase based on 2018 import values and quantities, while the washing machine tariffs amounted to a $0.4 billion tax increase based on 2018 import values and quantities.

We exclude the tariffs from our tariff totals given the broad exemptions and small magnitudes.

Trade Volumes Since Tariffs Were Imposed

Since the tariffs were imposed, imports of affected goods have fallen, even before the onset of the COVID-19 pandemic. Some of the biggest drops are the result of decreased trade with China, as affected imports decreased significantly after the tariffs and still remain below their pre-trade war levels. Even though trade with China fell after the imposition of tariffs, it did not fundamentally alter the overall balance of trade, as the reduction in trade with China was diverted to increased trade with other countries.

To read the full research article as it appears on the Tax Foundation website, click here.

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This essay considers alternative scenarios for international trade policy for 2025 and beyond through the lens of the spectacular series of events that upended international trade beginning in 2017. These events are the direct results of Trump administration decisions, 2017-2021. During those years the Trump administration, with its emphasis upon nationalism and populism, effected a revolution in international trade policy that in many respects repudiated international trade policy as it existed from 1948 to 2016. Whereas for decades prior American administrations emphasized trade liberalization through international agreements, the role of multilateral institutions such as the World Trade Organization (WTO), and adherence to international law rules concerning trade, the Trump administration stood these policies on their heads, emphasizing protection of U.S. domestic markets, primacy of U.S. domestic trade laws over international law, and the irrelevance of international institutions such as the WTO. Trump administration trade policies had four major impacts: (1) a significant retreat from globalization; (2) paralysis of the World Trade Organization; (3) a revival of U.S. unilateralism in trade; and (4) a tariff and trade war between the U.S. and China.

Looking toward the future, given that 2024 is an important election year, I will discuss the announced trade policy intentions of the two presumed candidates for president — Democrat Joseph Biden and Republican Donald Trump. I will sketch briefly what each candidate intends to do concerning trade and the likely results for the American and global economies. I conclude that while both Trump and Biden advocate a certain degree of trade protectionism, Donald Trump intends to implement a radical protectionist vision concerning trade. Biden, on the other hand, will adopt a milder version of protectionism that emphasizes national security and enhancement of U.S. manufacturing autonomy. In addition, Donald Trump intends to pursue a hard U.S.- China economic decoupling. Joseph Biden, on the other hand, intends to pursue a milder approach to China, involving “derisking,” supply chain diversification, and “friend-shoring” of international trade and investment.

To his credit, Biden and his team have stabilized U.S.-China relations. Biden’s November 2023 summit with Chinese President Xi Jinping, along with diplomacy of Treasury Secretary Janet Yellen and Commerce Secretary Gina Raimondo succeeded in restoring a degree of order to the U.S.-China relationship that was so chaotic during the Trump administration. China and the United States represent about 40 percent of the world economy; stability of this relationship is an essential component of global prosperity. The Biden administration has managed the U.S.-China relationship, essaying to prevent disagreements from spiraling into conflicts. 

Is the Past Prologue?

On January 20, 2025, someone will take the oath of office to serve as President for the next four years. A rematch seems to loom between Joseph Biden and Donald Trump. More than the names of the candidates will be on the ballot. Voters will choose the future role of the United States in the world. Voters will also choose the economy they will live with for the next four years and beyond. In terms of the subject matter of this symposium, we can pose the following key questions: (1) What will be U.S. economic policy toward China in the new administration? Will there be an attempted decoupling? (2) What will be the attitude toward tariffs and protectionism? (3) What will be the attitude toward new trade agreements? (4) Will the new president respect international law and institutions?

What will be the impact of international trade policies on the broader economy? The Federal Reserve seems to have engineered a “soft landing” for the U.S. economy. GDP rose 2.5 percent in 2023, and the unemployment rate is a low 3.7. percent. In 2023 inflation moderated to 3.4 percent. Which man, Trump or Biden, is more likely to maintain a good economy?

In this part I will address these and similar questions in the context of comparing the likely international economic policies of the Trump and Biden administrations. I will also describe a “third way” different from both.

Donald Trump’s “Maganomics”

Donald Trump on the campaign trail today still preaches the populist idea that tariffs benefit domestic industries and produce jobs and produce billions in revenue for the federal government. Trump has never been deterred by the opinions of economists who say that tariffs are taxes on American consumers and producers. Trump, the self-described “tariff man,” plans to double down on tariffs if he wins a second term as president.

First, he intends to impose a new “universal baseline tariff” of 10 percent on all imports into the United States.

Second, he is considering two possible options with regard to new tariffs on China. One option is to revoke China’s “most favored nation” status for trade with the United States. This would immediately result in huge tariffs on all Chinese products. If this option is problematic — it is against the rules of the WTO — Trump intends to simply impose across the board tariffs of 60 percent on all Chinese products. The magnitude of these proposed tariffs on Chinese products appears to mean that Trump will seriously aim to decouple the U.S. and Chinese economies.

These proposals, if implemented, would spark a global trade war, not only with China but with virtually all U.S. trading partners. They would also cause inflation and unemployment. A report commissioned by the U.S.-China Business Council predicts more than 700,000 job losses and a cost of over $1.6 trillion to the U.S. economy.

Third, Trump intends to propose a new round of tax cuts for small business and the middle- class worker. He proposes to cut the corporate tax rate from 21 percent to 15 percent.

Critics point out that this tax cut, like Trump’s first term Tax Cut and Jobs Act, is unfunded. Republicans are fond of such unfunded tax cuts that add to the national debt, which now stands at over $34 trillion. During his term as president, Trump added $8 trillion to the U.S. budget deficit. In 2023, U.S. interest payments on the national debt totaled $659 billion. The U.S. debt is growing faster than the economy. Many believe this rise in the debt is unsustainable.

Summing up Trump’s economics it can only be said that they are totally wrongheaded and borderline lunacy.

Joseph Biden’s “Bidenomics”

The Biden administration’s trade policy prioritizes labor and the American worker over consumerism. Biden’s 2021 Report to Congress states that American workers should be at the forefront of trade policy. Trade must be conducted to benefit regular American communities and workers. Trade policy must recognize that people are not just consumers, they are workers and wage-earners. Trade policy must protect American jobs not just low prices for consumers.

A threshold decision for the Biden administration was whether to repeal the Trump tariffs. At the time inflation was high. Numerous commentators advised Biden to rescind the Trump tariffs, arguing this action would lower U.S. inflation by 1 to 2 percent. Biden rejected this advice; he chose to defend the Trump tariffs in court litigation. Biden’s defense was successful. Biden did, however, allow importers to seek exclusions on grounds such as lack of domestic supply.

The Biden administration also vigorously defended the section 301 tariffs on China and ultimately prevailed in court. The Biden administration has not sought to lift these tariffs either unilaterally or in conjunction with an agreement with China.

The central element of Bidenomics, one that is new and untried, is an industrial policy that shapes the international economic order to achieve economic goals that benefit particular industries and communities. Four new laws are essential to this process: (1) American Rescue Plan Act ($1.9 trillion); (2) Infrastructure and Jobs Act ($1.2 trillion); (3) Inflation Reduction Act ($369 billion); and the (4) Chips and Science Act ($52 billion). Industrial policy is any governmental effort to boost priority industries or to create structural economic change. The United States formerly looked down on industrial policy and criticized states that adopted it. No more — if you cannot beat the competition, you join it.

Biden’s industrial policy involves three elements. First, massive subsidies are available doled out by bureaucrats or made directly to consumers in the form of tax credits. Second, the subsidy must be spent in America under Executive Order 14005, the Buy American mandate. Third, Executive Order 14017 comes into play mandate special attention to the supply chain to ensure there will be no disruptions or delays. “Make it in America is no longer just a slogan,” said President Biden, “it is a reality in my administration.”

The Chips and Science Act addresses a long-term decline in U.S. semiconductor chip manufacturing. Of the world’s five largest chip manufacturers, only one, GlobalFoundries, is based in the United States. In February 2024, the U.S. Department of Commerce announced a $1.5 billion grant to GlobalFoundries to build a computer chip manufacturing plant in New York state. Additional grants include $35 million to BAE Systems, a defense contractor, and $162 million to Microchip Technology, a Colorado company. The Biden administration argues that subsidies are the only way to create a viable computer chip manufacturing industry in the United States. This may be the case, but the subsidies potentially contravene the prohibitions contained in the WTO Subsidies and Countervailing Measures Agreement, and the “buy American” program may violate the WTO Government Procurement Agreement.

In past administrations negotiating free trade agreements that open foreign markets to American exporters was a high priority. The Biden administration, however, is an exception to this rule. Early in his administration President Biden stated, “I am not going to enter any new trade agreement until we have made major investments here at home and in our workers.” Biden has not sought to enter into any free trade agreements and apparently does not intend to do so if he wins a second term as president. He has not sought to revive unfinished negotiations with the European Union or theUnited Kingdom. He has not expressed interest in joining the Progressive and Comprehensive Trans-Pacific Partnership free trade agreement, which is in force for eleven nations.

As a substitute initiative the Biden administration formed what is called the Indo-Pacific Economic Framework for Prosperity. This is a “framework” not a free trade agreement. It is a voluntary document that does not contain any legal obligations but simply pledges cooperation. As Catherine Rampell describes it, “the only thing that can be reliably counted on is a growing aversion to anything branded as free trade.”

The words “free trade agreement” have become toxic on Capitol Hill and in the Biden administration.

The Biden administration eschews the inflammatory rhetoric of the Trump administration but has not sought to repair the damage to the multilateral trading system or to solve the thorny problems left over from Donald Trump.

The Biden administration’s trade policy, like Trump’s, is a huge break from decades of past trade policy. Biden rejects free trade negotiation to open foreign markets in favor of handing out lavish subsidies to favored industries. Critics decry the free spending and the emphasis on government creation of a manufacturing boom that will never materialize. They point out that manufacturing employment has been in steady decline for decades as automation makes it possible to produce more goods with ever fewer workers. Manufacturing accounts for just 8.3 percent of total employment, down from 8.6 percent when Biden took office.

A Third Way

Two prominent critics of Bidenomics, not to mention Trumpian Maganomics, are former Secretary of the Treasury Lawrence Summers and former USTR Robert Zoellick. These men constitute a “third way” in trade policy, different from Biden and more attuned to traditional trade policy of past decades. Summers has said, “I am profoundly concerned by the doctrine of manufacturing-centered nationalism that is increasingly put forth as a general principle to guide policy.” Summers decries much of the Biden administration’s industrial policy and the protectionism behind Biden’s emphasis on “buy American.”

Summers believes that excessive reliance on “buy American” exacerbates economic problems by driving up prices and fueling labor shortages. Summers argues that it sounds smart to use tariffs or buy American to protect the 60,000 workers in the U.S. steel industry. But when you raise the price of steel, the 6 million workers who use steel as an input all suffer as do consumers of steel. He reminds us that the workers who produce steel are only 1 percent of the workers who need and use steel as an input in the goods they make. Saving a few jobs for workers who make steel may not be the answer to economic malaise.

At a talk in 2023 at the Peterson Institute for International Economics, Summers made the following interesting points: (1) trade with China benefits the United States, which achieves job growth and consumer advantages; (2) government economic intervention aimed at bringing about a renaissance in U.S. manufacturing jobs is unrealistic and potentially counterproductive; and (3) the U.S. government should not try to maximize job creation over maximizing availability of low-cost goods to consumers.

Robert Zoellick makes four cogent criticisms of Bidenomics. First, team Biden ignores all fiscal discipline, embracing modern monetary theory that consigns fiscal constraints to the past. On the contrary, the U.S. budget deficit is worrisome and will have to be addressed. Second, “Biden’s team pursues trade and antitrust policies while questioning the importance of prices, costs, and efficiencies. Increased prices for consumers matter little to the administration compared with such goals as blocking foreign competition, doing away with fossil fuels, and experimenting with new regulations.” Third, team Biden distrusts the private sector of the economy, putting too much faith in statist solutions. Fourth, Biden now eschews American leadership in international trade. Instead, “Katherine Tai, Biden’s USTR, embraces Trumpian isolationism. She denies the power of deals to open markets and to accomplish other administrative objectives.

In short, Zoellick says, “Biden theorists imagine a national economy that Washington designs without foreign involvement.” There seems to be no memory that the post-war trade agreements signed between the 1940s to the 1990s produced unprecedented economic growth both for the United States and its trading partners.

Summers’ and Zoellick’s criticisms point toward a third way of handling the important subject of trade and investment policy. Why not return to multilateralism, which has stood the United States and its allies in such good stead for so many decades? This is not to advocate the multilateralism of the past. Why not adopt a multilateral approach suitable to deal with the problems of today. This multilateralism has three elements.

First, the United States should return to negotiating free trade agreements that open foreign markets to U.S. exporters. The U.S. traditionally was the largest exporting country. China became the world’s largest exporter only in 2009. The United States should again achieve this title; the way forward is the negotiation of free trade agreements.

Three free trade agreements should be high on the agenda of the next administration:

(1) The United States should join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP); this free trade agreement was negotiated by the United States and is in force for eleven friendly Asian-Pacific countries. President Trump withdrew his support for this agreement in 2017, part of his mistaken “Maganomics” protectionism. This was a grievous error. The provisions of the CPTPP were created in Washington and are in the American interest.

(2) The United States should restart and complete negotiation of the Transatlantic Trade and Investment Partnership (T-TIP) with the European Union and the UK. This negotiation was scuttled by Trump. It can easily be revived.

(3) The United States should come to a free trade agreement with eleven (or more) Western Hemisphere nations. The Biden administration has launched talks with these nations but only to discuss what is called an “American Partnership for Economic Prosperity.” This is a toothless political agreement to be “nice,” but would not open any foreign markets or carry economic obligations. Nothing less than a full free trade agreement should be the administration’s goal.

(4) The United States should reengage with African nations through the African Continental Free Trade Agreement.

The purpose of entering into free trade agreements is not only to open foreign markets, but also to compete with China, which is very active all over the world promoting its Belt and Road initiative and other goals. By entering into these free trade agreements, the United States can help craft a global standard of conduct in trade and investment that China must observe. Without new trade agreements China is free to pursue its “divide and conquer” strategy to negate American influence around the world. New trade agreements would also confirm and reanimate America’s relations with its allies, who are anxious to create a counterweight to China.

As a second element of a “third way” in trade, the United States should reengage with the WTO and again play a leadership role in that organization. Since 2017 a leadership vacuum has existed at the WTO. Now is an excellent time to reassert American leadership. There is still a need for clear multilateral rules in trade. American leadership of the WTO could help shape the rules to our liking. It is not enough to merely criticize the rules and the role of the Appellate Body. The U.S. should also actively promote new rules more to our liking.

Third, the United States should establish a wide-ranging dialogue with high-level Chinese counterparts to provide transparency and to justify American actions in the ongoing economic competition with China. While decoupling is not and should not be the American goal, strategic decoupling may be warranted. The United States is taking numerous actions regarding China unilaterally. But that is not enough; there should be a bilateral forum to discuss American and Chinese actions in real time as they are happening. Establishing such a forum could help each side to understand this strategic decoupling process and to make corrections where warranted. The Trump administration abandoned economic dialogue with China shortly after taking office in 2017 in favor of a one-sided, “lay down the law,” monologue with its Chinese counterparts. This was a mistake. Larry Summers has described how bilateral talks with China have been fruitful to change Chinese behavior with respect to currency valuation and other matters.

Conclusions

In November 2024, voters will choose between Trump and Biden to be president of the United States. This essay has compared the different international trade policies of each man. While Trump’s policy views are sheer lunacy, embracing full-throated protectionism, Biden’s trade policy views are troubling. Biden also leans toward protectionism to some degree.

It is surprising that Biden on trade resembles his Republican predecessor more than the presidents of both parties who preceded him in the White House. Biden errs in turning his back on past trade liberalization pursued by successive presidents before Trump. The next administration should adopt a “third way” set of policies on international trade, emphasizing (1) negotiation of wide-ranging new free trade agreements; (2) reengagement with the WTO; and (3) robust bilateral forums to discuss trade matters with China.

Thomas J. Schoenbaum is presently the Harold S. Shefelman Professor of Law at the University of Washington in Seattle. He received his Juris Doctor degree from the University of Michigan and his PhD degree from Gonville and Caius College, University of Cambridge (UK). He is also Research Professor of Law at George Washington University in Washington DC. He is a practicing lawyer, admitted in several U.S. states and before the Bar of the Supreme Court of the United States.

To read the executive summary as it is posted on the website of the Institute for European Policymaking at Bocconi University, click here.

To read the full policy brief published by Institute for European Policymaking at Bocconi University, click here.

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