Donald Trump’s victory in the 2024 election and his threat to impose tariffs on all imports into the United States highlight important issues for the global economy.
The United States is a technology powerhouse, spending more on research and development than any other country and winning more Nobel Prizes in the past five years than all other countries combined. Its inventions and economic success are the envy of the world. But the rest of the world needs to do everything in its power not to rely too heavily on it.
And even if Harris had won, the situation wouldn’t have been much different.
Donald Trump’s “America First” approach was actually a bipartisan policy. At least since former President Barack Obama’s energy independence policies, the United States has been on a largely inward-looking quest to maintain technological superiority while ending the offshoring of industrial jobs.
One of the major choices President Trump made in his first term was to force U.S. consumers to accept higher prices in order to protect domestic producers by imposing high tariffs on nearly all trading partners. Ta.
For example, President Trump imposed tariffs on washing machines around the world in 2018, meaning U.S. consumers are paying 12% more for these products.
President Joe Biden has raised some of the Trump tariffs, certainly in a more gracious manner. Up to 100% for electric cars, up to 50% for solar cells, and up to 25% for Chinese-made batteries.
In the climate emergency, this was an obvious choice to delay the energy transition to protect U.S. manufacturing.
Biden signed a truce with Europe on tariffs, but by launching a subsidy war, he has launched a potentially even more harmful battle.
For example, the US Inflation Control Act includes US$369bn (£286bn) in subsidies for areas such as electric vehicles and renewable energy. And the Chip Act promised US$52 billion in subsidies for the production of semiconductors and computer chips.
China, Europe and the rest of the world
This American industrial policy may have been inward-looking, but it has had a clear impact on the rest of the world. After decades of primarily export-based growth, China now has to deal with a massive problem of industrial overcapacity.
The country is currently trying to expand domestic consumption and diversify its trading partners.
Europe spends large sums of money on subsidy competition despite extremely tight budget constraints. Germany, facing slowing economic growth and deep doubts about its industrial model, is committed to matching subsidies to those in the United States, such as giving Swedish battery maker Northvolt domestic support. The company is providing 900 million euros (750 million pounds) to continue production.
All of these subsidies have a negative impact on the global economy and could easily have been used to cover urgent needs such as electrifying the entire African continent with solar panels and battery storage. Meanwhile, China has followed its interest in its natural resources, replacing the United States and Europe as the largest investor in Africa.
President Trump’s next appointment may be an opportunity to revise our thinking.
For example, some argue that the full-scale invasion of Ukraine and the ensuing thousands of deaths and energy crisis could have been avoided if the Biden administration had been more clear with Russian President Vladimir Putin about the consequences of the invasion. There may be. And before the war, it provided Kiev with modern weapons.
But the blame lies primarily with Europe. Not surprisingly, the strategic problem of over-reliance on Russian gas is something that President Trump explicitly warned Germany about during his first term.
The path forward is clear. Europe could help solve China’s overcapacity problem by negotiating an end to the tariff war on Chinese technologies such as solar panels and electric cars.
In return, Europe will regain some sovereignty by producing more of its own clean energy in exchange for importing record amounts of liquid gas from the United States. We might also learn a few things from production with Chinese companies, and China could use its huge influence over Russia to stop its invasion of Ukraine.
The European Union could also do more in what it does best: forging trade deals and using them as a means to reduce carbon emissions around the world.
This is not just a story of Europe or China. Despite decades of continuous improvement in every major aspect of human life, the world is going backwards.
The number of people facing hunger is increasing and returning to 2008-2009 levels. Wars are raging in Gaza, Sudan, Myanmar, Syria, and now Lebanon. The world has not seen this many civilian casualties since 2010.
For better or worse, the Trump administration is unlikely to reverse America’s decline in interventionism. It is also unlikely to lead major efforts on peace, climate change or trade liberalization.
The world is isolated and America will not save the world.
We don’t know what will happen to the United States. Most likely, Trump’s return will largely be a continuation of the past decade. Perhaps the U.S. economy will become less relevant due to exorbitant tariffs and the destruction of the institutions that made it such an economic power. But this is a choice Americans have made and something the rest of the world simply has to accept.
In the meantime, the only thing the world can do is learn how to work together better and not become too dependent on each other.
(Author: Renaud Foucart, Senior Lecturer in Economics, School of Management, Lancaster University)
(Disclosure statement: Renaud Foucart does not work for, consult, own shares in, or receive funding from any company or organization that might benefit from this article, and does not have any relevant affiliations other than academic appointments. (The affiliation has not been disclosed.)
This article is republished from The Conversation under a Creative Commons license. Read the original article.
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