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The Year Ahead 2019

Trump’s Trade Game

In 2018, US President Donald Trump finally followed through on his “America first” trade strategy. Yet it is already clear that his policies will have little impact on trade growth, and even less effect on China's behavior.

CAMBRIDGE – US President Donald Trump’s “America first” trade policy came into full bloom in 2018, and it was an ugly sight to behold. In addition to tariffs on steel and aluminum from Europe and other countries, Trump imposed levies on $250 billion worth of imports from China. By the end of the year, he had raised tariffs on 12% of total US imports, causing trade partners to retaliate with levies on 8% of total US exports.

Trump’s trade-policy unilateralism is unprecedented in the post-war period, which is why it caught many by surprise. I, for one, did not expect Trump to act on most of his threats, given the influence that commercial and financial interests have over US trade policy. But when the target is China, the situation changes. The Trump administration’s tough approach is supported by a broad coalition of US groups with distinct grievances. These include not just traditionally protectionist lobbies, but also large corporations that bemoan China’s industrial policies and a national-security establishment that frets over China’s growing geopolitical footprint.

Trump’s stated objective is to pressure China to end “unfair” trade practices, such as its subsidies for new technologies and its requirement that foreign companies entering the domestic market transfer proprietary technology to Chinese firms. So far, he has had little success, and that isn’t likely to change. Understandably, the Chinese government will not be deterred from pursuing its own objectives of industrial upgrading and technological development.

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