When America First becomes America Alone

America First: The Impact of Trump’s Trade Policy

At first glance, the US course – under both Trump and Biden – appeared to be primarily aimed at preserving hegemony in the face of China’s rise. The escalation against China shows that the Middle Kingdom is still enemy number one. However, the uniform imposition of a minimum tariff of 10 percent - in three months we will see if this is the final rate - shows that the US is also targeting all other countries.

It is even questionable whether it really wants to pursue re-industrialisation. Why the sudden attacks then on American universities? Why the retreat from clean-tech that had attracted manufacturers?

The mask has come off. America First means just that: America First. It is about more profit for America, and more than that, for those in the inner circle of the White House. Countries and companies will have to pay for access to the US market or for military protection. Trump keeps repeating that the US has been short-changed for decades by a liberal, rules-based model of free trade. This kind of thinking contrasts with the conservative-isolationist mindset of MAGA. Excessive tariffs are not a negotiating tactic, but the opening act of a new, coercive trade regime.

This coercive diplomacy is not limited to import tariffs. Elon Musk’s Starlink, for example, is vital to Ukraine’s ability to monitor Russian troop movements. American support for it came with a $500 billion ‘price tag’ in rare earth metals. In Congo too, a deal is struck with mercenary logic: support for the Kinshasa government in return for greater control over critical raw materials. Former allies must wonder if they too could soon fall victim to an America that for example wields the SWIFT payment system as a geopolitical weapon.

If Trump really wants to undermine the multilateral trading system, then the tariffs are not a bargaining chip, they are the end goal. In doing so, the era of globalisation that has brought immense prosperity to the US is coming under pressure. According to a 2017 study by the PIIE, the expansion of trade since 1950 has added an extra $18,131 to the average American household. Net annual job losses due to international trade (2001–2016) averaged 156,250 – less than 1% of total annual job losses. In Europe, many factory workers were able to find new jobs thanks to social safety nets and retraining schemes. In the US, the absence of such a safety net has led to frustration, polarisation and a tendency to scapegoat globalisation.

So is free trade doomed? It all depends on how the rest of the world responds. If countries continue to line up at the door of the White House, eager to strike a deal, then Trump comes out on top. His tactics are working, although this will likely come at the cost of a US recession. The pattern will repeat itself, each time with a different bargaining chip: military protection, technology access, and so on.

A robust counter-response is difficult. After all, the US is less dependent on exports than most other countries. What can help is a coordinated international response to limit the damage. One positive sign is the recent phone call between Chinese Premier Li Qiang and Commission President Ursula von der Leyen. They talked about stability and predictability in the global economy and the orderly rebalancing of trade routes – without dumping.

China and Europe must lead the way. Other regions can follow. There will not be consensus on everything, just as there never was between China and the US. But there must be clarity about what is acceptable in the new trade landscape. The damage done by the US is significant. But if the rest of the world stands united, the international economic order will endure – even without America. In that case, America First ultimately means America Alone.

Koen De Leus
Co-author of The New World Economy in 5 Trends