When he assumes the presidency in January, Joe Biden will have to contend with a global economy that is fundamentally different than the one he left when his second vice-presidential term ended in 2017.
While Biden was away from the White House, President Trump instigated a bitter trade war with China that has redefined huge swaths of the global economy. He pulled the United States out of the North American Free Trade Agreement, replacing it with the United States-Mexico-Canada Agreement, which took effect earlier this year. He rattled investors by threatening to terminate NAFTA entirely—without a replacement lined up—when Canada and the U.S. couldn’t agree on terms. Trump also withdrew from the Trans-Pacific Partnership in the early days of his term, which until then was on track to cover 40% of the global economy as the world’s largest free trade agreement, according to the Council on Foreign Relations. Hillary Clinton also said she opposed the Obama-era trade deal.
So will Biden reverse course on all of Trump’s big trade moves? Maybe, but it could be awhile. The Biden campaign has indicated that the president-elect would prioritize a new coronavirus relief package and “domestic investments” ahead of new trade deals, Politico reported in August. In the meantime, the future Biden administration will repair relationships with allies that have fallen by the wayside in order to present a unified front in the trade war with China.
During his campaign, Biden has championed a “Made In America” economic policy under which he pledges to invest heavily in American manufacturing and industry. That’s not entirely different from the “America First” plan Trump espoused during his campaign in 2016. With that in mind, Biden is expected to face particular pressure from labor unions and progressives who say status quo trade deals hurt American workers and will fight to maintain tariffs in key industries like steel and aluminum to protect American workers.
In September, former Biden trade advisor Tony Blinken said the then-candidate wouldn’t rule out new tariffs completely, but would “use tariffs when they’re needed but backed by a strategy and a plan.” And while it’s not clear exactly how tough Biden will be on China, his “Made In America” plan promises “aggressive trade enforcement actions” to defend against unfair practices from China or any other country “seeking to undercut American manufacturing.”
A Republican-controlled Senate in 2021 (pending the results of two January runoff elections in Georgia) could also put a damper on any swift trade moves from President-elect Biden. Edward Alden, a senior fellow at the Council on Foreign Relations, noted in Foreign Policy last week that “any moves to ease U.S. tariffs would face significant congressional opposition.”
The upside? Predictability. Biden’s changes to trade policy are not likely to catch investors by surprise, and he is much less likely to change his mind or make off-the-cuff statements or threats than was his predecessor. “The days of advisers scrambling to implement what they learn through presidential tweets will be in the past,” Wendy Cutler, vice president at the Asia Society Policy Institute, told Reuters. China appears to prefer a Biden presidency, too: last week, the Chinese yuan hit levels not seen since July 2018 on hopes for more stable trade relations with the U.S.
Shortly after the election was called on Saturday, Box CEO Aaron Levie wrote on Twitter that Biden’s win would be “great for American competitiveness…businesses need market stability, global trade relations that don’t change on a whim, talent from everywhere, long-range planning, and a lack of constant distractions.”