NewsUS trade policy shift: Challenges for EU amid rising protectionism

US trade policy shift: Challenges for EU amid rising protectionism

Irrespective of whether Donald Trump or Kamala Harris assumes the presidential seat in the US from January 2025, US trade policy will likely focus on safeguarding American manufacturers. This necessitates the EU contend with competition from China and the US.

US elections. What does a Trump win mean, and what does a Harris win mean?
US elections. What does a Trump win mean, and what does a Harris win mean?
Images source: © Getty Images | Jabin Botsford, Kevin Dietsch
Marek Wąsiński

31 October 2024 08:32

Perhaps more significant will be the congressional elections, as Joe Biden's administration's actions have been constrained by the Republican majority in the House of Representatives over the past two years. Republicans have a modest lead in the polls for this House, although the outcome remains uncertain. Meanwhile, according to The Hill, Republicans have a 67% likelihood of gaining a majority in the Senate.

If Harris wins, this could limit her legislative capabilities, including formulating further initiatives like the Inflation Reduction Act, passed thanks to the Democratic majority in both Houses in 2022.

What a Trump win means

A Donald Trump presidency means conflicts with allies. The Republican candidate promises to introduce tariffs of at least 10% on all imports to the US, including 60% on imports from China. Such a move could negatively impact the EU.

It will also diminish the competitiveness of European exports, but on the other hand, there may be a shift in trade from third countries (especially China), resulting in increased competition in the European market.

These negative effects could be partially mitigated if the dollar appreciates due to Trump's administration policies. This may be bolstered by increasing demand for American products, potential tax cuts and deregulations, and likely interest rate hikes due to potential inflation growth.

Simultaneously, the continuation of the Inflation Reduction Act, a protectionist stance, and relatively low energy prices in the US may boost investment and reduce Europe's export potential. EU must also be prepared for unilateral US decisions in international policy—concerning Ukraine, the EU itself, or other global regions.

In 2023, goods worth approximately £460 billion were imported from the EU to the US.

what a Harris victory means

A Kamala Harris victory means more targeted and selective protectionism. In this "quiet" vision, the primary focus is on supporting specific sectors, particularly those related to technological competition (e.g., semiconductors) and decarbonisation. Trade barriers would include not only tariffs but also environmental and climate regulations.

For example, the Harris administration would favour cooperation with the EU in areas such as critical raw materials supply chains. However, this does not preclude the White House from pressuring the European Union to boost defence capabilities, restrict China's access to advanced technologies, or participate in American initiatives related to the protection of Taiwan, for example.

Harris's priority is domestic action, with the side effect possibly being programmes like the Inflation Reduction Act, which impacts cooperation with the EU, potentially even more strongly than trade barriers in the form of tariffs.

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