<p>A second Trump administration is primed to enact sizeable changes in US trade and national security policy.While initial actions have been light on immediate shifts, the administration laid the groundwork for a more aggressive, unilateral and protectionist approach. The core themes revolve around a focus on reducing trade deficits, leveraging trade for geopolitical gains, aggressive enforcement of trade laws and the use of executive power. There is also an increased emphasis on national security concerns driving trade policy. Despite uncertainties, this paper seeks to highlight the potential for market volatility, global economic impacts and challenges for businesses worldwide.</p><p>America has for several years been on the receiving end of mercantilist policies by a few of her trade partners. China, specifically, has through subsidies and stolen American technology been outsmarting US industry and running massive trade surpluses. The administration views trade through a lens of winners and losers, seeing the US trade deficit as a sign of weakness. This is a departure from decades of bipartisan support for free trade. Then there is a distrust of the multilateral trading system, which will likely continue to put the WTO in a precarious position. A review of all existing US trade agreements has been ordered.</p><p>A key policy pillar will constitute reducing the US trade deficit through tariffs and trade remedies, with the administration tackling what they see as unjust practices. While a full-blown trade war is considered less likely, some protectionist measures will happen. President Trump has already pledged to impose a 25% tariff on goods from Canada and Mexico, as well as a 10% duty on Chinese imports from February. The administration will use trade as a tool to achieve other policy goals such as increased border security, higher defence spending by allies and compliance with immigration policies. The White House prefers to use executive orders rather than rely on legislation. This approach could lead to legal challenges and potential limitations by the courts. The reliance on executive authority indicates a willingness to bypass congressional oversight. The administration is seeking to identify and eliminate loopholes in export controls, with a focus on emerging technologies such as AI, advanced semiconductors and quantum computing.</p><p>Mr Trump's policies such as tariffs, tax cuts and mass deportations could be inflationary. These might lead to a less dovish Federal Reserve, which will impact other countries. Markets are expected to be volatile. The President rescinded many executive orders from the Biden administration, signalling a clear shift in direction. This includes the withdrawal from the Paris Climate Agreement. The broad nature of rescissions suggests stark changes across multiple sectors. Mr Trump has indicated plans to establish a crypto advisory council. This is a departure from past concerns around cryptocurrency and may signal a growth in this market under his administration. The "America First Trade Policy" Memorandum, directs a review of all aspects of the US trade landscape and proposes measures to address the trade deficit, unfair trade and a feasibility study of an "External Revenue Service" for collecting tariffs.</p><p>A mixed bag of actions could increase costs for businesses and consumers. The administration's approach could strain relationships with key partners and increase friction in international forums. Companies must prepare for potential changes in tariffs, trade regulations and international trade flows, including higher costs, fines and increased legal complexity. For business enterprise, there is bound to be no dull moment, albeit for the wrong reasons!</p>
<p>A second Trump administration is primed to enact sizeable changes in US trade and national security policy.While initial actions have been light on immediate shifts, the administration laid the groundwork for a more aggressive, unilateral and protectionist approach. The core themes revolve around a focus on reducing trade deficits, leveraging trade for geopolitical gains, aggressive enforcement of trade laws and the use of executive power. There is also an increased emphasis on national security concerns driving trade policy. Despite uncertainties, this paper seeks to highlight the potential for market volatility, global economic impacts and challenges for businesses worldwide.</p><p>America has for several years been on the receiving end of mercantilist policies by a few of her trade partners. China, specifically, has through subsidies and stolen American technology been outsmarting US industry and running massive trade surpluses. The administration views trade through a lens of winners and losers, seeing the US trade deficit as a sign of weakness. This is a departure from decades of bipartisan support for free trade. Then there is a distrust of the multilateral trading system, which will likely continue to put the WTO in a precarious position. A review of all existing US trade agreements has been ordered.</p><p>A key policy pillar will constitute reducing the US trade deficit through tariffs and trade remedies, with the administration tackling what they see as unjust practices. While a full-blown trade war is considered less likely, some protectionist measures will happen. President Trump has already pledged to impose a 25% tariff on goods from Canada and Mexico, as well as a 10% duty on Chinese imports from February. The administration will use trade as a tool to achieve other policy goals such as increased border security, higher defence spending by allies and compliance with immigration policies. The White House prefers to use executive orders rather than rely on legislation. This approach could lead to legal challenges and potential limitations by the courts. The reliance on executive authority indicates a willingness to bypass congressional oversight. The administration is seeking to identify and eliminate loopholes in export controls, with a focus on emerging technologies such as AI, advanced semiconductors and quantum computing.</p><p>Mr Trump's policies such as tariffs, tax cuts and mass deportations could be inflationary. These might lead to a less dovish Federal Reserve, which will impact other countries. Markets are expected to be volatile. The President rescinded many executive orders from the Biden administration, signalling a clear shift in direction. This includes the withdrawal from the Paris Climate Agreement. The broad nature of rescissions suggests stark changes across multiple sectors. Mr Trump has indicated plans to establish a crypto advisory council. This is a departure from past concerns around cryptocurrency and may signal a growth in this market under his administration. The "America First Trade Policy" Memorandum, directs a review of all aspects of the US trade landscape and proposes measures to address the trade deficit, unfair trade and a feasibility study of an "External Revenue Service" for collecting tariffs.</p><p>A mixed bag of actions could increase costs for businesses and consumers. The administration's approach could strain relationships with key partners and increase friction in international forums. Companies must prepare for potential changes in tariffs, trade regulations and international trade flows, including higher costs, fines and increased legal complexity. For business enterprise, there is bound to be no dull moment, albeit for the wrong reasons!</p>
