Donald Trump’s plans and rhetoric on international and trade relations are an open book. Kamala Harris' policies and actions may not have the same drastic consequences as those of Trump, but the US seems set on a course towards openly serving narrowing national interests at the cost of multilateralism and open markets, argues Nhlanhla Cyril Mbatha.
The upcoming US presidential elections merely underscore the limited options that their outcome will present to our country going into 2025 and beyond.
More directly, this is with respect to the trade and development agendas that are being proposed by the Trump and Harris camps.
Republican candidate Donald Trump’s plans and rhetoric on international and trade relations are an open book. He has resolved to continue where he left off with his economic war on open global trade as governed by the rules of the World Trade Organisation (WTO).
Although China continues to occupy centre-stage as the US' enemy number one in his economic thinking, central Europe and Japan are not that exempt as US allies.
Trump's love of tariffs
In a recent interview at the Economic Club of Chicago, Trump declared his religious love for the word tariffs, i.e. export or import taxes. Having initially imposed tariffs to the value of $250 billion during his presidential term, he has outlined plans to do more damage in his second term. He proposes to unilaterally impose 60% or more tariffs on Chinese imports into the US and a sweeping 10 to 20% percent on imports from the rest of the world.
Some economists estimated the net costs (i.e. costs minus benefits) of Trump's first-term trade war with China to be in the region of $195 billion, mostly borne by US consumers, and a total of 245 000 jobs lost in downstream sectors that imported their inputs from Chinese producers.
Some economic net losses were also estimated for the Chinese economy, which retaliated with its own tariffs, but the losses could not have been as deep because the US imported more goods than it exported to China.
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Estimating the net effects of a trade war at both national and global levels is a hard exercise, because with tariffs, trade opportunities and losses are also taken up by different stakeholders within affected countries and by bystander countries at a global level. But most economists would still agree that higher tariffs, as restrictive measures, are on average bad for global economic growth.
For his second term, Trump promises to intensify his tariff plans against China and also to extend them to the rest of the world. This then means there will be fewer countries who reap trade war opportunities as bystanders.
This will be true particularly for sub-Saharan countries who have long benefited from the US's African Growth and Opportunity Act (AGOA) development assistance. South Africa is one of those countries. A 10 to 20% blanket tariff hike on global imports into the US would effectively signal a removal of AGOA benefits for the country.
Across the Atlantic, the European Union (EU) in Brussels has promised it would retaliate hard and fast against Trump's trade war promises.
Economic significance of BRICS' membership
A declining EU economy, stemming from potentially the biggest trade war in recent history, could never be good news for the current South African economy. This is because the EU remains one of our biggest trading partners, even though the Chinese trade volumes and values have been catching up rapidly in recent years.
Given such a global scenario, a Trump election win, and the full or partial implementation of his trade plans, would only amplify the economic significance of South Africa's membership in the BRICS (Brazil, Russia, India, China and South Africa) countries, both as a trading and a political cooperation block. South Africa’s trade, which was originally meant for the US and the EU, would have to divert to BRICS countries.
READ | John Matisonn: Harris, Trump and SA's trade future
Democrat candidate Kamala Harris has hit back at Trump’s proposed global tariff hikes. She has called them a "sales tax on the American people" given their almost guaranteed negative effect on consumer prices. This is evaluated against their relatively limited benefit of revenue-generating ability for government coffers and the protection they provide to upstream producers.
So, although a Harris presidential win may mean that we get to hold on for a little bit longer to some of the global institutions and rules that we are familiar with, things may not stay that way for very long.
Firstly, it is important to note that the current Democratic Party presidency did not repeal Trump’s 2018 tariffs against China when Joe Biden became president. This should raise questions about Harris's own full embrace of global markets and international politics, when the rest of the world seems to be looking towards protecting national interests at the cost of an open global political and economic environment.
But what makes the politics of the Democrats even more complicated, if not ambiguous, is the formulation of their own version of green nationalism in the form of the Inflation Reduction Act (IRA) of 2022. On the surface, the Act innocently proposes "tackling the climate crisis (and) advancing environmental justice… towards a net-zero carbon economy by 2050". The mechanism of the Act, however, is to achieve the environmental goals by limiting international competition in monopolising and nationalising the clean energy sector and by propping up local firms.
Limited suggestions of a different Harris
The US is actively building an input-supply value chain that deliberately cuts out global players, with Chinese suppliers as the main targets, as well as suppliers from the EU.
The European parliamentary briefing, which was requested by the Economic and Monetary Affairs Committee in response to the IRA, has been revealing. It notes the aspects of the Act that encourage the national protection of local suppliers and the containment of the production processes in growing the green energy industry exclusively within the US borders. This is being done through government subsidies to local US firms at the expense of competition from private global capital investors.
The briefing notes the potentially negative consequences of the Act for trans-Atlantic bilateral trade relations and its possible diversion of foreign direct investments. It notes that "Beyond US-EU relations, (elements of the IRA) also have the potential to undermine the free trade principles that are the core of the World Trade Organisation".
Harris was praised recently by Biden and peddled as the tie-breaking vote that was cast to pass the plan into US law. Not repealing Trump's tariffs of 2018 once in office and passing legislation that limits competitive international trade means that the Biden-Harris presidency may not have been the polar opposite of the one led by Trump.
READ | With marching bands and parades, Kamala Harris leans on support of black voters
There are limited suggestions of a different Harris, away from Biden. This is the case with respect to the full or partial lack of support for fair rules-based international economic and political systems.
Her policies and actions as president may not have the same drastic consequences for the global community as those of Trump, but the US, like the rest of Europe, seems set on a course towards openly serving narrowing national interests at the cost of multilateralism and open markets.
This is a gloomy political and market climate that is emerging in the West, which South Africans need to navigate as friendlier trading opportunities may be opening-up in the East. This will still be the case, although at a slower pace, even if Harris wins in November and China's economic growth survives for the sake of the BRICS and many other Chinese dependent African countries in the years that follow.
First published on 24/10/2024: