The joining of the Trump campaign by his running mate, Senator J.D. Vance (R-Ohio), solidified the Republican Party’s shift toward economic protectionism and skepticism of unlimited globalization.
Former President Trump’s disdain for free trade agreements and global supply chains undermined the policy consensus during his first term and narrowed the gap between Republicans and Democrats on key industrial issues.
Vance, who will serve in the Senate in 2022, has expressed disdain for some of his party’s longstanding policy priorities and embodied the spirit of economic populism that characterized Trump’s first term. The Ohio senator has blasted bipartisan agreements on free trade agreements and the outsourcing of labor-intensive heavy industry as the “stupid Washington consensus.”
Speaking at the Munich Security Conference in Germany earlier this year, Vance recommended economic policies that would boost production but criticized those that had led to “de-industrialization.”
“Look at how many people are employed in German manufacturing now compared to 10 years ago,” Vance told a German audience in February. “Look at the amount of important raw materials produced in Germany now compared to 10 years ago, look at our dependence on energy now compared to 10 or 20 years ago. We have to stop deindustrialization.”
Vance has regularly voiced his disdain for the bipartisan policies that have shifted much of the world’s manufacturing to Asia in recent decades, which he sees as a key driver of the decline of America’s industrial base and the social institutions built on it in places like his home state of Ohio.
“The funny thing is, free traders never admitted that it was 2024, but when we were arguing in the ’70s and ’80s that we should build up China’s industrial economy, we did so with the clear knowledge that it would hurt the American middle class,” he said in a speech at the Quincy Institute in May.
Vance praised Federal Trade Commission Chair Lina Khan’s antitrust enforcement, saying she’s “doing a pretty good job” despite criticism from many in the business community. He acknowledged that his stance on Khan sets him apart from the majority of his party.
Vance’s distrust of globalized value chains reflects Trump’s economic populism, but expressed in a more measured and less bombastic way.
Much of President Trump’s economic agenda for a second term remains secret, but some highly protectionist elements seem likely if the former president wins the White House again.
As part of his immigration crackdown, President Trump has proposed a 10% general tariff on imports, tariffs of more than 60% specifically on Chinese imports, and mass deportations of immigrants.
The economic impact of such a high-profile plan, and the reaction from businesses and the lobbying groups representing them in Washington, are likely to be highly complex, as the private sector is likely to be wary of losing migrant workers and access to international markets as a result of retaliatory measures by other countries.
Despite resistance, protectionism in trade policy became politically influential in many ways during President Trump’s first term in office, as he launched a trade war with China and renegotiated the landmark NAFTA trade agreement to include worker protections in the form of the United States-Mexico-Canada Agreement (USMCA).
Trump also withdrew from the massive Trans-Pacific Partnership (TPP) trade deal with several Pacific Rim nations shortly after taking office, largely halting the multilateral free trade agreements that had taken root in the postwar era and accelerated in the 1990s with the creation of NAFTA, the Uruguay Round of General Agreement on Tariffs and Trade, and the creation of the World Trade Organization.
While President Trump has forcefully ignored many international precedents in his overhaul of U.S. trade relationships, experts warn that the current regulatory environment, recently reset by the Supreme Court with its decision in Loper Bright Enterprises v. Raimondo, may be less amenable to unilateral changes by the executive branch.
In Roper Bright, the Supreme Court struck down a provision known as “Chevron deference,” which expanded the authority of federal agencies to determine the nature and scope of legislative regulations as they saw fit.
The law “requires courts to use their own discretion in determining whether an agency acted within its statutory authority and cannot defer to an agency’s interpretation of the law simply because the statute is ambiguous,” the court ruled.
“this [puts] “You need checks on the government,” investor Axel Merck, founder of Merck Investments, told The Hill. “If you take power away from the administrative state, it’s obviously a win-win.”
Mr. Trump’s protectionism has moved Republicans away from the free trade they have supported for decades and pulled them closer to Democrats, who have largely upheld many of the trade policies of previous presidents under their current administration.
Rather than reviving the TPP or scaling back the USMCA along the lines of its predecessor, NAFTA, the Biden administration is keeping those efforts alive while moving further away from the WTO and creating room for greater exercise of national sovereignty in the trade sphere.
The Biden administration is not pursuing additional large-scale trade agreements that make access to foreign markets a top priority.
In March, U.S. Trade Representative Katherine Tai oversaw reporting changes to the National Trade Estimates report that removed the designation of trade barriers long favored by U.S. companies.
At the domestic level, the Biden Administration has also launched several major new industrial programs through several major bills, including the Chips and Science Act, which aims to bring microprocessor manufacturing back home, major infrastructure investment legislation, and the Climate Technology Act.
While President Trump’s economic nationalist tendencies in the areas of trade and industrial production have now been further accentuated by his running mate, Vance, many of the most fundamental aspects of their economic policy are very much in line with previous Republican administrations.
These include corporate and personal tax cuts that have been a staple of Republican policymaking for more than a generation, and could further inflate the national deficit.
President Trump wants to extend his signature 2017 tax cuts, which cut some personal tax rates and lowered the corporate tax rate from 35% to 21%, and he is also considering lowering the corporate tax rate to 15%.
Even with further changes to the corporate tax rate, expiring provisions for individuals and businesses could add $4.6 trillion to the national deficit, after it soared to a new level of about 120% of gross domestic product in the wake of the pandemic, according to the Congressional Budget Office.
The International Monetary Fund has warned that the United States should begin a deficit reduction program within the next decade.
