Trump’s populist administration and US-China interstate economic relations

Research Essay by Subateeswarran Looganaden

(Awarded First Class)

Democracy may have been accepted as the most legitimate form of governance however, we’re experiencing deconsolidation even in the most stable and wealthiest state as many voters lost faith due to its failure in delivering and are endorsing radical populist movements that oppose the status quo (Mounk & Foa, 2016). Crippling neoliberal hegemony, China-trade shock, economic inequality, polarised politics & anti-globalization sentiments has created a fertile ground for populism in US (Rodrik, 2017). Trump’s populist presidency shocked American political establishment, neoliberal orthodoxy and shattered liberal internationalist tradition of US foreign policy towards China which trumpets geo-political economic rivalry over economic interdependence. Interstate economic relations is a broad subject that covers removal of interstate trade barriers, tax exportation and interstate administrative agreement; it’s managed by the Congress which enacts uniform state laws and fosters interstate cooperation by regulating relations between states to ensure free flow of commerce (Joseph F. Zimmerman, 2004). The purpose of this analysis essay is to examine the impact of Trump’s populist economic policies with reference to US-China interstate economic relations which changed economic policies from liberal to protectionism to increase US economy and thwart China’s trade practices.

Friedman’s Neoliberalism dominated American politics for over 40 years, it shifted away from national Keynesianism and was facilitated by Reagan, Clinton, Bush & Obama (Anshu Siripurapu, 2022). The neoliberal order celebrated globalization, self-running free trade markets, beneficial role of competition, tax cuts, deregulation, liberalization, and privatization as beneficial for economic growth; it was aided by international economic institutions such as WTO, IMF, World Bank and formed the Washington consensus. Neoliberal promises were poverty reduction, advancements in technology, gains in productivity, new jobs and essentially a win-win situation for states that adhere to its principles (Mittelman, 2000). However, in the US, many began to lose faith in neoliberalism as its promises could not survive the economic wreckage of 2008 which resulted in economic anxiety and displacement of jobs due to economic mismanagement & governments bailing out the investing classes (Metawe,2020).

There are no static definitions, class or social base, specific criteria, policies or set of emotions for populism, it’s often identified as simplistic, irresponsible, irrational and a form of anti-elitism. However, it’s a particular moralistic imagination of politics that represents the “real” people, vouching for the common good by opposing fictional unified “other”/elitist & minorities that are “corrupt” or “crooked.” (Müller, 2014, 2017). Hegelian dialectics of nationalism shows how populist mobilize society by constructing “imagined community” with new identity by placing statesman or political elites as subject of nation-state power. Automation, high trade-deficits, illegal/mass-immigration, financial crisis, falling wages, loss of manufacturing jobs due to outsourcing and rising economic insecurity caused by globalization are amongst the factors that drives the rise of populism (Bimantara,2018). The globalization shock paved the way for both right-wing & left-wing variants of populism in the US as the presidential elections were contested by Bernie Sanders who mobilized income/social class lines and Donald Trump who mobilized along ethno-national/cultural cleavages due to immigration. Both garnered major support by voicing against political corruption by elites, poor globalizing domestic economic policies that places free trade over working class and evisceration of American manufacturing (Frieden,2021).

Donald Trump’s rise to power can be seen as the symptoms of dissatisfaction amongst voters; he claimed that free trade was a disaster for Americans and attempted to break the status quo, using neo-protectionist, mercantilist policies and nationalist rhetoric of “us against them”, “America First” & “Make America Great Again”. He antagonized immigrants and painted outside influences such as China/Europe as a sovereign threat and withdrew support from international organizations like the WTO & the European Union (Petrova et al, 2020). Donald Trump’s populist trade policies are neoliberal and just as traditional globalist neoliberalism it too places the market as site of veridiction; however, he finds the existing internationalist, neo-liberal centrist, “elitist”, cooperative, globalization and free trade policies benefits large corporations and rich individuals who manipulate tax systems and other states at the expense of the American workers. Domestically Trump wanted to promote neo-liberal, free market policies that create jobs by eliminating de-location of productions to increase US economic growth. In the international market, he advocated competitive policies to reduce trade deficits, restore reciprocity & balance economic relations with trading partners to secure US American commercial interests (Gruszczynski, et al 2019).

During the Bush and Obama era, China was treated as a strategic competitor and was expected to develop into a “responsible stakeholder” in upholding the rules-based international order. Bush’s administration provided China permanent trade status and backed China’s accession WTO; hoping it would produce mutually benefitting economic gains & abide fair trading practices. Obama’s administration made few strategic adjustments to influence China’s mercantilist, state led economic model & curbed its unfair trading practices and cyberespionage via bilateral diplomatic appeals & filing claims against China in WTO. US labour unions blame China for job losses in the manufacturing sector due to outsourcing production & Trump accused China’s currency devaluation, IP theft, compelled tech transfer and trade barriers that restrict American products into Chinese markets (Hass, 2021).

Trump rejected multilateralism & previous administration’s approach but still attempted to influence China to become a ‘responsible stakeholder’ in LWO through unilateral exertion of pressure by starting a trade war & planned to implement 10–25% tariffs on 200 billion dollars’ worth of Chinese products via Phase One trade deal, to cut China’s trade deficit that accounted for 66% of total US goods deficit in 2017. Trump was concerned by RMB internationalization, “Made in China 2025” industrial strategy, and China’s involvement as norm shaper in global economic governance. The White House called BRI as “debt trap diplomacy” & advocated protectionist trade policies by claiming it will benefit US workers, renegotiate trade deals, & crucial to protect US primacy & national security. To prevent Chinese competition in 5G telecommunications, Chinese theft of intellectual property and espionage, Trump framed ZTE & Huawei as national security threat due to possible “wiretapping”. Trump banned US companies from working with them and threatened to suspend relationship with states that pursue dealings with flagged Chinese tech companies (Boylan et al,2021).

The right-wing populist placed tariffs on steel and aluminium imports; the 25% tariffs on all imported steel and 10% on aluminium was claimed to increase US steel industry although, it was largely driven by consideration to fulfil his campaign promises for upcoming midterm elections. Trump’s neo-protectionism were enacted not only to protect economic primacy but to secure his political power. In 2019, 79$ billion in tariffs was charged but $28 billion government subsidies from U.S. taxpayers was spent to offset losses of U.S from tit-for-tat tariffs with China (Thiemo, Carlo, 2021). China’s retaliatory tariff plans was to decrease agricultural imports in targeted “Red/Republican” states to press Trump’s administration however, due to partisan polarization & 12 billion US$ farmers relief aid, it didn’t reverse voters support (Wang, Zhaohui,2019). After many negotiations, deals were struck between China & US, but China failed to deliver its promise of importing more US goods and there’s no reforms on Chinese trade practices. China criticized Trump’s policies for disrupting & violating trade norms, but the CCP can boosts exports by devaluing RMB to support industries affected by tariffs (Graaff, Bastiaan,2018).

Statistics indicate that Trump’s protectionist policies failed as the trade deficits continue to increase from 375$ billion (2017) to 420$billion (2018); due to retaliatory tariffs US exports productions were limited and more workers in manufacturing sectors were affected (Sanja, 2020). It led to more losses than gains as tariffs didn’t aid US negotiate better deals or improve national security; they increased transportation costs & prices of imported goods in domestic markets which caused major supplies but lower demands. Pro-free trade international institutions have blame US administration’s for poor trade adjustment assistance; they suggest better education, unemployment safety net, insurance, or savings to respond to free trade shocks rather than protectionists measures. Finally, the Trump’s populist protectionism led to Beggar-thy-neighbour as its impact on interstate economic relations with trade partners has made US look less credible to lead the LWO (Inderjeet & Thomas, 2021).

Full research including references provided upon request: subawarran@gmail.com