Trump 2.0 could go ‘nuclear’ on trade with China, economist says

Former President Donald Trump would likely take his trade war and economic decoupling policies to new levels if he were elected to a second term in the White House, experts told CNBC.

While Joe Biden also placed strategic competition with China at the forefront of his economic policy, economists and trade experts largely expect Trump would further cut and destabilize trade relations between the world’s two largest economies.

“A Trump victory is highly likely to increase trade and economic hostilities between the U.S. and China, ramping up the trade and financial decoupling between the two countries,” said Eswar Prasad, an economics professor at Cornell University.

Trump is widely expected to face incumbent Vice President Kamala Harris after Biden bowed out of the race and endorsed her. According to Prasad and other experts, Harris’ approach to China would likely be similar to that of Biden.

While Trump and Biden both took a protectionist stance, their strategies and tactics differed greatly, explained Prasad, who previously served as head of the International Monetary Fund’s China and financial studies divisions.

“Trump relied on tariffs to keep out imports from China. Biden — while keeping those tariffs in place and even increasing tariffs on certain imports — has focused more on restricting China’s access to technology transfers and computer chips,” he said.

Trump’s biggest diversion from Biden-era trade policy would likely be tariffs levied on China.

The self-proclaimed “tariff man” set off a trade war with Beijing during his first term. He placed a series of duties on $250 billion of Chinese imports, disregarding warnings the levies would raise prices and hurt consumers. 

After defeating Trump in 2020, Biden retained his predecessor’s tariffs and even added his own, announcing stiff new duties on about $18 billion worth of Chinese imports, including electric vehicles, solar cells, lithium batteries, steel and aluminum. 

Experts told CNBC they expect Harris to largely continue Biden’s tariff policy. Trump, on the other hand, has already proposed increasing rates on Chinese imports by at least 60%. 

“I certainly don’t know if Trump is willing to pursue such extreme measures, but I do believe that he’s likely to increase tariffs to some degree during a second term,” said Stephen Weymouth, a professor of international political economy at Georgetown University.  

Economist Stephen Roach said Trump raising tariffs in a second term would be the “functional equivalent of the nuclear option” in international economic conflict. 

William Reinsch, Scholl chair in international business at the Center for Strategic and International Studies, said the tariffs risk another trade war that would end most goods exchange between the two…