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- Defense and reaction: how the global economy will be changed by the new US president's policies
Defense and reaction: how the global economy will be changed by the new US president's policies
The protectionist policy of the United States, which is going to be pursued by newly elected President Donald Trump, will mean a new round of trade wars with China and will put pressure on the economy of Europe, experts interviewed by Izvestiya believe. Even before his inauguration, he announced the introduction of duties on imported goods from China, the European Union, Canada and Mexico. Western countries have already started to stock up warehouses in the States in order to have time before the introduction of restrictions. But China has improved its trade balance in recent years. However, it too will have to look for new markets. How all this will affect Russia - in the material of "Izvestia".
US-China trade wars
November 6, 2024 Republican Party candidate Donald Trump won the U.S. presidential election. His inauguration will take place on January 20 - it will be his second term as head of state, but with a difference of four years. The Republican takes a more isolationist approach to politics: he favors protectionism in trade, protecting the states' economy and encouraging investment domestically.
As president, Trump plans to raise tariffs on all imported goods by between 10 and 20 percent. One of the most significant measures is directed against China - imports from this country may be subject to a duty of about 60%.
Trade wars between China and the United States began during Trump's first term in 2018 - they implied the introduction of mutual duties on goods. Back in 2023, the Republican promised, in case of his return to the White House, to cancel the most-favored-nation trade regime for China. Without it, Washington will be able to set any tariffs on imports.
It is assumed that radicalization of trade policy with China will protect domestic American manufacturers. The U.S. has a large trade turnover with China - for 10 months of 2024 it amounted to $564 billion, while the figure may exceed $700 billion for the year, said independent expert Andrei Barkhota.
- Nevertheless, China and the United States will maintain foreign economic dependence on each other. At the same time, Beijing exports much more than it imports - this allows us to conclude that Washington is significantly dependent on supplies from China," said Natalia Milchakova, a leading analyst at Freedom Finance Global.
More than 40% of products imported from China are high-tech, said Darya Sokolan, deputy dean for international activities at the PFUR Economics Faculty. This means that prices for machinery inside the United States may rise because of the duties, she warned, which means that the duties will turn against the country's residents.
In the global economy, this will lead to a redistribution of Chinese exports to other countries, Daria Sokolan added. Russia may even gain an advantage, as China will be able to give discounts on its goods to sell them at least somewhere, she suggested.
Why the U.S. is imposing duties on Canada and Mexico
In recent years, due to trade wars, China's direct role in economic relations with the United States has weakened, but the share of Mexico and Canada has increased, and at the same time, China's investment activity in these countries has increased, said Anastasia Prikladova, associate professor at the Plekhanov Russian Economic University's International Business Department. Beijing places its production in North American countries - this allows it to overcome trade barriers.
- It is because of China's high activity in Canada and Mexico that Donald Trump announced the introduction of a 25 percent duty on goods from these countries, despite the trade and investment agreement between the three countries," she said.
As Trump himself said, the reason lies in the migration policy of these states and drug smuggling.
Mexico and Canada will be forced to come to an agreement with the US. In this case, the compromise may reach an unprecedented level, said independent expert Andrei Barkhota.
U.S. economic policy towards the European Union
Among the key partners of the US are European states, in particular Germany, the UK and France. Nevertheless, Trump threatened to impose duties of 10% against trading partners from Europe. After that, European companies began to build up stocks in US warehouses ahead of the inauguration of the new leader, Handelsblatt wrote.
In general, the eurozone economy continues to stagnate - especially difficult situation in Germany, where the year-end recession is expected, recalled Olga Belenkaya, head of macroeconomic analysis department of FG Finam.
- The decline in competitiveness is due to rising gas and electricity costs, accelerated energy transition, displacement by Chinese competitors (especially in electric cars), and regulatory problems. And Trump's threat to apply an import tariff of 10% to EU countries may further worsen economic conditions for European businesses," the expert believes.
She added: according to the estimate of the EU itself, duties of 10% can reduce EU exports by about €150 billion a year.
The role of the dollar in the global economy in 2025
Donald Trump has also repeatedly expressed his intentions to fight for the preservation of the status of the dollar. In September, he promised voters to impose duties of 100% on goods from those countries that would abandon the US currency. In particular, in late November, the elected leader threatened that he would impose duties on goods from BRICS countries if they created their own currency.
However, in recent years, trade within the BRICS countries has been growing, while the importance of the U.S. for the association, on the contrary, is decreasing, said Daria Sokolan.
- Radical statements by the US indicate that the country is increasingly losing control over the situation and is ready to resort to measures that violate the rules of free trade, which it has so actively imposed on everyone. In order for the BRICS countries not to fear the consequences of U.S. sanctions, they need to further increase mutual trade," she emphasized.
However, it is still too early to say that the ongoing dedollarization may hit the role of this currency hard. Now more than half of the international reserves of the world's central banks are kept in it, and its share in payments and settlements fluctuates around 47-48%, said Natalia Milchakova from Freedom Finance Global.
- Because of sanctions, the dollar is becoming a rather dangerous currency for settlements. Its status and role in the global economy may be undermined by the use of the United States currency as a political weapon, rather than the transition of other countries to settlements with each other in national currencies," the expert explained.
According to Olga Belenkaya, Head of Macroeconomic Analysis at Finam, if the process of dedollarization intensifies, it will weaken the U.S. ability to attract foreign borrowings, which are necessary to refinance the record government debt (according to the latest data, it exceeded $36 trillion).
Russia is unlikely to be affected by the new restrictions. Our country has already converted most of its settlements into national currencies - at the end of the third quarter of 2024, the share of the ruble in transactions with Russia amounted to 41%, and in monetary units of friendly (non-Western) countries - another 42%, Izvestia wrote earlier. This indicates that the Russian economy is gradually becoming more independent and confident.
