Donald Trump’s victory in the 2024 election – and his threat to impose tariffs on all imports into the United States – highlights a significant problem for the global economy.
The US is a technological superpower, spending more on research and development than any other country and winning more Nobel Prizes in the last five years than all other countries combined. Its inventions and economic successes are the envy of the world. But the rest of the world needs to do everything in its power to avoid becoming too dependent on it.
And if Harris had won, this situation would not have been much different.
Donald Trump’s “America First” approach has been a truly bipartisan policy. Since at least previous President Barack Obama’s policy of energy independence, the US has been in a mostly internal quest to maintain technological dominance while eliminating the offshoring of industrial jobs.
One of the major choices made by Trump in his first term was to accept higher prices for American consumers in order to protect national producers by imposing higher tariffs on almost every trading partner.
For example, Trump’s 2018 tariffs on washing machines from around the world meant American consumers were paying 12% more for these products.
President Joe Biden — certainly in a more modest manner — then increased some of the Trump tariffs: up to 100% on electric vehicles, 50% on solar cells and up to 25% on batteries from China.
At a time of the climate emergency, slowing the energy transition was an obvious choice to protect American manufacturing.
While Biden signed a truce with Europe on tariffs, he started a perhaps even more damaging fight by starting a subsidy race.
For example, the US Inflation Reduction Act includes US$369 billion (£286 billion) in subsidies for sectors such as electric vehicles or renewable energy. And the CHIPS Act committed US$52 billion to subsidize the production of semiconductor and computer chips.
China, Europe and the rest of the world
This American industrial policy may have been inward-looking, but it has clear consequences for the rest of the world. After decades of mostly export-led growth, China now must deal with huge problems of industrial overcapacity.
The country is now trying to encourage more domestic consumption and diversify its trading partners.
Europe, despite extremely tight budget constraints, spends a lot of money in the subsidy race. Germany, a country facing sluggish growth and great doubt over its industrial model, has committed to matching US subsidies, for example giving Swedish battery maker Northvolt €900 million ( Is offering £750 million).
All those subsidies are hurting the world economy and immediate needs like electrifying the entire African continent with solar panels and batteries could easily be met. Meanwhile, China has replaced the US and Europe as the largest investor in Africa, following its interest in natural resources.
The coming Trump mandate could be a chance to fine-tune ideas.
For example, one could argue that the full-scale invasion of Ukraine, and the thousands of deaths and subsequent energy crisis, could have been avoided if the Biden administration had been frank with Russian President Vladimir Putin about the consequences of the invasion, and Provided modern weapons to Kiev before the war.
But most of the blame lies on Europe. Credit where it’s due, the strategic problem of being overly dependent on Russian gas is something that Trump clearly warned Germany about during his first mandate.
There is a clear path forward: Europe can help China fix its overcapacity problems by negotiating an end to its own tariff war on Chinese technology like solar panels and electric cars.
In return, Europe would gain some sovereignty by producing more of its own clean energy rather than importing record amounts of liquefied gas from the US. It could also learn a few things from producing with Chinese companies, and China could use its enormous influence over Russia to end its invasion of Ukraine.
The EU could also work harder at what it does best: signing trade agreements, and using them as a way to reduce carbon emissions around the world.
This is not just about Europe and China. After decades of continuous improvement on all major dimensions of human life, the world is moving backwards.
The number of people facing hunger is increasing, taking us back to 2008-9 levels. There is war in Gaza, Sudan, Myanmar, Syria and now Lebanon. The world had not seen so many civilian casualties since 2010.
For better or worse, it is unlikely that the Trump administration will reverse the path to less US intervention. It is also unlikely to take any major initiatives on peace, climate change or trade liberalisation.
The world is alone and America will not come to save it.
We don’t know what will happen to America. Maybe Trump’s return will mostly be a continuation of the last ten years. Maybe prohibitive tariffs or destroying the institutions that made America an economic superpower would make the American economy less relevant. But it’s something Americans have chosen, and something the rest of the world will just have to live with.
In the meantime, the only thing the world can learn is how to work better together, without becoming too dependent on each other.
,Author: Renaud Foucart, Senior Lecturer in Economics, Lancaster University Management School, Lancaster University)
,disclosure statement: Renaud Foucart does not work for, consult, hold shares in, or receive funding from any company or organization that would benefit from this article, and has no relevant affiliations beyond his academic appointment. not disclosed)
This article is republished from The Conversation under a Creative Commons license. Read the original article.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
