According to the Lowy Institute, Kamala Harris is likely to continue to pursue President Joe Biden's trajectory on trade if elected.
The Lowy Institute (Australia) recently analyzed Kamala Harris' economic policies, based on the content mentioned in her election campaign.
Tariffs and industrial policy
Under President Joe Biden, the US has largely maintained most of the tariffs imposed by former President Donald Trump on Chinese imports, and added some. Although Joe Biden has considered suspending some tariffs, most of the policy moves have been in the opposite direction.
In 2022, the Inflation Reduction Act (IRA) was passed, providing $370 billion in tax incentives and subsidies primarily targeted at renewable energy. That same year, President Biden also extended tariffs on imported solar panels. Then in May 2024, President Biden increased tariffs on Chinese electric vehicles to 100% and expanded tariffs to other Chinese goods.
A potential Kamala Harris administration would likely continue to use tariffs (primarily against China) to address what the US sees as unfair competition and accelerate the energy transition to meet US emissions reduction targets.
Policies based on “techno-nationalism” are also likely to continue, although perhaps less aggressively than under former President Trump. This will make it harder for other countries to invest in their energy transitions as domestic industries are crowded out by larger, US-subsidized projects.
Environmentally focused industrial policy is also likely to continue under the Harris administration.
The US government is currently pursuing policies to reduce greenhouse gas emissions. The IRA is all carrots and no sticks, providing subsidies and tax incentives for renewable energy investments. While Mr. Trump will struggle to “reverse” the IRA, Ms. Harris will ensure it. With Ms. Harris’s focus on American jobs and the environment, she can increase her use of industrial policy.
Ms. Harris has been a vocal critic of Mr. Trump's sweeping import tariffs (which he has said could be as high as 20%). Recognizing the impact of tariffs on American families, Ms. Harris's administration may be more cautious about using them as an economic weapon, especially against allies. Whether Ms. Harris will reduce the current tariffs remains to be seen, however.
Trade is seen as a “scapegoat”
In the past, Japan has been accused of price intervention that undermined US manufacturing, and the formation of the European Union (EU) has similarly been seen as creating “fortress Europe.” Now it is China’s turn, but through its central role in many global value chains, it has significantly more economic power than either Japan or the EU ever had.
Washington officials blame the current account deficit and the decline of the middle class on trading partners, primarily China. Those concerns are increasingly being linked to national security, with President Joe Biden accusing China of seeking to undermine America’s military capabilities by competing for manufacturing jobs.
While some of the accusations that China's trade and growth have fueled structural economic change in the US are true, the decline of US manufacturing is also inevitable due to robotics and automation.
Blaming international trade and China does not help the U.S. economy or security. Protectionism also does not help reduce the current account deficit, which is more a reflection of high domestic spending and low savings. Domestic budget deficits also play a role.
Ms Harris may be more subdued when it comes to reversing global economic integration, but this direction of US integration is unlikely to change.
The US will continue to maintain a “high wall” on industries it considers strategic, including punishing trading partners if they export militarily sensitive (“dual-use”) technologies to China. Like the IRA, which restricts access to the lowest-cost clean energy technology, US policy imposes costs on the rest of the world.
Commercial Inertia
Beyond serving as a useful scapegoat, trade has little political traction in the United States. While former President Barack Obama pushed for the Trans-Pacific Partnership (TPP), it was not supported by Hillary Clinton in the 2016 election, and Trump formally withdrew from the agreement upon taking office.
In 2022, President Biden introduced the Indo-Pacific Economic Framework for Prosperity (IPEF) to promote cooperation among 14 Asian countries (but not China) on four pillars: supply chains, clean economies, fair economies, and trade.
However, in November 2023, the US abandoned the trade pillar over concerns that any concessions would hurt American workers. Kamala Harris has not said anything specific about IPEF, but her administration is unlikely to consider it a top priority, given the current vice president's interest. Harris has expressed skepticism about the North American Free Trade Agreement (NAFTA), the Trump-era version known as the United States-Mexico-Canada Agreement (USMCA), and the TPP.
On the urgent need to reform the global trade architecture, one should not expect much from the US administration if Ms. Harris is elected. President Joe Biden continues to refuse to approve the appointment of judges to the Appellate Body of the World Trade Organization (WTO). Despite Ms. Harris’s 2021 congratulatory call to WTO Director-General Ngozi Okonjo-Iweala and an agreement to cooperate on WTO reform, little progress has been recorded. This does not bode well for efforts to restore the WTO’s judicial function and reform international rules related to trade and investment.
