Many in the world ridiculed Donald Trump’s unconventional handling of affairs, but Trump somehow proved to be better at realizing his economic promises. Trump’s tax cuts increased growth and investment, on the other hand, protectionist policies and trade war strengthened the agricultural and manufacturing sector. It was evident as the unemployment rate dropped and median household income rose from 62,898 USD to 68,703 USD in a three-year time. The COVID-19 pandemic changed the scenario, and Biden came to power. What does this new president mean for the global economy?
Biden Economy: Moderate change in world trade
Biden has promised a ‘Buy American’ policy. The policy makes clear that Biden thinks globalization has created inequality, and the U.S. has failed to boost its productivity. Biden promised to work for the benefit of domestic producers. By investing trillions in healthcare, industry, and infrastructure, Biden will likely concentrate on strengthening U.S. domestic capabilities. He will likely increase the worker’s bargaining power.
The new president is to follow the same protectionist policy as his predecessor. He proposed the federal agency only buys U.S. service and will impose a tax for American companies shifting jobs and manufacturing outside. Trump’s aggressive policies brought positive results for the U.S. economy, it’s likely that Biden will follow suit. With some changes of course.
Biden and Europe
Biden will want to broaden the trade relation with European Union (E.U.) as a collective entity. In that regard, some of Trump’s economic policies relating to Europe may be relaxed to some extent. Biden may spare European exports like wine, olive, and cheese from Trump’s protectionism. Tariff levels may decrease among the U.S. and E.U. Trump’s policy prompted a backlash from the E.U., especially France. Both sides are to come together and negotiate their way through.
Germany is to expect warm trade relations with the Biden presidency. Previously, German Chancellor Angela Merkel wasn’t on very friendly terms with the U.S. Due to the lack of Trump’s hands-on involvement, China and Russia continue to increase their trade presence in Eastern Europe. The E.U. will likely pursue a more Europe-centric security and trade reaction. This was made clear by Germany’s eagerness to pipeline discussion with Russia despite U.S. protest and E.U.’s show of disapproval with the Venezuelan politician Juan Guidado. Guidado was championed by the U.S. and its allies as the president of Venezuela, fighting an illegal Maduro regime. Europe may share a softer approach.
Biden’s U.S.A. will return to WTO rules and regulations. Trump previously hampered the group by blocking appointments to its dispute resolution body and threatening a U.S. withdrawal from the body entirely. Biden will favor a multilateral approach. Biden is reported to state since the U.S. has 25% of the world’s trading capacity, it must ensure a majority by building ties with another 25%; those of the democracies. WTO appointment requires approval from all 164 member nations. The U.S. under Tramp was the only member who rejected the latest appointee in 2020. Biden will ensure WTO functions smoothly.
Biden’s trade policy will definitely coincide with his decision of rejoining the Paris Agreement. However, he will have to ensure the carbon footprint regulations must not put domestic U.S. products at a disadvantage. He may impose an E.U.-like tariff on imports that doesn’t meet U.S. standards. This will ensure the U.S’s environment-friendly approach doesn’t run out of capital. The rest of the world’s exporting countries will need to strengthen their environmental regulations as a result. It remains to be seen what his approach with the U.K. will be. But one can expect a closer bonding after Brexit.
Joe Biden and Asia
Joe Biden will likely control the oil production in the U.S., they recently surpassed Saudi Arabia as the biggest oil producer. Along with his environmental policy, Biden’s presidency may see a lower production intensive, raising the price of crude oil. This means middle eastern countries and OPEC members can be benefitted. The oil market has been hit hard due to the pandemic. Oil production can’t be fully stopped, so a slumped demand saw freefall of oil price. The recent Saudi-Russia trade war also shows a vulnerable oil market. Biden is to boost back the price. He even expects to export energy by the 2050s. A Biden presidency likely means the green energy sectors like solar, wind, and reusable sources will become more prominent in world trade.
For SouthEast Asia, Biden may want to form a stronger bond with 11 of the Transpacific Trade Partnership (TTP) members; a group from which Trump withdrew. However, their formation of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in 2018 shows a clear divergence from the U.S. sphere. Last year China and 14 Asian countries signed the Regional Comprehensive Economic Partnership (RCEP); the largest trading block in today’s world. The RCEP block contains a market of 2.2 billion generating 26.2 trillion USD output. The U.S. will like to counter this block with more investments and involvement. Thailand and Vietnam will benefit from Biden’s economic policies. The new president will likely maintain a tough position regarding China, thus investment and trade are likely to increase in this part of the region. The U.S. may want to compete with China’s high-interest rate megastructure projects; widely dubbed as aggressive and debt traps. It remains to be seen how a U.S.-centric community rebuilding program works regarding the economy. The U.S will likely balance the aggressiveness out of its trade relations regarding the region.
China
Biden is following the same policy with China as Trump did. Though tariff war is likely to lessen, however, what Biden plans to do about the Chinese economy is yet unknown. Trump demanded China pay the U.S. billions of dollars regarding property rights and make room for the American companies in the Chinese market. China didn’t comply. Now Biden is likely to maintain the same pressure. Although the tariff regime may see slight changes. Regional allies like Japan, Korea, or Southeast Asian’s won’t favor a tug of war regarding trade. Therefore, the U.S. has to balance between the Chinese influence and its allies’ willingness to accept U.S. preference.
Latin America
With little U.S involvement in Latin American affairs during the Trump era, China came in to become the region’s biggest trade partner. Biden will likely increase U.S. aid and trade relations in Latin America and take a less aggressive refugee policy. Its trade relations with Venezuela and Cuba however, are going to be negative most likely. Trade relations with Mexico, one of the U.S.’s biggest trading partners, will likely increase. The U.S. withdrawal of aid created an increased refugee problem, as previously U.S. aid-dependent countries don’t comply with security regulations. The growing lawlessness in Honduras, El Salvador, Guatemala, and Mexico can be attributed partly to the U.S. withdrawal from the region. On the other hand, Latin American economies like Mexico or Chile will want a more fair trade relation.
Joe Biden’s environmental policy may hamper his trade with Brazil. The largest beef and chicken producer in the world, Brazil’s meat industry has faced criticism for its lack of environmental concerns. Leading South America’s biggest economy, Bolsonaro’s government has repeatedly mixed the environmental concerns regarding Amazon with national sovereignty. This trick will likely create a strenuous regulatory battle.
Africa and Others
Biden lifted the ban on travelers from Africa’s Sahara and Sahel region. He will approach warmer trade and investment policies with the continent. China is already in a favorable position. The Biden administration will likely see a warmer relation with Australia too. The major aim of Biden’s trade policy is to maintain a balance among its multilateralism and improving the U.S. capacity. This may become difficult regarding questions like China, Russia, Iran, or Venezuela.
What it means for Bangladesh’s economy.
The Trump administration disrupted the multilateral trade system. The war with China made international trade systems unstable. Bangladesh hopes to gain some leverage with Biden’s interest in multilateral trade. The country hopes in light of its progress from least developed status, Bangladeshi products could gain extra profits. Some economists also think that Bangladesh should renegotiate the restoration of the Generalized System of Preferences (GSP) which was blocked by the Obama administration in 2013. The country experienced a sharp decline in export earnings due to economic difficulties caused by COVID-19.
On the other hand, in line with Biden’s environmental policy and pro-democratic approaches, Bangladesh will meet demands for a more environmentally friendly, reformed economic approach.
