On January 20, 2025, Donald J. Trump will take office as the re-elected president of the United States. Both Amazon and Meta (Facebook) have rushed to donate $1 million each to help enhance the inaugural event of Trump’s second term in the White House.
The empowerment of American giants in the digital sector, as well as cryptocurrencies, seem to be spearheads of this second Trump administration.
However, it is the new trade war that Trump proposes which generates the most news and debate. In 2018, Trump imposed a round of tariffs under the “AMERICA FIRST” campaign, with the main objective of punishing Chinese imports under the pretext of unfair competition and intellectual property theft. A 25% tariff was placed on Chinese products. The goal was also to protect key sectors such as steel and aluminum, imposing a 25% tariff on steel imports and a 10% tariff on aluminum. Today, the ineffectiveness of these measures to protect the American steel industry is evident, as the sector is immersed in a serious crisis, and U.S. Steel must be sold to survive and preserve its operations, something neither the Biden nor the Trump administration has ever considered. Nippon Steel made a purchase offer of $14.1 billion, which the government blocked for patriotic reasons.
The tariff campaign directly targeted washing machines from China and South Korea with a 50% tariff, which led Samsung and LG Electronics to set up assembly plants in South Carolina and Tennessee, respectively. Local producers Whirlpool and General Electric saw improvements in their sales results, as the prices of washing machines in the market rose by $90 per unit due to the direct tax effect.
In this second round of new tariffs, China remains the primary target of Washington, although new tariffs will also be imposed on trade partner countries such as Canada, Mexico, the European Union, Japan, and South Korea. In this case, imposing an additional 25% on all products from China has a greater impact on the North American market than in 2018, as well as significant international repercussions. Traditional trade flows may be disrupted in terms of volumes, origins, and destinations in a way that will notably alter many global supply chains.
In this Trade War 2.0, the concept of “America First” is reinforced, focusing on boosting local production and protecting strategic sectors, aiming to safeguard the national industry through import tariffs. The technology sector is key, but the automotive industry stands out due to its functional weight in the economy. At this moment, the three major American automakers are facing difficult times. Ford, General Motors, and Stellantis are caught in the electric vehicle dilemma, a market where they lag far behind their Chinese competitors. Moreover, several models of these brands sold in the U.S. are manufactured in China, meaning they are also affected by the new tariffs.
The planned tariffs aim to reduce the volume of imports from China, but they could also lead to a direct price increase that affects inflation. In this regard, China has prepared in advance by developing alternative markets to absorb Chinese manufacturing production. The New Silk Road and the BRICS are important approaches to developing countries, having consolidated trade routes with their own ports and strengthening political influence in many strategically important countries.
It is worth noting that by mid-January 2025, the cancellation of the strike by dockworkers and port workers on the U.S. East Coast and Gulf (ILA) should be confirmed. The Biden administration imposed a temporary agreement between employers and the union, as the presidential elections were being affected by the port shutdown, with January 15 being the deadline to ratify the pre-agreement reached in October. The issue here lies in automation, robotization, and the digitalization of port activities. Trump is opposed to these changes and supports American workers, meaning the inefficiencies in port productivity will likely persist, at least for the six years of the renewal agreement.
While Trump empowers dockworkers, Xi Jinping is betting on the opposite. A clear example of this is the Chancay megaport, operated by the Chinese state, which, in addition to exclusively managing port activities, proposes a completely automated model with robotic cranes and platforms to maximize efficiency and productivity. The U.S. is arriving too late and is now focusing on strengthening the Chilean port of San Antonio to counter China’s influence in the region.
