US Trade Policy Shift: Reindustrialization and the End of Free Trade?

The Trump administration's imposition of tariffs, initially considered radical, marked a departure from the promotion of global free trade, a trend that has continued under the Biden administration. During the 2016 campaign, both Trump and Hillary Clinton voiced opposition to the Trans-Pacific Partnership (TPP). Trump implemented tariffs on goods from China and other nations, many of which have been maintained or even increased during Biden's tenure. Biden's Inflation Reduction Act, enacted in 2022, seeks to foster American reindustrialization, particularly in green sectors, through subsidies and tariff protection. Trump's recent tariffs also aim to stimulate reindustrialization. This bipartisan move towards protectionism is partly driven by concerns over the dollar's role in creating trade imbalances. Countries often prefer to be net exporters, accumulating dollars that are then reinvested in U.S. debt. Some analysts now view the dollar's 'exorbitant privilege' as a burden and advocate for 'rebalancing' the U.S. economy by boosting domestic production. Simultaneously, nations like Germany are loosening their debt brakes, and the EU is increasing defense spending, potentially offering alternatives to the dollar. China is also diversifying its markets and focusing on domestic consumption. This shift towards rebalancing began before Trump and is likely to persist beyond his administration. On April 2, 2025, Trump declared a national emergency to address the US trade deficit, enabling him to invoke the IEEPA to impose a 10% tariff on all imports to the US, effective April 5, 2025. He also announced higher tariffs for 57 countries and territories set to begin April 9. The White House confirmed that these tariffs would be applied in addition to existing measures on Chinese imports, resulting in an effective tariff rate of 54% on Chinese goods after April 9, 2025.