A strategic shift. US President Donald Trump’s America First Trade Policy largely mirrors former US President Joe Biden’s economic approach, focusing on national security and economic resilience.
- While Trump’s rhetoric is more forceful, the underlying objectives remain similar.
- “Trump’s approach is not drastically different from that of the Biden administration,” said Valbona Zeneli, an expert in transatlantic relations at the Atlantic Council, in an interview with our sister website Formiche.
- Zeneli believes broad U.S.-EU tariffs remain unlikely: “I don’t believe we will see transatlantic tariffs in the future, except in specific sectors where negotiations fail.”
- Instead, the policy shift reflects a broader shift from globalisation towards protectionism and national interest-driven trade strategies.
Recent tariffs on Canada and Mexico. On 3 February, Trump issued executive orders imposing tariffs on Canada and Mexico, citing national security concerns related to drug trafficking and illegal immigration.
- In response, Mexico deployed 10,000 troops to reinforce its northern border and curb fentanyl smuggling, and Canada agreed to strengthen border controls and create a joint task force with the US to combat drug flows.
- Markets initially reacted negatively, with falling stock prices, rising oil costs, and a stronger US dollar.
- However, Trump’s decision to delay the tariff implementation led to a market rebound.
Trade and investment outlook. While the EU is not currently targeted, tensions could arise over industrial protectionism.
- 2023 transatlantic trade totalled $950 billion, with the EU running a $200 billion surplus.
- Zeneli suggests reducing the EU’s 10% tariff on US auto imports to 2.5%, matching US rates on European cars, to ease tensions.
- Foreign Direct Investment (FDI) remains a more substantial pillar of transatlantic economic ties than trade, with mutual FDI stock reaching $7.4 trillion. This deep financial integration reduces the likelihood of a full-scale trade conflict.
Implications for Italy. Italy, exporting $67 billion annually to the US, could be significantly impacted by tariffs.
- A 10% tariff would cost Italian exporters $6.7 billion.
- A 25% tariff would raise that figure to $16.7 billion, nearly 1% of Italy’s GDP.
- However, Zeneli predicts that U.S.-EU tariffs will remain limited to sector-specific disputes rather than large-scale economic measures.
The bigger picture. Trump’s trade agenda prioritises eliminating “unfair” trade practices, including currency manipulation, which disadvantages US exports, revising trade agreements to ensure balanced concessions, and protecting domestic industries through targeted tariffs.
- Regarding China, Trump is expected to revisit the Phase 1 trade deal, which is widely seen as ineffective due to China’s failure to meet purchase commitments.
- Before imposing a proposed 60% tariff on Chinese imports, he aims to enforce stricter compliance on technology transfer, intellectual property, and economic discrimination.
Key quotes. The aim of the America First Trade Policy “is not the tariffs themselves but to address unfair and unbalanced trade practices… and currency misalignment that provides an unjust advantage in international trade,” Zeneli said.
- Reasons for the emergency tariffs: “The executive orders described the tariffs as a response to the flow of drugs and illegal immigrants, framing it as a national security issue related to fentanyl.”
- China’s role in trade competition: “The Phase 1 trade deal with China, widely seen as a failure due to China’s non-compliance, may be revisited before imposing a 60% tariff on Chinese imports… The focus will be ensuring China adheres to the agreement, addressing technology transfer, intellectual property, and economic discrimination.”
