Protectionist Trade Policies in the New Administration: A Question of Degree

Regardless of what happens in the U.S. elections on November 5, one theme is clear – protectionist policies in international trade are here to stay. To some extent, the key difference between the trade policies of a Harris administration and a second Trump Administration may be one of degree. Vice President Harris is expected to continue the more cautious, incremental approach to trade policy favored by the Biden Administration. A second Trump administration, on the other hand, is expected to pick up where it left off and aggressively use the trade tools at its disposal to try to reset and renegotiate trade relationships with many of the U.S.’s trading partners—particularly those countries with whom the U.S. has a trade deficit.

Trump’s view is that trade policy is fundamentally domestic policy—a way to try to increase domestic manufacturing and exports while working to make our trading relationships more fair. While Vice President Harris also wants to increase domestic manufacturing and exports—not to mention labor rights - her administration would try to do that by providing government incentives and subsidies instead of heavy tariffs. That said, Vice President Harris is expected to keep many of the tariffs currently in place to protect American industries and put pressure on U.S. trading partners, especially China.

Another difference between a Harris and Trump administration is how they would approach trade agreements. Like President Biden, Vice President Harris is expected to seek multilateral trade agreements to the extent possible, although Congressional opposition to multilateral agreements will make this process difficult. In practice, any multilateral agreements will probably need to be informal like the Biden Administrations work on the Indo-Pacific Economic Framework (IPEF). A second Trump administration, on the other hand, would likely continue the largely bilateral approach to trade agreements Trump pursued in his first term. The next President will also have to grapple with whether to extend or renegotiate the United States-Mexico-Canada Agreement (USMCA) and other thorny issues including import regulation (e.g., tariffs and forced labor), export controls and sanctions, national security (both inbound and outbound investment). We provide our views below on where the presidential candidates and their political parties stand on these key issues.

Key Takeaways

• • Protectionist trade policies are here to stay no matter who wins the White House, but Trump’s approach to trade would use tariffs more aggressively. In the short term, this could be disruptive to the supply chains of U.S. businesses.
  • Import and export controls will continue to be used. Companies should prepare for increased enforcement efforts no matter who wins the White House.  
  • Clients should carefully scrutinize their supply chains to make sure they are not taking on too much risk, especially with respect to supply lines that go through China.
  • Clients concerned about additional tariffs or import and export controls should consider a strategy that includes de-risking their supply chains and putting together a strategy to share their concerns with policymakers in Congress and the incoming presidential administration.

1. Import Administration: Tariffs – Two Different Approaches

Significant tariffs imposed by the Trump administration remain today and a key question is whether they will increase or stay steady under a new Trump or Harris administration. In 2018 and 2019, Trump imposed tariffs ranging from 7.5% to 25% on $380 million of a wide range of Chinese consumer and industrial goods under Section 301 of the Trade Act of 1974. The so-called “Trump Tariffs” were in response to China’s discriminatory policies and practices regarding technology transfers and intellectual property. Trump also imposed significant tariffs on steel and aluminum imports that threatened national security under Section 232 of the Trade Expansion Act of 1962.

The Biden administration largely maintained the Trump 301 tariffs in place during his term. Biden also retained many of the 232 tariffs imposed by Trump on steel and aluminum products, except in the case of steel and aluminum from the EU, UK, and Japan where he converted tariffs to tariff-rate quotas. Thus, with only a few exceptions, the Biden administration will end in relatively the same position on tariffs as when Trump left office. Earlier this year, USTR implemented targeted 301 tariff increases on approximately $18 billion of Chinese goods in strategic sectors such as EVs, batteries, semiconductors, solar cells, and critical minerals.

Trump Stance on Tariffs

Trump has doubled down on his use of tariffs, recently referring to the word “tariff” as the “most beautiful word in the dictionary” at the Economic Club of Chicago. He has proposed blanket 10% to 20% tariffs on all imported goods, and tariffs ranging from 60% to 100% on all goods from China. Trump has singled out sector-specific goods such as imported cars made in Mexico by Chinese companies by proposing tariffs on those goods of up to 200% (and perhaps even higher). He also has mentioned possible 100% tariffs on goods exported from countries that reject the use of the U.S. dollar in trade, a proposal likely to greatly impact China.

Harris Stance on Tariffs

Despite Harris’ criticism of Trump’s use of tariffs as a “sales tax” on consumers, a Harris administration likely would maintain tariffs at their current levels but consider additional targeted tariffs in strategic industries. Like Biden’s approach, she is expected to apply tariffs on goods in sectors critical to U.S. economic and national security rather than any wide-ranging increases. Harris’s trade policies generally are expected to rely more on subsidies and other similar tools rather than tariffs to achieve her economic goals.

2. Import Administration: Forced Labor – Bipartisan issue, driven by Congress as much as the Administration

The Republican and Democratic parties agree that it is politically expedient to be “tough on China.” Perhaps no other issue has brought such unity than China’s reported oppression of its Muslim Uyghur minority in northwest China. The Trump Administration declared in 2021 that China’s actions against the Uyghur constituted genocide. The Biden Administration followed a few months later with its own, similar ‘genocide” declaration. With strong bipartisan support, the Biden Administration implemented the Uyghur Forced Labor Prevention Act (“UFLPA”) at the end of 2021. The law created a rebuttable presumption that imports of all goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region (“XUAR”), or by entities identified by the U.S. government on the UFLPA Entity List, are made with forced labor and are prohibited from entry into the United States.  If CBP determines that goods are made in whole or in part in the XUAR, then CBP must prohibit entry of such goods into the U.S. unless the importer proves, by clear and convincing evidence that the goods were not produced from forced labor. This high standard has resulted in nearly $3.5 billion in detentions of imported merchandise by U.S. Customs and Border Protection since the UFLPA’s enforcement began. The shipments come from a wide array of sectors, including automotive, apparel, chemicals, electronics, flooring, and solar panels.

With bipartisan support, the U.S. House of Representatives has passed bills in support of the Uyghur minority. One objective is to apply pressure to companies that have Uyghur labor in their supply chains to stimulate China de-coupling. Protection of the Uyghur minority was an agenda item that made its way into the September 2024 “China week” legislative session in the House. One of the bills that passed, H.R. 8631 – Decoupling from Foreign Adversarial Battery Dependence Act, prohibits the use of U.S. Department of Homeland Security funds to procure batteries by certain entities including those listing entities pursuant to the UFLPA. Even if the bill does not become law, both political parties are using the legislative process to signal strength against China as a strategic adversary in a tight political election year.

High profile representatives from both sides of the aisle have decried the alleged use of Uyghur forced labor in supply chains as part of their re-election efforts. Earlier this year, Representatives Michelle Steel (R-CA) and Jimmy Panetta (D-CA) pressed the Biden Administration to investigate Chinese companies in the seafood industry for alleged use of Uyghur forced labor.

Regardless of the outcome of the election, we expect continued, bipartisan support for the use of the UFLPA and similar tools to encourage companies to de-risk and diversify their supply chains away from China. While we expect a future Trump administration to use UFLPA as part of an array of tools to create an environment that accelerates de-coupling from China, a future Harris administration might echo some of the restraint that the current Biden administration and its allies have exhibited in the face of some of the broader sweeping and more aggressive proposals offered in the House of Representatives.

3. Export Controls – a “Stealth” Issue for Both Candidates

Neither presidential campaign has articulated clear views on export control policies. During the prior Trump presidency and current administration, the U.S. sought to limit access to advanced semiconductor technology, particularly to China. Commentators have observed that the policy had the effect of dampening Chinese purchases of U.S. semiconductor-related goods and services, which was one factor in the failure to achieve China purchases at the levels contemplated under Trump’s highly-touted “Phase One” trade agreement with China. The Biden Administration has pursued policies to limit Chinese access to advanced semiconductor technology – using a mix of export control enhancements as well as sanctions designations. It would be reasonable to infer that similar policies would arise if either candidate wins the presidency.

Harris – If Harris is elected, the current policies and goals of the Biden Administration will likely continue to be implemented with little change. This includes retaining and expanding end-user controls and restrictions on countries of concern such as Russia, China, and Venezuela. It is also likely that the Department of Commerce will continue its efforts to identify and restrict exports of new critical technologies in the artificial intelligence and semiconductor design and fabrication areas.

Trump – The Trump campaign has provided little insight into whether there would be expected changes in the export control space. The best predictor of how Trump will approach export controls is what he did during his first administration where he routinely used export controls against foreign adversaries. Certainly one area to watch is whether a prospective Trump Administration would result in a relaxation or elimination of export controls on Russia added by the Biden administration.

The Heritage Foundation’s Project 2025 provides some insights into possible policies that Trump may implement including:

• • Eliminating the “specially designed” licensing loophole;
  • Redesignating China and Russia to more highly prohibitive export licensing groups (country groups D or E);
  • Eliminating license exceptions;
  • Broadening foreign direct product rules;
  • Reducing the de minimis threshold from 25 percent to 10 percent—or 0 percent for critical technologies;
  • Tightening the deemed export rules to prevent technology transfer to foreign nationals from countries of concern;
  • Tightening the definition of “fundamental research” to address exploitation of the open U.S. university system by authoritarian governments through funding, students and researchers, and recruitment;
  • Eliminating license exceptions for sharing technology with controlled entities/countries through standards-setting “activities” and bodies; and
  • Improving regulations regarding published information for technology transfers.

Some of these proposals are unclear and require further policy and implementation analysis that includes practical impact on U.S. industries that could be significantly affected.

4. Sanctions – a Preferred Foreign Policy Tool of Choice

Similarly, the use of economic sanctions as a preferred foreign policy tool of choice as an alternative to military incursions is likely to continue in either a Trump or Harris administration.  While Trump aggressively used sanctions more frequently than the Obama administration, particularly in the context of Iran, the Biden administration has imposed an unprecedented number of sanctions in the wake of Russia’s invasion of Ukraine. 

A Trump administration could relax the prioritization of Russia sanctions, while both a Harris and Trump administration could continue to use secondary sanctions to target non-U.S. person operations in China that continue to provide support to sanctioned persons or knowingly facilitate significant transactions with sanctioned persons.  Importantly, the uptick in enforcement of sanctions and export controls, not only by the Commerce and Treasury Departments but also the Department of Justice, will likely continue.   

As has been the case over the past several years, both financial institutions and multinational companies will need to maintain robust compliance programs with built in flexibility to adapt to shifting foreign policy priorities implemented through sanctions and export controls.

5. The U.S.-Mexico-Canada Agreement (USMCA) and U.S.-Mexico Bilateral Relations

The U.S.-Mexico-Canada Agreement (USMCA) first went into effect under the Trump Administration on July 1, 2020, replacing the North American Free Trade Agreement (NAFTA). In 2023, the total trade value between the U.S., Mexico, and Canada was over $1.8 trillion. While the USMCA has been a crucial component in the facilitation of trade relations between the North American countries, there remain substantial bipartisan concerns around its full implementation and its extension in 2026. The outcome of the 2024 U.S. election will play a pivotal role in shaping the direction of the USMCA joint review process, with markedly different approaches expected under a Trump or Harris administration.

Scenario Under a Trump Administration:

If Trump wins the presidency, the USMCA joint review process will likely face significant challenges and scrutiny. Although the Trump administration experienced a reportedly positive relationship with former Mexican President López Obrador’s administration, it remains unclear whether this same sentiment will continue with newly elected President Claudia Sheinbaum. Signals of Sheinbaum’s early prioritization of Mexican enterprise, in continuation of Obrador’s Fourth Transformation policies against privileges enjoyed by Mexican elites, may generate tensions with Trump’s strong protectionist stance.

A few areas to watch as the next administration reviews USMCA:

• • Tariffs and Trade Barriers: Trump has stated that he will impose tariffs on Mexican manufactured automotives, potentially exceeding 200%, which could severely impact Mexico’s automotive sector and its broader economic stability. This has created investment uncertainty, as evidenced by industry hesitation to expand manufacturing in Mexico citing potential post-election tariffs. While automakers BYD, Stellantis, and Tesla are each considering expanding manufacturing in Mexico, potential tariffs will play a significant role in their final investment decisions. These potential tariff and trade decisions will greatly impact Sheinbaum’s vision to enhance Mexico’s auto manufacturing sector.
  • Energy Policies: Mexico is the second largest exporter of crude oil to the U.S. Sheinbaum’s proposed limit on Mexican oil production to 1.8 million barrels a day could further strain bilateral relations. This will be significant under a Trump administration given his prioritization of traditional energy sources.
  • USMCA Implementation: Mexico’s ongoing challenges with full implementation of USMCA provisions will become a focal point during the 2026 joint review process under a potential Trump administration. A further complicating factor would be Mexico’s ongoing constitutional reforms that appear to be in conflict with USMCA market access provisions. Trump’s administration is expected to adopt a hardline stance in renegotiation which will likely lead to an adversarial review process.

Scenario Under a Harris Administration:

Although Vice President Harris was one of only ten Senators who voted against USMCA, a Harris administration is expected to be more supportive of USMCA during the joint review process.

A few areas to watch:

• • Environmental Alignment: During Harris’ congratulatory call to Sheinbaum, the two pledged to work together to address the global climate crisis. Both Harris and Sheinbaum prioritize environmental sustainability, which could lead to cooperative initiatives, particularly in renewable energy sectors. Although the proposed limit on crude oil production in Mexico would still pose a challenge for the Harris administration, it is not expected that Harris would respond as drastically as a Trump administration, given her shared commitment with Sheinbaum to diversifying energy sources.
  • Investment Climate: Given the geopolitical dynamics, a Harris administration will seek ways to bolster the North American trade alliance and attractiveness to global business investors. It is expected that the Harris administration will not impose unilateral tariffs which may signal a more stable investment environment in Mexico, particularly for automakers and large manufacturers.
  • Diplomatic Engagement: During the June 2024 call between Harris and Sheinbaum, the two leaders discussed ways to deepen the U.S.-Mexico relationship. It is expected a Harris administration will continue to leverage diplomatic channels both bilaterally and multilaterally to increase trade cooperation and address Mexico’s unfulfilled commitments under the USMCA.

The North American trading relationship is of significant importance and the outcome of the U.S. presidential election will be a defining factor for the 2026 USMCA joint review process. If the USMCA is not extended in 2026, it will trigger an annual review process through 2036 or until a re-extension agreement is reached. This would create significant uncertainty for the economic environment across North America. While it is expected that Trump will take a zero-sum negotiation approach, whereas Harris would take a more diplomatic one. Regardless of the election outcome, it is in the U.S.'s economic interest to directly address Mexico’s ongoing USMCA implementation challenges and set a path forward that bolsters our commitments to our most important trading partners.