- Macro Strategist
United States, Intermediary
Change
The views expressed are those of the author at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only.
With divided government in the US sure to limit the prospects for new legislation, trade policy is likely to be a key area of focus for the Biden administration over the next two years. At the annual meeting of the National Association for Business Economics in October, I had the opportunity to speak with US Trade Representative Katherine Tai and I came away with five conclusions that encapsulate shifting US trade priorities and could have important economic implications.
1. Free-trade agreements concerned solely with liberalization and tariff elimination are history. Instead, the pillars of the Indo-Pacific Economic Framework, launched in 2022, would seem to be a better indication of the new direction of US trade policy: Along with the traditional trade pillar (in this case, focused on the digital economy), the stated priorities include supply chains, infrastructure, decarbonization, and governance. The last includes effective tax and anticorruption policies as its goals. This innovative framework brings together 14 nations, representing 40% of global GDP and 60% of the world population. I will be keeping an eye on how this evolves in 2023, especially as the US tries to reposition its trade footprint in Asia away from China.
2. The decoupling of the US and China will remain top of mind. Acknowledging that the two countries are in competition with each other, Ambassador Tai explained the use of Section 301 tariffs as a tool for level-setting the policy field. This tool would serve to facilitate the strategic realignment of priorities given the buildup of issues around intellectual property, innovation, and technology transfers with China over time, suggesting less room to maneuver in bringing these tariffs meaningfully lower. The review of these tariffs is ongoing, and the public has been given the chance to weigh in. I would expect to hear a lot more on this issue, perhaps early in 2023 now that the mid-term elections are behind us.
3. Trade policy is now more focused on standards and not strictly on market access. The Biden trade agenda includes goals related to sustainability, inclusion, and resiliency. This administration has found allies in Europe for sustainability and inclusion goals and in emerging markets for goals related to inclusion, as well as investments required for the rerouting of supply chains and the buildout of infrastructure. The US/EU Trade and Technology Council, launched in 2021 to enhance competitiveness, fosters collaboration with allies on issues like labor and the environment, which are critical to sustainable trade policy.
4. US trade policy could now serve as a complement to US industrial policy. This means the costs of past trade liberalization efforts, such as fragile supply chains, de-industrialization, offshoring, and the decimation of manufacturing communities, would be considered as a counterbalance to market access. As industrial policy rebalances, trade policy, which sits at the nexus of domestic and foreign policy, also adapts. Note how the pillars of the Indo-Pacific Economic Framework encompass the goals of sustainability, inclusion, and resiliency, which also drove the passage of the CHIPS Act, the Infrastructure bill, and the Inflation Reduction Act (US industrial policy).
5. Enforcing trade rules is an area of focus for the administration. Since the passage of the US/Mexico/Canada Agreement (USMCA), more legal cases have been brought up to ensure that the letter of the law is followed in practice. Recall that the USMCA includes both labor and environmental protection clauses. We’re likely to see similar scrutiny around deals with the rest of the world.
Expert
Related insights
Showing
of
Insights Posts
URL References
Related Insights
Stay up to date with the latest market insights and our point of view.
Read next
Showing
of
Insights Posts
Iran/Israel conflict: What can we expect?
Our expert examines recent attack, the threat of escalation in the region, and what it means for investors.
3
min
Article
2024-10-31
Biden 2.0: National security and investment themes
The geopolitical and investment implications of a potential second Biden term.
5
min
Article
2025-04-30
Weekly Market Update
What do you need to know about the markets this week? Tune in to Paul Skinner's weekly market update for the lowdown on where the markets are and what investors should keep their eye on this week.
4
min
Video
2025-12-31
A turning point for US small caps
Myth busting US small caps: why now could be a compelling entry point for the asset class.
18
min
Article
2025-04-30
Risky business: Is now the time for surplus action?
Tim Antonelli, Head of Multi-Asset Strategy – Insurance and Portfolio Manager, considers insurers' renewed interest in risk assets and offers his views on areas that may be worth a closer look.
17
min
Article
2025-04-30
The immigration surge: Political challenge, economic blessing?
Macro Strategist Juhi Dhawan considers the impact of rising immigration, a top issue in this year's US elections, on growth, interest rates, and the labor market.
4
min
Article
2025-04-30
Trump 2.0: National security and investment themes
Our expert examines the geopolitical and investment implications of a potential second Trump presidency.
14
min
Article
2025-04-30
Battle for the supply side of the economy: US election implications
Starkly different policy agendas from Biden and Trump are examined in terms of how they may affect the supply side of the US economy.
5
min
Article
2025-04-30
Four questions for investors after Japan’s historic hike
With the Bank of Japan having finally moved out of negative rates, Macro Strategist John Butler identifies the four key questions he believes investors should focus on.
5
min
Article
2025-04-30
Do fundamentals support a risk-on tilt?
Surprisingly strong economic growth, declining inflation, easy financial conditions — can it get any better for markets? Members of our Investment Strategy & Solutions Group offer their outlook, including their latest views on equities, bonds, and commodities.
Article
2025-03-31
FOMC: Stable policy amid market volatility
The Fed is holding steady amid market turmoil. See our quick notes on the FOMC's March policy statement, forecasts, and the Fed chair's press conference.
Quick Take
2025-03-31
URL References
Related Insights