The US Mid-term Elections: an International Business Perspective

The US is halfway through Donald Trump’s term in office. For the last two years, every international business will have been keeping a close and watchful eye on the international trade policies of this unpredictable administration, to remain aware of the many significant shifts in policy, news and actions undertaken by the president so far.

According to Trump, the US has a trade problem, and has been trading in a deficit, buying more goods than it sells abroad, and being treated ‘unfairly’ by trading countries – with a particular focus on China. The president has long held this view, including for many years before he came into office – so when the White House made it a top priority to restrict imports, few were shocked. The President stated that restricting imports was necessary to boost domestic production and bring operations at US. steel mills up to 80% of their capacity.

During 2017, Trump pulled the US from the Trans-Pacific Partnership (TPP). He also then threatened to pull the country from the North American Free Trade Agreement (NAFTA).Trump has since made no secret of his plans to revise NAFTA in favour of the domestic automotive sector. And before the new Congress is sworn in in January, lawmakers will likely be asked to ratify the US-Mexico-Canada Agreement, the trade deal negotiated by the Trump administration to replace NAFTA.

However, the US’s situation has been further complicated by the introduction of steel and aluminium tariffs. When granting countries exemptions from the tariffs, the White House only engaged with countries that agreed to cap their exports to the US. South Korea, for example, had to agree to restrictive quotas that affected its steel imports, while the US got into a series of escalating retributory measures with China over the measures. This trade war has escalated for months, with experts now warning that it threatens to spill over into the broader relationship between the US and China, and could even have a negative impact on cooperation on sensitive issues including Iran and North Korea.

Without the US as its champion, the global trade agenda risks faltering. But the midterm elections earlier this week have given some businesses hope, following a victory for the Democrats, who are poised to create significant changes for how Trump can approach domestic policies. While Democrats reclaimed the majority in the House of Representatives, Republicans expanded their majority in the Senate.

However, experts warn that this rebalancing of the legislature may not result in much meaningful change for trade policies. Both the Democrats and Republicans are said to be in favour of having a tougher stance on Chinese trade, and some experts predict that Trump will get more aggressive with his stance toward China.

Only in the case of the US economy showing signs of suffering would Congress intervene. But if Trump attempted to re-introduce tariffs on the European Union, for example, or withdrew the US from the World Trade Organization, there’s no doubt Democrats would then intervene – a move that would be well received by the global business community. For now, businesses are advised to remain observant of the situation, and ensure that they are capable of adapting swiftly to unforeseen developments.

If you’re looking at expanding your business overseas, and are concerned about how US policies might affect you, speak to Galvin International for advice and guidance.