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Donald Trump said repeatedly during his presidential campaign that tariff “is the most beautiful word in the dictionary”. Now he has won a landslide mandate to stamp it across US trade policy.  

Trump’s massive gains in the popular vote and electoral college defied polling predictions of a dead heat in the presidential ballot. The Republican party also won control of the Senate, while the race for the House of Representatives remains too close to call as of press time.  

Trump’s position on trade, along with immigration, was one of the most consistent messages in his pitch to voters. If he follows through on his promises, his next term may unleash the biggest shake-up to global trade in decades. 

The businessman-turned-politician said he will enact blanket tariffs of between 10% and 20% on all imports to the US, and 60% on imports from China. He views any bilateral trade relationship in which the US imports more than it exports as a bad deal.  

Trump’s win “presents a consolidation, or confirmation, that we are in a new trade era,” says Josh Teitelbaum, a former Obama administration trade official. “The era of a consensus in United States politics in support of the free movement of goods, people and capital is significantly eroded today.” 

“Any sense that the first Trump term was some sort of aberration or outlier has been put to bed,” says Teitelbaum, now a senior counsel with Akin Gump law firm. “This will represent a continuation of the building of a new trade policy regime, creating more friction for market access into the US.” 

“I think we are now returning to a much more politically supported form of ‘America first’ protectionism.” 

European Central Bank vice-president Luis de Guindos warned of major impacts from Trump’s tariffs, according to Blooomberg.   

“If a jurisdiction as important as the US imposes tariffs of 60% to any other important jurisdictions… I can assure you that the direct effects and the indirect effects and the deviations of commerce will be huge,” he said.  

 

Trump takes aim at EU, automakers 

In an expansive appearance at the Chicago Board of Trade in September, Trump indicated that even tariffs of 10% would be too low to achieve his aim of forcing companies that want to sell goods in the US to build factories there. 

“You make the tariff so terrible, so high, so obnoxious, that they’ll come right away… if you want the companies to come in, the tariff has to be a lot higher than 10%, they’re not going to come in for 10%,” he said.  

“We’re going to have thousands of companies coming into this country… and we’re going to protect them when they come in, because we’re not going to have someone undercut them.” 

One of Trump’s biggest targets is Europe’s car industry, especially German heavyweights such as BMW, Mercedes-Benz and Volkswagen. 

Trump recalled complaining to former German head of state Angela Merkel about the lack of US-made cars in Berlin and Frankfurt. 

Stocks in BMW, Mercedes-Benz, Porsche and Volkswagen, already facing weakening sales and competition from China, suffered falls of between 4-7% after the German bourse opened to news of Trump’s victory.  

But BMW chief executive Oliver Zipse said his company may be able to take advantage of the tariffs due to its already large production footprint in the US. “In this respect, we shouldn’t be too nervous about what might happen,” Reuters quoted him as saying.  

In the Chicago appearance Trump argued that European countries “treat us so badly” because of the US’s giant trade deficit with the EU.  

EU countries exported €503.7bn-worth of goods to the US in 2023, according to official data, making the country the EU’s biggest single export market. Imports were much lower, with EU member states buying €347bn-worth of US goods.  

“Transatlantic relations are facing an epochal change,” says Siegfried Russwurm, president of the BDI, Germany’s apex industry group. “It is feared that the tone will become harsher and a protectionist course will be consistently pursued.” 

“Trump’s plans for numerous new tariffs announced during the election campaign are worrying German industry,” he says in a statement, adding that the mooted trade restrictions “would not only cause massive damage to Germany and the EU, but also to the US economy”. 

European companies also need to worry about the much steeper tariffs Trump has vowed to slap on imports from China, according to Melanie Vogelbach, head of international economic policy at the German Chamber of Commerce and Industry. 

“It could put more pressure on the European market if more Chinese goods would flow into the EU instead of the US,” she tells GTR. Brussels and Beijing are already at loggerheads over cheap imports of renewable energy technology, electric vehicles and steel.  

 

New era for global trade 

Global trade movements have picked up over the course of 2024 after contracting the previous year, according to the World Trade Organisation. The relatively sluggish picture has weighed on banks’ revenue from trade finance, particularly in Asia.  

In the aftermath of Trump’s victory, investors appeared to see trouble ahead for global goods trade, sending shares in shipping company Hapag-Lloyd’s down 8% as of press time. Competitor AP Moeller – Maersk was 6.24% down, and shares in Zim dropped 1.36%.  

Teitelbaum says that after being sworn in, Trump could move quickly to impose universal import tariffs, likely through the International Emergency Economic Powers Act. He adds that court challenges from importers would almost certainly follow.  

If the Republicans control both houses of the US Congress, Trump is likely to face few roadblocks from Democrats, who in any case retained many of the tariffs imposed during Trump’s first term after Joe Biden became President.  

Commentators have questioned whether the threat of tariffs is a negotiating ploy to get the likes of China and the EU to afford US exporters tariff-free access to their markets. Trump negotiated several exclusions for some countries during his first four years in power.  

Howard Lutnick, chief executive of financial services firm Cantor Fitzgerald and co-head of Trump’s transition team, has previously suggested the chief benefit of tariffs will be forcing other countries into talks.  

“When you’re running for office, you make broad statements so people understand you. Tariffs are an amazing tool by the president to use… but he understands ‘don’t tariff stuff we don’t make’,” Lutnick told CNBC in September.  

Washington may “make a bunch of money on the tariffs”, Lutnick said, “but mostly everybody else is going to negotiate with us”.  

ING’s chief China economist, Lynn Song, wrote on Wednesday that “the 60% tariff call may be a starting point for negotiations rather than a set-in-stone number”.  

During Trump’s first term, the EU hit the US with retaliatory tariffs on goods such as whisky and Levi’s jeans in response to Washington’s restrictions on steel, aluminium and other goods.  

The two sides hammered out a compromise under the Biden administration, but the truce expires in March 2025, representing a potential opportunity for negotiations.  

Vogelbach, of the German Chamber of Commerce and Industry, says that there appears to be little appetite in the US for a comprehensive free trade pact with the EU.  

But she adds “there are several issues where the EU and the US could come to agreement to reduce trade barriers”, including through the joint trade and technology council.