President Donald Trump’s inauguration speech left no one in any doubt that his administration will pursue trade protectionism aggressively. He argued for putting “America first” and that “protection will lead to prosperity”. The former echoes back to isolationism in the early 1940s while the latter is a remarkable break from the norms of the past thirty years, when globalisation and free trade were promoted as the best way of boosting prosperity for all. The incoming Trump administration will focus efforts on Mexico and China, not least because those two countries account for more than half of America’s trade deficit. It is possible that those two countries will offer concessions, not unlike Japan’s pragmatic response to the US protectionist push in the 1980s. But if not, protectionism could trigger a stronger dollar, retaliation from other countries and higher domestic inflation.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services