In One Sentence

• The latest monthly poll from Open Source shows 44% of registered U.S. voters favor Trump’s economic management abilities while 43% express confidence in Harris’ approach; in terms of popularity, Harris holds a narrow lead, leading 51% to Trump’s 47%.
• In a recent interview, Trump argued that a “10% tariff is not enough,” advocating rather for a “50% tariff” as necessary to incentivize American companies to repatriate manufacturing, and with further intent to impose tariffs on European carmakers like Mercedes-Benz and on Mexican imports as high as “100, 200, or even 2000% tariffs.”
• On the national debt, both Harris and Trump have sidestepped the issue in debates and on the campaign trail, focusing instead on advancing tax cuts and spending programs while opposing cuts to Social Security and Medicare benefits.

Mark the Essentials

• Market speculation on a Trump victory has driven up U.S. bond yields and the dollar, yet mainstream investors remain cautious attributing recent volatility more to strong U.S. economic data than political shifts. On Trump’s “disruptive” tariff plans, ex-Biden administration staffer Peter Harrell has noted that the Trump team plans to counterbalance it with  a “robust deregulatory agenda” paired with an “American energy production agenda” to help lower costs.

• Trump’s tariff proposals have faced criticism from industry stakeholders and economists. Maurice Obstfeld, an ex-IMF chief economist and a senior fellow at the Peterson Institute, described Trump’s sweeping tariffs as a “grenade thrown into the heart of the [multilateral trading] system,” adding that such tactics fragment the global trade landscape for both countries and businesses.
• Trump’s former U.S. Trade Representative Robert Lighthizer defended the tariff strategy, noting that in the late 19th century, the U.S. maintained tariffs over 40% on dutiable goods while achieving trade surpluses and fiscal stability.
• A recent study has revealed that should China reimpose tariffs on U.S. agricultural products as it did in 2018, U.S. soybean exports could drop by 51.8% and corn exports by 84.3%. Meanwhile, on October 15, USTR announced a new initiative allowing stakeholders to request temporary exclusions for certain machinery imports from the Section 301 duties.

Keeping an Eye On…

• “Are we adversaries, or partners? That is the number one question for us,” President Xi Jinping had queried President Joe Biden during his meeting last November at the Filoli Estate in Woodside, California. Returning to the question five months later in his phone conversation with Biden, Xi asserted that the two sides needed to first get the “issue of strategic perception” right, “just like the first button of a shirt that must be put right.” Be it a Harris administration or a second Trump administration, the first button is not likely to be worn as per Xi’s liking. The era of engagement in U.S.-China relations has drawn to a close and strategic competition is the order of the day. The operative question going forward, rather, is whether the two sides are capable of stabilizing ties by placing guardrails on the relationship, even as the negative tendencies in their relationship deepen. Or whether extreme competition will degenerate into outright strategic rivalry with the possibility of the bottom falling out of the relationship entirely. Both a Harris administration and a second Trump administration’s approach towards China is likely to feature many common elements. These include maintaining America’s innovation edge over China; countering China’s trade and industrial policy practices from distorting global markets and harming U.S. competitiveness; promoting U.S. values and counterbalancing Chinese models of government and influence operations; maintaining an intelligence advantage over Beijing; and, foremost, deterring China from the use of military force regionally. The philosophical basis of the common approach towards China derives from the Trump administration’s National Security Strategy of December 2017. Having declared China a “revisionist power” that was engaged in “long term strategic competition” with the United States, the administration worked to redraw the region’s ‘hub-and-spokes’ architecture into a four-cornered network featuring Washington, Tokyo, Canberra and New Delhi as the “principal hubs” to preserve a favorable strategic balance over China. On the geo-economic front, tariffs were imposed on $370 billion worth of Chinese imports and, after declaring that Chinese control of advanced technologies “pose[d] profound challenges to free societies,” the United States’ technology control regime was reimagined via an expansive ICTS (information and communications technology and services) rule that was trained initially on kneecapping the telecoms giant, Huawei. The Biden administration’s three-part approach to ‘invest, align and compete’ against China has been built on this foundation. Its punitive ‘small yard, high fence’ controls—be it with regard to chips, supercomputing or connected vehicles—derive from the ICTS order. Trump’s Section 301 tariffs have not only been retained but also selectively increased, not scaled down. The administration has also expanded domestic productive capacity in key strategic and high value-added manufacturing sectors, by introducing landmark legislation such as the CHIPS and Science Act and the Inflation Reduction Act (IRA) as well as by employing a number of industrial policy authorities, such as the Defense Production Act, Buy American Act and the Bayh-Dole Act. Geopolitically, the Biden administration’s strategy on China has centered on crafting a bespoke “latticework” of trilateral and multilateral coalitions to build “situations of strength” and dictate the terms of effective competition with China. Having assembled these coalitions (i.e., AUKUS, the Quad, the ROK-Japan-U.S. trilateral, the Squad) to shape the strategic environment around China, the administration has, since the November 2022 G20 Summit in Bali, sought to cement a ‘floor’ under its working relations with Beijing. On November 5, the U.S. will elect a new president. Harris and Trump are down-to-the-wire in a bitter and divisive race. On China policy though, the broad brushstrokes of the last two presidencies will persist, regardless of who wins. The U.S. and China are fated to remain locked in an intensely competitive relationship over the next four years. It remains to be seen if the two sides are able, or willing, to embed this competitive dynamic within a steadying strategic framework. Success or failure in this regard will have huge implications for the Indo-Pacific region and the world.

Expanded Reading

• Companies Ready Price Hikes To Offset Trump’s Global Tariff Plans, The Washington Post, October 30, 2024

• Trump’s Foreign Policy Plan: Embrace Unpredictability, Financial Times, October 28, 2024
• Economists Warn Of New Inflation Hazards After Election, The Wall Street Journal, October 28, 2024
• The Problem With The Trump Trade, Financial Times, October 26, 2024
• Kamala Harris And Trade: Better Than The Alternative, But Not Much, The Interpreter, September 30, 2024