President-elect Trump has taken an opening shot at rewriting the global economic order with his threats of tariffs against Mexico and Canada, as well as China and other BRICS+ countries. While the announcements have triggered a fierce debate about the pros and cons of tariffs, the incoming president’s willingness to pursue both tariffs and deals creates an opportunity to rewrite international economics to put U.S. and allied national security at the center.
During his first term, President-elect Trump, though often portrayed as a unilateralist, demonstrated a willingness to strike trade deals and work with partners. These included the U.S.-Mexico-Canada (USMCA) trade deal, a digital trade agreement with Japan, and changes to the U.S.-Korea FTA. He built international coalitions to tackle security challenges posed by China, for example, persuading European governments to reduce their use of Chinese-made telecommunications equipment, making them less susceptible to espionage and cyber-attacks from Beijing. His administration also supported programs like the Three Seas Initiative to strengthen economic and security ties in Central and Eastern Europe.
President-elect Trump’s tariff threats give his team the opportunity to sit down at the negotiating table to pursue new types of deals that advance American and allied security interests. But rather than traditional FTAs that focus on opening up markets across all sectors, the incoming team should leverage the threat of tariffs to advance a U.S. economic security agenda that would strengthen supply chains, promote an allied economic block, and ramp up pressure on China.
A deal, for example, could strengthen cooperation in discrete sectors that are important to U.S. economic security. These could include sectors like semiconductors, medicines, critical minerals, and defense manufacturing. Here, the United States and its allies are all ramping up their own investments, but future success will depend on the availability of component parts and materials from other countries. Energy is another important sector where the United States and its allies could work to promote the deployment of future energy technology, like new types of high-tech nuclear reactors and geothermal power, while also guaranteeing each other steady access to hydrocarbon fuels.
Trade deals can also help keep China out. Countries could agree to cooperate on tariffs against Chinese products that are flooding global markets, like cars, by raising higher common tariffs against Beijing. Countries could also agree to reduce reliance on Chinese supply chains. For example, a car assembled in Southeast Asia that uses significant Chinese parts should be tariffed at Chinese rates rather than being given favorable deal treatment. These types of shared measures against China could help U.S. exporters because they will face less Chinese competition in third-country markets.
President-elect Trump has always been more willing than other U.S. leaders to see that national security and economic relations are no longer separate spheres but inextricably linked realms. Deals could increase cooperation on export controls and investment screening to limit the flow of advanced technology to China. Reducing our use of risky Chinese hardware and software is another area of cooperation. Beyond Chinese telecommunications gear, the Biden administration recently took steps to restrict the sale of Chinese cars in the United States, citing the risk that China could use internet-connected cars to engage in espionage. The European Union, meanwhile, is discussing a “trusted vendor” program that would address cybersecurity risks posed by non-European tech companies. This provides an opportunity to develop a trans-Atlantic trusted technology ecosystem that is open to U.S., European, and other allied tech companies while restricting risky Chinese products.
For deal-making to work, America’s allies need to understand that they cannot just wish away tariffs and tough negotiations. President-elect Trump and his advisors want a global trading order that is less focused on low-cost production and more focused on economic security, trade balance, and increased domestic manufacturing. They are not going to ignore trade imbalances by allies, including in Europe and Asia, and tariffs will be used to help U.S. producers of at least some key products. Allies shouldn’t derail cooperation on the broader set of economic security measures simply out of pique over the inevitable U.S. tariff increases.
Conversely, Trump officials should see tariffs as a scalpel. Targeted tariffs are an essential part of the economic statecraft toolkit. Broad, indiscriminate tariffs against allies would weaken the American Team against the Chinese while raising consumer prices. American national security imperatives call for economic statecraft to grow and strengthen the American Team while minimizing any infighting.
Allied economic engagement also has the potential to strengthen the West’s position in emerging markets like India, Indonesia, and Brazil. China has made inroads with many of these countries through its Belt and Road investment initiative, channeling hundreds of billions of dollars into infrastructure investment. While much of this investment comes with onerous financial terms and geopolitical conditions—so-called “debt trap diplomacy”—if the West does not provide alternatives, countries will take China’s offer.
During his first term, President-elect Trump worked to address this disparity by creating the U.S. Development Finance Corporation (DFC), which finances development projects in dozens of developing countries, and reauthorizing the Export-Import Bank (ExIm), which finances U.S. exports and can offer terms to help U.S. exporters match offers made by Chinese competitors. Both the DFC and ExIm, however, are set to expire next year. President-elect Trump and the Republican Congress have an opportunity to use the renewal process to push through needed reforms, like expanding work in middle-income countries and allowing better co-investments and co-financing activities with allied-nation counterparts, and prod DFC and ExIm to be better integrated into overall U.S. economic statecraft and national security measures.
As the world moves towards a much more divided global economy, with a U.S.-led bloc and a Chinese-led bloc, the United States and our allies need to ensure that our bloc is bigger and stronger and limit the spillover of technology, expertise, and capital to Beijing’s. President-elect Trump and his team have a generational opportunity to use deal-making, including targeted tariffs, to write the rules for a new geo-economic order.
Kaush Arha is a nonresident senior fellow at the Atlantic Council and previously served as the senior advisor for global strategic engagement at USAID and the G7 Sherpa for the Blue Dot Network during the Trump administration.
Peter Harrell is a nonresident senior fellow at the Carnegie Endowment for International Peace and previously served as senior director for international economics with a joint appointment to the National Security Council and National Economic Council during the Biden administration.
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