This chapter is part of a report written in collaboration between the Center for American Progress and the Foundation for European Progressive Studies (FEPS).
The author, Elizabeth Baltzan, was counselor for trade and investment to Ambassador Katherine Tai, the United States trade representative during the Biden administration.
The second Trump administration is moving fast and breaking things, including on its foreign and economic policy. Tariff chaos is crashing markets and destabilizing the global economy. Threatening to withdraw the security guarantee that the United States has provided Europe and its NATO allies since the end of World War II is leaving erstwhile partners scrambling to figure out how to fend for themselves going forward. This chapter considers opportunities for progressives within this context.
Strategic context
The first Trump administration, despite periodically grumbling about allies, was fixated on the geoeconomic threat posed by the People’s Republic of China (PRC). The PRC’s strategy of using aggressive state intervention to achieve dominance in key manufacturing sectors has undermined the economies of market-oriented democracies, including those in the EU. Concern about these actions provides common ground for both sides of the Atlantic.
The Biden administration hoped to work with the EU, as two democracies, to address this challenge while also promoting good-paying jobs and cleaner manufacturing. It sought to negotiate a Global Arrangement on Sustainable Steel and Aluminum, which would have allowed the United States and the EU to create a common tariff wall to address the price effects of excess and polluting PRC production. However, the two sides were unable to finish that deal before the end of President Biden’s term in office.
Policy continuity and change
Rather than continuing his first administration’s focus on the PRC, President Trump appears to be going after all trading partners, whether friend or foe. Yet as with any administration, internal conflicts exist within the current Trump administration. It is important for progressives, even in a time of turmoil, to bring objectivity to policy analysis in order to maximize the opportunity to advance common goals.
The playbook for the Trump administration’s approach to policy seems to be the far-right playbook Project 2025. The trade section of the playbook, unlike most of its other sections, has not one but two chapters: one on fair trade, and one on free trade. The fair trade chapter is consistent with the Trump administration’s first term: a focus on the PRC. By contrast, the free trade chapter is consistent with libertarian, trickle-down free trade. Its goal is to use trade not to build a more equitable global economy, but to tear down the barriers to maximizing corporate power. The chapter even repeats the trope that labor is not a trade issue. Progressives—and economists more generally—cannot take seriously any discussion of trade that does not recognize labor—like capital—as a factor of production.
The tension between the fair trade and free trade factions in Project 2025 makes it difficult to assess where U.S. policy is headed in the long term. However, the administration’s moves so far may suggest certain conclusions.
First, the Trump administration’s broadside against other democracies, including the European Union and Canada, undermines the ability of the United States to address the genuine challenges posed by the PRC’s nonmarket policies and practices. Rather than cooperating with other democracies, the administration is alienating them—incentivizing them to join forces not with the United States, but with each other. President Trump seems to have realized as much and has threatened Canada and the EU if they cooperate. But the one-two punch of this shift in security and trade policy has fundamentally changed the calculus for these democracies. They now feel that they must address not only a disruptive trade policy, but also the existential threat that comes with the withdrawal of the American security guarantee.
Second, it is possible that the tariffs will be used to pay for tax cuts for the rich as part of an overall return to the pro-corporate excesses of the Gilded Age. On the other hand, they might be leverage in pursuit of free trade deals. In other words, the fair trade chapter of Project 2025 may be the means to an end—the end being an even more extreme libertarian approach to trickle-down trade.
Diverging interests and approaches between the United States and the European Union
The Trump administration seems to believe that tariffs will trigger a manufacturing boom and ultimately lead to an increase in American exports. However, there are two reasons to be cautious about assuming that demand will translate into an export boom for American-made goods.
First, the United States is a consuming economy, not an exporting economy. It exports only between 10 percent and 13 percent of its gross domestic product annually. American trade deals of the 1990s and 2000s were premised on the idea that the United States would pry open foreign markets and ramp up exports. That simply has not happened.
Second, the economies with the very markets American exporters would want to reach—such as the European Union, with 450 million people and significant purchasing power—no longer consider the United States a reliable partner. It is possible for the United States to bully other countries into signing trade deals, but if consumers abroad are not interested in buying American products, then these lucrative export markets are illusory.
American and European progressives recognize that trickle-down economics—whether at home or as part of the global economic system—drives wealth upward, leaves ordinary citizens behind, and incentivizes environmental degradation. The internationalization of Reaganomics through trade agreements in the 1990s created economic choke points that leave people and communities particularly vulnerable to supply chain disruptions, whether shortages exposed by the COVID-19 pandemic or energy shocks caused by the Russian invasion of Ukraine. Policymakers must devise a trade policy that corrects for these problems, not revert to the policy that fostered them in the first place.
Industrial strategy will be part of any solution to deindustrialization driven by anticompetitive practices. The Biden administration pursued such a correction; the EU and its member states are, in the wake of the Trump administration’s policy toward Europe, now also looking to industrial policy as a tool. Ideally, economies would be able to coordinate their policies to maximize their chances of effectively diversifying supply chains and reducing unhealthy dependencies. Those industrial strategies—if they respect labor rights, promote a cleaner economy, and reduce choke points—can foster a more resilient and equitable economy within and across borders.
Advancing shared agendas
At the end of the Biden administration, the United States trade representative (USTR) synthesized lessons learned from supply chain shocks and issued a paper on supply chain resilience. Trading partners may find this work useful as they rethink their approaches to trade policy. Instead of promoting old-style comprehensive free trade agreements, which contributed to the supply chain concentration economies are now seeking to diversify away from, the paper recommends focusing on building blocks for more resilient trade, including using sectoral agreements as incubators for new approaches to move toward a version of globalization that promotes resilience, not fragility.
The Biden administration’s USTR also issued a series of model texts that recognize the core challenge in trickle-down economics: a high tolerance for unfair competition that leaves working people behind both at home and abroad. Thus, the model texts cover competition, economic inclusion, nonmarket policies and practices, public enterprises, and standards. Of particular interest for progressives is the economic inclusion text, which offers a pathway for trading partners to work together to unlock the economic potential of those workers too often left behind.
The Biden administration’s trade representative’s work offers trading partners a blueprint for working toward new trade and economic approaches that can contribute to improved economic and, ultimately, national security. If the current administration is moving fast and breaking things, then progressives must move purposefully to fix things. As other democracies work together to build their own security and diversify away from the United States, progressives on both sides of the Atlantic can work together to shape a new version of globalization that is more resilient and more equitable.