President Trump signs the US-Mexico-Canada accord in the White House in January

The US election results shed light on trade policy

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Hello from Washington DC, where we saw another tumultuous, tight, and generally anti-polling presidential election. The final results are not yet in some swing states, but it looks like Joe Biden is headed for a close win over Donald Trump.

Following the president’s promise to challenge the outcome if it suggests defeat, there is uncertainty about legal challenges to the outcomes, which could create tension and uncertainty in the coming weeks. So we all buckle up in DC for a very difficult and troubled time.

It is clear that Mr Biden did not achieve the victory he had hoped for, as Congress is likely to remain split between Democratic control of the House and Republican control of the Senate. But if he wins the White House, that will be the big prize, and Mr Trump will no longer hold power, including in trade.

In our Main pieceWe take a look at what the results so far say about US trade policy. Great stories of the tradeis considering an upcoming deadline for US trade policy while ours Chart of the daylooks at the EU’s path to recovery from the economic impact of Covid-19.

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Joe Biden would make US trade policy more stable

Robert Lighthizer, the US chief commercial officer who has led Donald Trump’s collective bargaining battles for the past four years, is likely to take some comfort from the election results in his hometown. Mr. Trump won Ashtabula County in northeast Ohio in the heart of the rust belt with more than 60 percent of the vote against Joe Biden, improving his 2016 performance against Hillary Clinton.

But is that enough to demand eligibility for the president’s hardened trade policy? Probably not. In 2016, Mr Trump won the White House by running extremely tight margins in Pennsylvania, Michigan, and Wisconsin to rebalance trade relations with the rest of the world, so the fate of non-college-educated, blue- Collar workers displaced by globalization would be revived.

Election results show that many of these voters, as in Ashtabula, held on to the president and these states came much closer than pollers expected for an incumbent in a pandemic and recession-ravaged economy.

But Mr Trump’s political goal was certainly far more ambitious: he would have liked to have built on his 2016 victories thanks to his trade balance, which included the Nafta renegotiation and confrontation with China.

In that regard, Mr Trump may have come up short as Wisconsin and Michigan turned to Mr Biden and a close race in Pennsylvania – what the presidency could cost Mr Trump if the results are not successfully challenged. While the president generally did well in the more economically dynamic and diverse sun belt, his relative weakness in the rust belt signals that protectionist policies have not been a political panacea for him. Indeed, some voters may have judged that they failed to live up to their hopes.

However, if you look at the results differently, it is clear that Mr Trump did not pay a high price for the trade wars either. His support in the farm states remained high – he prevailed again in Iowa, consolidating his profits in many rural counties across America that had suffered when his tariffs sparked retaliation that shut down agricultural markets and caused great disruption. Mr Trump tried to compensate for this by saving many farms with federal dollars, which may be just enough to keep them on his side.

It’s also worth noting that the bulk of Mr Trump’s trade battles took place in 2018 and 2019 before the pandemic hit – and he eased tensions noticeably that year – which may also have helped him domestically reduce.

That brings us to what could happen in 2021. If Mr Trump scores a surprise victory, it is unlikely that he will change his approach to trading significantly based on these results. Indeed, in a second term he might feel encouraged to restart some of the unfinished trade disputes he sparked during the first.

Mr Biden, on the other hand, will add stability and less erratic leadership to US trade policy. However, it is also unlikely to deviate from the course it set during the campaign. The aim is to prioritize domestic investment over trade liberalization and tighten “Buy America” rules that force the federal government to buy from US suppliers at the expense of foreign competitors.

And if he wins thanks to a thin edge in the rust belt, Mr. Biden cannot afford to deviate from these maxims.

Great stories of the trade

President Trump signs the US-Mexico-Canada accord in the White House in January. © Bloomberg

The most notable trade policy deadline faced by both a potential Biden administration and a second Trump administration is in the middle of next year, when a law called the Trade Promotion Authority expires in Congress.

This legislation enables executive-negotiated trade agreements to be examined quickly and without changes on Capitol Hill, which strengthens the hand of American negotiators as it gives U.S. trading partners more security for a successful conclusion.

However, TPA is not a substitute for broad political consensus. The renegotiation of NAFTA as the USMCA – the trade pact between the United States, Mexico, and Canada – was passed in Congress without adhering to the TPA rules, as there was widespread support from both parties. Even if the law is respected, trade agreements can be amended and renegotiated if they do not lack enough votes to approve. The UK’s goal is to finalize and wipe out its trade deal with the US before the TPA deadline next summer.

Mapped waters

The EU’s path to recovery from the economic effects of Covid-19 has been pushed back by the second wave of the pandemic and it will take at least two years for the bloc’s economy to return to pre-pandemic levels, Brussels warned. The European Commission forecast Thursday the EU’s deepest downturn in history will recover more slowly than previously expected, as the recurrence of the virus has forced most member states to impose new activity restrictions in recent weeks.

Bar chart of forecast change in GDP (%) shows that the economic blow of the pandemic will be unevenly distributed across Europe

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