18 Jan 2017

What Trump could mean for US foreign policy

How will President Trump shape United States foreign policy, in particular in regard to trade, finance and development aid? Just days before the 45th US president is sworn in, the World Trade Institute (WTI) of the University of Bern hosted a roundtable discussion to consider these questions.

The event on 11 January in the university’s ‘Kuppelraum’ brought together five leading US political economists and foreign aid experts and was moderated by Manfred Elsig, Professor of International Relations at the University of Bern and Deputy Managing Director of the WTI.

If there is one word that describes the current mood among US analysts it is ‘uncertainty’, as Professor Elsig pointed out in his opening comments. As the roundtable preceded the annual conference on the Political Economy of International Organizations (PEIO), hosted by the university from 12 to 14 January, Professor Elsig invited the experts to also reflect on how the work of international organisations may be impacted by the new Trump administration.

America First?

Helen Milner of Princeton University said Donald Trump had been “very unspecific and contradictory about what he was going to do – especially regarding trade”. The professor of politics and international affairs believes Trump’s catchy ‘America First’ slogan doesn’t signal a return to the course of isolationism the US followed in the 1930s, but could herald a move away from multilateral and mega-regional trade agreements.

Trump has said he will abandon the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) and has made noises about leaving or renegotiating the North American Free Trade Agreement (NAFTA). Instead, a Trump administration might raise tariffs against certain countries, notably China and Mexico, and negotiate bilateral agreements with others.

“There is a sense of general protectionism in store,” Milner said, pointing out that Trump would face major obstacles if he were to push ahead with a policy of protecting the US economy from foreign competition. Internationally there would be the threat of retaliation from China and Mexico. But the biggest obstacles would be domestic, in the form of opposition from business-minded Republicans in the US Congress and the 100 top firms with global interests.

Opposition to IMF

Randall Stone Director of the Skalny Centre for Polish and Central European Studies at Rochester University said that in terms of macroeconomic policy, Trump’s initiatives include a massive tax cut as a boost to the economy. Associated rising interest rates could lead to a strong dollar. At the same time, recession in Europe and the slowdown in China could lead to increasing demand for credit from the International Monetary Fund (IMF).

While a Trump presidency does not pose a big threat to the financial lending body presided over by a European, Trump with his anti-trade agenda may seek to undermine the IMF, the financial expert said.

“If Trump follows through on his ‘America First’ programme, he may find a pliant right-leaning Congress ready and willing to cut US support for the IMF,” echoed Lawrence Broz of the University of California, San Diego.  

“An anti-IMF Congress conjoined with an anti-IMF president could be a fatal combination for the IMF,” according to the professor of political science.

Foreign aid

When it comes to foreign aid the Trump Administration has said very little about specific policies but has made many general negative comments, commented Christopher Kilby, professor of economics at Villanova University. He recalled a statement from June 2015 when Trump said the US should "stop sending foreign aid to countries that hate us and use that money to rebuild our tunnels, roads, bridges and schools".

But the economics professor said there had been other statements from Trump that it would be unwise to cut off foreign aid funding. The World Bank is the agenda-setter on development aid, Kilby said, adding that the first test of the new president’s policy towards that body will come in April when the Board of Governors is expected to discuss the replenishment of International Development Association (IDA) funds that include a substantial contribution for climate change-related issues.

Michael Tierney, professor of government and international relations at the College of William and Mary said he was puzzled that Trump’s electoral campaign had not focused on development aid, as this would have been an obvious strand of his ‘America First’ policy. Presidents often come to power and talk about reorganising or rationalising foreign aid, but this has not happened.

No one from the transition team had been named to liaise with the US Agency for International Development, Tierney said. “The Trump team does not seem to know or care much about foreign aid policy,” concluded the international relations expert.

The roundtable discussion was part of the Global Series on Trade Regulation, which is organised by the WTI’s NCCR-Trade Regulation research project.