Will Trump change the world? Premium

Donald Trump's second term will likely see revived policies, including tariffs, tax cuts, immigration crackdowns, and global disengagement.

U.S. President Donald Trump second term will likely see the domestic and foreign policy priorities enacted in his first term as President revived and sharpened, institutions reformed further in line with his administration’s vision, and Americans’ socio-cultural response to the Trumpian paradigm.

Significant changes are expected in multiple dimensions of the policymaking space. First, on the economy, Mr. Trump has promised to bring back the extensive import tariffs of his first term, particularly those levied on China. India is likely to feature on the broader list of nations impacted by cross-cutting tariffs on critical commodities of global trade, such as steel and aluminium. Mr. Trump is also expected to enact a corporate tax cut or renew the lapsing cuts that his White House had first enacted in 2017. Second, on immigration, during the election campaign of last year, Mr. Trump repeatedly vowed to advocate for a mass deportation of undocumented workers and other categories of migrants, estimated at 11 million at latest count. Third, in terms of foreign policy — and against the backdrop of the first Trump administration’s exit from the Paris climate agreement, the Iran Joint Comprehensive Plan of Action, the Trans-Pacific Partnership, UNESCO, UNHRC, NAFTA, and more — the second term of the erstwhile business tycoon will probably lead to Washington continuing its withdrawal from global, multilateral and regional engagements. There is a distinct possibility that America’s inward retreat from global politics could have a direct impact on the wars in Gaza and Ukraine, broader conflicts in West Asia and the South China Sea, not to mention rocking the boat so far as a range of bilateral and regional arrangements are concerned. Lastly, Mr. Trump will continue to be seen not only as the only viable, charismatic face of the Republican Party, but also the founder and original leader of the MAGA movement, which began in 2016 as a mixed bag dominated by the economic despair of White America but soon transmogrified into the reassertion of unvarnished racism, misogyny and bigotry in American society.

The Trump 1.0 administration kicked off a trade war with China in 2018 when it slapped Beijing with tariff coverage of nearly 15% of all U.S. imports. Given that there were already several tariffs in place prior to 2018 too, this resulted in overlapping tariffs on a wide range of products. For example, a 25% tariff was imposed that year over and above an anti-dumping tariff of approximately 66% that was already in place. Notwithstanding this apparently ad hoc approach to tariff imposition, it was clear that China was the focus of the trade war on the global stage: the 11.1% import coverage by U.S. special tariffs in 2018 on products originating from that country considerably overshadowed the rate for other exporters to the U.S., including India, at 0.2%. Regarding the specific products targeted, the U.S. special tariffs preponderantly were imposed on intermediate goods, and to a considerably lower extent on final products and capital goods. Basic trade economics would suggest that this pattern of taxation would likely impact the final price of finished goods — typically sold to consumers in the U.S.

The impact on U.S. prices is relevant to the second Trump administration — as it will be the true test of whether any policy to hike tariffs has yielded a net benefit to the U.S. middle class — a critical cohort of voters in past elections. During Mr. Trump’s 2024 campaign, he said that he planned to impose an across-the-board tariff of approximately 10-20% on $3 trillion worth of U.S. goods imports and a China-specific extra tariff of 60%. If the new policy continues to target intermediate goods, there would likely be a significant increase from 2018-2020 in terms of the value of goods impacted, possibly to the tune of tens of billions of dollars’ worth on commodities such as steel and aluminium and at least $300 billion worth of Chinese goods. It would be safe to assume that retaliatory tariffs from China, the E.U., India, and other trading partners of the U.S. will follow swiftly.

The second major policy promise that Mr. Trump is likely to deliver on during his second term in office is a corporate tax cut, which could take the form of renewal of the lapsing cuts that he had introduced in 2017, through the Tax Cuts and Jobs Act. The idea of a tax cut is politically powerful, even if, in fact, last time around the Trump-led tax cut policy reduced taxes for most people while disproportionately benefiting the wealthy, according to the non-partisan Center on Budget and Policies Priorities (CBPP). The CBPP report at the time noted that Mr. Trump’s policy would provide households in the top 1% income bracket with an average tax cut of more than $60,000 if the cuts were maintained, a substantive reduction compared to an average tax cut of less than $500 for households in the lowest 60% income bracket. Further, the Trump tax cut “was expensive and eroded the U.S. revenue base… and failed to deliver promised economic benefits,” the CBPP noted.

While absolute clarity on the planned economic agenda of the second Trump term is elusive, additional policy actions — executive or via Congress — that the Trump White House might advocate for include quantitative restrictions on investments into U.S. assets, such as essential medicine production capabilities and infrastructure, by China and a carbon-border adjustment tax.

Mr. Trump’s White House would also likely seek to implement the recommendations of the Department of Government Efficiency — led by his supporters in the private sector, Elon Musk and Vivek Ramaswamy — to cut out wastage and inefficiencies within the machinery of the federal government, specifically by rationalising the actions of civil servants and eliminating unnecessary regulations across sectors. While the “tech bros” team has hinted at possibly discovering $2 trillion in savings via their plan proposal — which includes mass layoffs and closing certain agencies entirely, some have argued that the magnitude of the potential gains that could be made here has been exaggerated.