Election could impact imports/exports for Northeast Wisconsin’s manufacturers
When it comes to international trade policy in 2025, “uncertainty” is the word — at least until after the Nov. 5 U.S. presidential election. Former Insight associate editor Nikki Kallio separately interviewed Ngosong Fonkem, a trade compliance lawyer with Amundsen Davis, and Marc von der Ruhr, professor of economics with St. Norbert College, about what international trade policies might look like under either a Harris administration or a Trump administration, and the potential impacts to Northeast Wisconsin manufacturers and the economy as a whole. Here’s what they had to say.
Q: What are you hearing about various proposed international trade policies of each administration?
Fonkem: No one really knows what’s going to happen, obviously. But one thing we know for sure is that during Trump’s time in office, he implemented a very aggressive trade policy. But now it’s become the norm, in terms of using import tariffs and export control laws as a tool to protect American manufacturers from Chinese and other global competitors, with the goal of forcing U.S. companies to move back home domestically.
When the Biden administration came into office, there was a belief that they would ease up on some of Trump’s tariffs. But four years later, a lot of those tariffs are still in place. In fact, the Biden Administration has added more — except that they’re not being done by tweet anymore. They’re a lot softer now in terms of their presentation. As to what we can expect on the campaign trail, Trump has floated the idea that if he were to be re-elected again, he would impose an additional 10% tariff on all imports, and up tariffs on China by an additional 60%.
Now, the Harris administration has spoken more in generalities as it relates to trade policy. Most experts think that trade policy under her administration will likely be similar to U.S. trade policy under the Biden administration. One thing we all know for sure is that regardless of who comes into office, the tariffs are not going away anytime soon. It’s just going to depend on how aggressive they will be and their presentation.
von der Ruhr: Advice has been given to the Harris administration to reverse the policies of the Trump administration, but I found nothing concrete of what that administration would plan to do on international trade policy. I’m not sure if the Harris administration would prioritize other domestic issues first and revisit these down the road. That’s mere speculation on my part, but I think there would be some voices in her ear saying, “We should be rethinking this in light of the data that we have.”
If you go back to Trump’s first administration, he withdrew the United States from the Trans-Pacific agreement, and he characterized NAFTA as something similar to one of the worst business deals ever. The data does not support that kind of a conclusion. Some years ago, the U.S. International Trade Commission did a simulation that showed withdrawing or not entering NAFTA would’ve had a significant negative effect on the U.S. economy. These trade agreements are technically viewed as actually very good things, because they reduce the cost of getting inputs.
What is not clear is if Trump’s 10% blanket tariff proposal is purely 10%, or 10% on top of whatever else is already out there. That would have a pretty negative effect on our economy, because essentially those are costs that are pushed forward to the consumer. I found one estimate that supply-side shock would introduce more than 4% inflation.
An outcome of that, then, is that the Federal Reserve — which doesn’t want to see that kind of inflation — would probably raise interest rates, which would have a negative effect on U.S. consumption and economic investment expenditures. Furthermore, that kind of negative impact on the international community could very well trigger a tariff war across other nations imposing tariffs on our exports, thereby reducing our exports.
Q: What do you think Northeast Wisconsin manufacturing companies can expect and what strategies can they implement, given the uncertainty about what’s ahead?
Fonkem: Well, they can expect the tariffs to be in place, to stay in place. Since global supply chains are essentially cleaving into two with a U.S.-led supply chain on the one side and a Chinese-led supply chain on the other, as a Northeast Wisconsin company operating in this environment, they basically need to do what they have to do to survive. They have to adapt to survive and thrive.
What they need to do is start implementing certain duty mitigation strategies, which a number of companies are already doing, whether that’s setting up their operations within foreign trade zones, which basically allows them to defer paying custom duties at the time of import.
There are other strategies such as duty drawbacks, or filing of exclusion requests if applicable, which would allow them to ask the government for refunds for the duties that they paid for those products they brought into the U.S. There’s also what they call the first sale doctrine, which is a duty mitigation strategy that allows the importer to base the duties they pay to customs based on the price that the middleman paid to the original manufacturer prior to the products being imported into the United States.
von der Ruhr: Evaluate what options you have under the different scenarios, and think about what would be most advantageous for your firm.
It seems that generally speaking, lower tariffs are better for us, both for consumers and our firms. If they’re pushed forward on intermediate products, our firms are going to have to pay a higher price, so their cost of producing goods is rising, and then they’re going to push that forward to the consumer. That’s how these tariffs generally go. They get split up. Sometimes they get pushed back on the producer, but generally they’re pushed forward on the consumer.
Understanding that, economists consider comparative advantage-based trade to be a mutually beneficial thing to engage in for both us and our trading partners. Maybe there’s just the momentum behind the past policies and the world stays the same. Again, what a candidate proposes on the election trail may not be what happens when that candidate is elected. It seems pretty universally understood by economists that it’s not a good idea to restrict free trade.
Q: What would be the impact of restricting trade ties with China?
Fonkem: One of the main goals of the tariffs on China is to force U.S. manufacturers to move out of China into the U.S. or at least to friendlier countries. The main impact that I see is a disruption of supply chains, which now makes products that we consume more expensive. For example, if companies are now moving their manufacturing to a country where the labor cost is high, that cost would be passed to consumers downstream.
von der Ruhr: You can have trade diversion. Products made in China could be manufactured elsewhere and imported, but I think it’s generally a misguided idea to think that you’re saving all these jobs and doing well for our economy. I found one New York Times article saying that there are estimates that these tariffs that are proposed would lead to a $1.6 trillion loss to our economy and cost us 744,000 jobs over five years (according to a study by Oxford Economics, which is commissioned by the U.S.-China Business Council).
Q: Anything else that’s important to consider as we look at international trade policy?
Fonkem: I would say look at ESG (environmental, social and governance) standards. We are going to start seeing a lot of ESG-related restrictions to trade that could impact U.S. companies’ ability to do business with certain countries. For example, there’s a U.S. law that basically bans the import of products made within a certain region of China called the Xinjiang region because there’s a presumption that anything produced in that region utilizes forced labor. The EU also has a law called CBAM that requires importers of certain categories of products to the EU report the embedded carbon content in that product. These are just two examples of ESG-related laws that impact trade that companies now have to consider when doing business internationally.
von der Ruhr: When I teach international trade, I mention that economists consider it good not just for the reasons that we discussed, but it’s also a way to help spread democracy and promote international relations. If we’re thinking about international diplomacy, we want to be engaged with these other nations on many levels — including commerce — and restricting that will compromise our ability to help spread democracy and maintain a leadership position in the world.
