“Protection will lead to great prosperity”

Paris, 10/02/17



David Page, 

Senior Economist (US and UK) - R&IS AXA IM


Shirley Shen, 

Economist - Non China Emerging Asia 


Aidan Yao, 

Senior Economist - China 

How the US might slip into protectionism

Key points

  • Since inauguration, President Trump has revived a protectionist tone.
  • Key members of his administration do not consider the benefits of globalisation through an orthodox, comparative advantage lens.
  • The debate in Washington appears to be whether to address on-shoring through a reform  of corporate tax incentives, or to follow a more direct, protectionist route.
  • President Trump has already withdrawn  from TPP and initiated discussions to reform NAFTA. However, he has broad powers to enact import tariffs and restrictions.
  • We see a risk that the US declares China a currency manipulator and enacts targeted tariffs. Electronic & computer and electrical & appliance sectors appear at risk.
  • We see a high risk of retaliation by China to any targeted tariffs. There is a significant chance of escalation. Escalation would not only weigh on US and Chinese economies, but globally.
  • Corporate tax reform offers an alternative means of addressing these problems. The current House Republican Blueprint would reduce the incentives for shifting production overseas. However, we consider the current border tax adjustability proposal veiled protectionism.