China Research

A discussion forum on emerging markets, mainly China – from a macro, micro, institutional and corporate angle.

President Trump’s trade policy – bad news for lagging (emerging) countries

April 25, 2025

The whole world has learned in the past few weeks that American President Donald Trump does not understand cross-border trade policy – or does not want to understand it. More or less all experts inside and outside the U.S. have accused him of neglecting the most obvious advantage of free trade and the disadvantages of protectionism and raising tariffs on such a broad global scale.
What should be discussed more in our part of the world are the bad consequences that affect many of the emerging and less developed countries by all the single bilateral trade accords the U.S. wants to achieve, primarily with strategically important trading partners such as India and possibly also China.

Bilateral trade deals have a lot of disadvantages
We know from reality that there exist both bilateral and multilateral trade agreements which should not be equalized with more ambitious pure free trade agreements. Let’s begin by discussing somewhat what bilateral trade agreements are about – the kind of trade agreement that President Trump and his administration clearly prefer. This was – by the way – obvious already in February 2017 (https://www.brookings.edu/articles/what-will-trumps-embrace-of-bilateralism-mean-for-americas-trade-partners/).

We know that it is not difficult to recognize that a bilateral trade agreement practically uses to be easier and faster to achieve than a multilateral one. The main reason for this is that bilateral negotiations only have two sides, in our already mentioned case, for example, the U.S. and India. Multilateral trade negotiations with several or many involved countries on the other hand can take years or even decades. However, multilateral trade agreements can create a larger harmonized market than bilateral trade agreements, provide connected countries with more competition and innovative power plus, consequently, lower prices. They can also help to resolve trade disputes via the currently disarmed WTO and promote cooperation and stability among countries.

In my view, the time-limited duration of bilateral trade negotiations compared to multilateral trade talks manifests itself as the major advantage that this option of trade negotiation usually enjoys. Otherwise, quite a number of disadvantages can be found.
Among the countries that initially are particularly affected by Trump’s tariffs are, for example, China, Lesotho, Cambodia, Laos, Vietnam, Sri Lanka, Syria, Botswana, Bangladesh, Thailand, Indonesia, Angola, South Africa, Pakistan, India, Malaysia, etc (see https://www.cbsnews.com/news/trump-reciprocal-tariffs-liberation-day-list/).
Many other emerging and less advanced countries could be quoted as well, spread all over the globe – countries that are strongly hit by the irresponsible Trump tariffs. Consequently, it cannot be regarded as a surprise that that more than 50 affected countries already a few days after the so-called “Liberation day” on April 2 had announced – according to Trump advisers – that they wanted to negotiate over the import taxes they have been confronted with (https://www.pbs.org/newshour/politics/trump-advisers-say-more-than-50-countries-have-reached-out-for-tariff-talks-with-white-house). Other sources speak currently about stronger interest from even more countries (https://www.independent.co.uk/news/world/americas/us-politics/trump-tariff-trade-deal-countries-b2737526.html). We know that it will be bilateral negotiations accordingly.

Bilateral trade negotiations for so many countries mean by definition that different results will come out for the participating countries – leading to further injustice between suffering countries. Different results are logical because of the fact that bilateral trade negotiations have no underlying support by the WTO. This means also that more and more bilateral trade agreements tend to hollow out the position of the WTO – very much at the expense of outsiders among emerging and less developed countries. From this point of view, multilateral agreements are more beneficial to developing countries than bilateral ones because the included countries become more competitive as a group.
In general terms, larger corporations are supposed to benefit the most from bilateral trade agreements because they usually have bigger resources for different competition-improving activities than smaller and medium-sized companies.

Conclusion – disparities may increase, also geographically
Altogether, analysts should be cautious about positive trade interpretations after the ongoing or forthcoming bilateral negotiations between the U.S. and a significant number of emerging and less developed countries, particularly since the results may differ substantially between non-OECD countries both in trade details and geographically. It should be a good idea to look deeper into the negotiated trade deals between the U.S. and the tariff-affected countries – and what they really mean to them.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University

Companies from OECD- and emerging countries – do they want to invest in Trump’s U.S.?

April 14, 2025

President Trump’s trade war has certainly caused a lot of concern in most countries in the world, to a high extent in the U.S. as well. As I have tried to explain in my previous two blogs on this issue, many emerging markets are about to be hit dramatically by Trump’s economic world war (https://blogg.lnu.se/china-research/?p=3650¸ https://blogg.lnu.se/china-research/?p=3642). In this respect, one specific question still seems to be analytically neglected – which foreign companies actually want to invest in the U.S. in the foreseeable future.

Uncertainty vs large market
One can read and hear frequently these days that the ongoing trade war has been causing a lot of uncertainty about the future American behavior – or rather the future behavior of President Trump. And as we know from corporate practitioners and academics, uncertainty means a major stumbling block for investors (see for the latter group, for example, Bloom et al https://bfi.uchicago.edu/wp-content/uploads/2022/11/BFI_WP_2022-149.pdf). This leads us to the crucial question of this blog: How will foreign investors behave in the U.S.?

Looking more carefully at all the negative policy and institutional conditions created by President Trump, uncertainty exists at every corner and end. But at the same time President Trump wants foreign companies to move production to the U.S. Aren’t these two developments contradictory?
Looking somewhat more profoundly into ongoing institutional conditions, things are indeed on a deteriorating trend. Examples are

¤ President Trump’s unpredictable and changing psychological attitudes and decisions (which could be described as an institutional weakness);

¤ the determination of President Trump and his administration to appoint their supporters for important jobs (even in jurisdiction);

¤ the ongoing cuts of federal money to the research of famous American universities, meaning that many American academic researchers would like to leave the country; by the way, why are (most) Swedish academic institutions reacting so reluctantly on this new opportunity to attract disappointed American researchers;

¤ the recently started American “movement” to make conditions more complicated for incoming foreign visitors and foreign residents in the U.S.

Thus, the question remains – why should foreign companies like to move their production to the U.S. under all these negative institutional and behavioral (psychological) conditions? Even if President Trump recently has announced a 90-day pause on ‘reciprocal’ tariffs for most countries (but except China), uncertainty remains in place – also for foreign corporations with potential plans to invest in the U:S.

However, certain companies will do so all the same – but nobody knows how many of them indeed will take such a step in these uncertain times. Usually or often, poor or worsening institutional conditions turn out to be sufficient for refraining from a new foreign direct investment – but not in the last decades in

China as an outstanding exception.
Quite some time ago, I made a survey on this Chinese issue. The result was not very surprising – telling me that the enormous (potential) size of this giant market served as the main incentive for investing there despite the country’s political and institutional shortcomings. Maybe also then still existing good growth prospects (which under current conditions should not be the case in the U.S.). The same main argument of a market’s enormous size will probably be applied by the foreign companies that still want to invest in the U.S. – despite President Trump irrational behavior.

But how frequently will this happen?

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University

China wants to counteract Trump’s trade war

April 8, 2025

China is about to become badly hit by President Trump’s sharply raised tariffs. As an answer to China’s first response, the American president has envisaged a further substantial rise of import tariffs from China, maybe by as much as another 50 percent.

The current situation can really be regarded as a global trade war with China as the main opponent for the United States. This is nothing new. Indeed, I had quite some articles and comments on this issue in the past (see, for example, from 2019 https://blogg.lnu.se/china-research/?p=2796).

Trump’s rude treatment of China may have different reasons. There be a link to what many observers in the West consider as China’s “unfair trading” by different direct and indirect export subsidies. But it may also be Trump’s objective to change China into a more comfortable competitor country, i.e. for the U.S. Or there may be both explanations.

China tries to find an answer

When studying reactions on Trump’s tariffs in Chinese media, quite some comments deal with desirable normalization of business contacts between the U.S. and China (http://en.people.cn/n3/2025/0407/c90000-20298634.html). Certain pragmatism still seems to exist when it comes to China’s commercial relations to the U.S.

But in my view, China will focus mainly on strengthening domestic demand in order to react on American tariffs and to give more steam to the economy – despite the serious debt situation (see also from 2024: https://blogg.lnu.se/china-research/?p=3606). Still, China obviously plays down the size of its enormous domestic debt – and so seem reactions of global financial markets (which is not really understandable, see my analysis from January 2025 https://blogg.lnu.se/china-research/?p=3615).

Finally, I would like to quote professor Jeffrey Sachs – expert on emerging markets – by using his words that Washington should not aspire to a world in which it alone is prosperous, while everyone else remains poor. Instead, it should strive for a world in which prosperity is widely shared, and all nations can reap the benefits of peace and openness .

All these positive aspects assume liberal and/or free trade conditions.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University