AFTER A TUMULTUOUS four years with the Trump Administration, then the COVID-19 crisis, 2021 should be a year of relative calm for United States international trade. Two factors make this outlook likely. The first is the outcome of the U.S. elections, an outcome that makes dramatic policy shifts unlikely. Joe Biden has the clear intent to smooth American foreign relations after the constant upsets under President Trump. Expect no further dispute with NAFTA partners or the Europeans. Relations with China should be calmer, at least until China decides to flex its muscles in the South China Sea. The latter expansion of Chinese power is highly likely, but probably not in 2021 (unless you include Hong Kong). In addition, the apparent division of Congressional power between the Democrats and Republicans will prevent dramatic trade proposals coming from Capitol Hill. The past 10 years have taught us that executive orders are the driving force in U.S. foreign policy; I give you Barack Obama’s policies toward Cuba and Donald Trump’s NAFTA negotiations. In that regard, President-elect Biden is likely to manage closer to then-President Obama’s stance on Cuba than to President Trump’s.
The second reason for a calmer 2021 is the likely weakening of the pandemic restrictions on economic activity. Historical precedent and recent trends suggest that the fall surge in cases will recede as we move into 2021 and will limit further surges below the concerning levels of 2020. Also, the growing realization that COVID-19 death numbers are well below fears will moderate governmental reactions to surges in 2021, as they have in the second half of 2020. This all means that the economy will be spared the worst of the whiplash effects of sudden lockdowns and equally sudden releases of pent-up demand. We are not likely to see the record swings in GDP and trade that we had to deal with in 2020. Trade volumes should be more stable, as will the intermodal volumes that help move the trade.
Having said all this, 2021 may not feel so stable—for two reasons. First, President Trump will be compelled to yield the White House in January, but not the microphones. He is certain to agitate loudly for his power base’s important agendas, out of habit, and perhaps with an eye to running for the top job again in 2024. Those agendas clearly include immigration and the export of American jobs. Given the reality that neither of those issues will be solved in 2021 guarantees that the ex-president will have plenty of targets. In the same way, the two sides of Congress will loudly denounce the other’s international policies. While such conflict will prevent substantive changes, it will join with President Trump in sustaining a climate of dissent. The reality may be muted—but not the rhetoric.
Finally, the economic environment will be downright placid after the violent swings of 2020. By mid-year, we should be back to the slow growth in domestic and international output we have lived with since the Great Recession 12 years ago. However, it won’t feel that way because those of us tied to the goods sector will be coming off the most spectacular halfyear of growth in history. Such surges always end. The catch is that humans get hooked on the euphoria of success and fail to plan for the inevitable fall back to sustainable reality. So the return to 2% growth will feel like a recession after the double-digit freight growth of 2020:3 and 2020:4. Moreover, the wounds to the service sector from the pandemic lockdowns and health scares are far from healed. One wonders how the U.S. economy can prosper when its prime sector is still operating well below capacity.
Of course, a resumption of severe COVID-19 lockdowns at any time during this flu season will guarantee a 2021 with legitimate high stress. The same thing applies should there be a crisis in the presidential succession process or in international relationships, either with China, North Korea, or Iran. Perhaps this outlook should be labeled “Smooth seas ahead, but watch out! It could change.”
Noël Perry is Principal with Transport Futures, located in Lebanon, PA. He can be reached at firstname.lastname@example.org.
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