Washington, United States | AFP |
President Donald Trump’s first moves on trade have cast a pall over US trade relations and could hurt US businesses, trade experts say.
Trump has begun his term by pulling out of one major agreement, vowing to renegotiate or exit another, and threatening to impose border taxes on imports — a clear shift away from decades of policy putting the United States at the forefront of the global push for free trade.
A strident critic of existing US free trade agreements throughout his campaign, Trump’s first order of business Monday was to sign an executive order officially withdrawing from the 12-nation Trans-Pacific Partnership.
The move was the fulfillment of a campaign promise — one that was easy to do because the 2015 agreement had never been implemented, but which nonetheless sent a clear signal the United States is backing away from hard-fought trade pacts.
“It’s a sign of a brake on global integration,” said International Monetary Fund official Alejandro Werner, who heads the Western Hemisphere Department.
Jake Colvin, vice president of the National Foreign Trade Council, a pro-trade business group, said US leadership on trade issues remains key.
“It is critical that the United States not cede leadership on the global economy to countries like China,” he told AFP.
“It’s important to have a muscular trade policy, but we need to make sure we’re playing offense as well as defense and continue to open up foreign markets for American business and workers.”
He said the NFTC will engage with the new administration to point out the good things the TPP would have accomplished.
– ‘A disruptive guy’ –
The TPP withdrawal followed shortly on Trump’s threat in a meeting with corporate CEOs at the White House early Monday to impose “a substantial border tax” on products coming into the US market, to encourage firms to move manufacturing into the country.
“Now, some people would say that’s not free trade, but we don’t have free trade now,” since countries like China and others make it “very, very hard” to sell US products there, he said. “In some cases it’s impossible.”
“What we want is fair trade, fair trade. We’re going to treat countries fairly, but they have to treat us fairly.”
But trade experts caution that such moves risk retaliation and in an extreme event a trade war.
“This is going to be disruptive. It’s not a surprise. We elected a disruptive guy as president,” said Scott Miller, an international business expert at the Center for Strategic and International Studies.
Discriminatory tariffs on particular countries — like those Trump threatened to impose on Mexico and China during the campaign — are “just chaos,” said Barry Bosworth, chair of international economics at the Brookings Institution, a Washington think tank.
“They always respond,” Bosworth said of China. “They will start responding. And then we have the significant risk of trade war, because there is no underlying principle, it’s just, does Donald Trump like them or not.”
That would impose “a high cost to American companies,” like Boeing, since China would just switch to Airbus, he said. “How is that going to help us?”
– Modernize NAFTA? –
Trump on Sunday repeated his pledge to begin renegotiating the North American Free Trade Agreement in upcoming talks with the leaders of Mexico and Canada. In a statement Friday shortly after his inauguration, the White House said he will pull out of the 23-year-old deal unless there is a “fair deal.”
The trade experts said they are at a loss to understand Trump’s objectives in renegotiating a deal that already provides tariff-free trade among the three members, but acknowledged that there are areas that can be brought up to date, such as e-commerce rules.
But they cautioned that manufacturing in the region is highly interconnected, and change could be disruptive.
“Is he going to throw all that away?” Bosworth asked. “I think a lot of American businesses are going to be upset about this.”
Chad Bown, a senior fellow at the Peterson Institute for International Economics in Washington, noted that Trump did not invoke the NAFTA article governing renegotiation, which would have “triggered a ticking clock” dissolving the treaty in six months unless an agreement was reached.
Trump will receive his Mexican counterpart Enrique Pena Nieto on January 31. No date has been given for a meeting with Canada Prime Minister Justin Trudeau, but it is expected soon.