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Trade: Trump starts flexing his muscles on the “America First” mantra

25th September 2017


The article below was drafted by our colleagues from Dutko in Washington D.C.- for any questions you can contact Jayne.Fitzgerald@dutkogr.com

Candidate Trump campaigned on a promise to throw out America’s existing trade agreements and pursue trade deals that would “put America first.”  He made much of how “terrible” a deal the North American Free Trade Agreement (NAFTA) with Canada and Mexico was, as well as the pending Trans-Pacific Partnership (TPP) agreement. He pledged to pull out of both.

 

Nine months into the Trump Presidency, what’s the status?

We have seen much similar rhetoric but thus far not a lot of drastic action on the trade-related campaign promises. The major exception was President Trump’s decision during his first week in office to withdraw from TPP.  On NAFTA, more moderate voices within the Administration, such as National Economic Council Director Gary Cohn, and outside, specifically, Canadian Prime Minister Justin Trudeau, have succeeded in convincing the President that the better course of action would be to renegotiate the NAFTA deal. That, in fact, is occurring, with very tough talk emanating from U.S. Trade Representative (USTR) Robert Lighthizer during the first negotiating session regarding negative U.S. trade balances with Mexico and Canada. 

 

Trade imbalances

This appears to be the mantra for trade negotiations with this Administration. Thus, the existing trade agreement between the U.S. and South Korea (KORUS) has come under attack from the President, who threatened to withdraw from that agreement because of trade imbalances, particularly on U.S. car exports.  Again, cooler heads within the Administration, including his national security adviser, have persuaded him to renegotiate those aspects of KORUS that have not worked to the U.S.’s advantage. However, at this point, the Administration has not notified Congress of its intent to renegotiate KORUS which is required by law before negotiations can commence.

 

Trade war with China

Candidate Trump reserved much of his anger on global trade for China. Chinese trade imbalances and alleged currency manipulation were the Trump campaign’s poster children for what was wrong with the global trading system. As President, Trump invited the Chinese Prime Minister to the U.S. in April as one of his first forays into foreign and trade policy.  The meeting appeared to cool the anti-Chinese rhetoric for a time. It also set up a negotiation with the Chinese trade ministry that yielded the removal of some trade barriers. Yet major issues with China such as steel markets remain unresolved, with geopolitical tensions with China over North Korea complicating trade decisions.

 

Justifying tariffs based on national security risks

Beyond actions to revise and reject existing bi- and multi-lateral free trade agreements, the Administration has utilized other tools at its disposal, including Commerce Department investigations opened by Executive Order of the President into steel and aluminum imports, through which tariffs can be imposed if the investigations find a national security risk. Traditional anti-dumping and countervailing duty petitions on other sector- specific products have been filed and accepted for review, including most recently for titanium sponges.

 

WTO Reform

Reform of the World Trade Organization (WTO) is also in President Trump’s sights. Candidate Trump threatened to withdraw from the WTO during the campaign, but the Administration has not acted to do so.  In the President’s recent speech to the U.N. General Asssembly, however, he criticized “unaccountable international tribunals and powerful global bureaucracies” for leading to the demise of the American middle class.  USTR Lighthizer has also spoken of the need to reform the WTO, focusing on its dispute settlement system.

 

What’s next?

As the Administration progresses with the implementation of its trade agenda, it will likely continue to deal with the internal tensions reflected in the decisions on NAFTA and KORUS. However, one of Trump’s key architects of the America First agenda, Steve Bannon, has been forced out of the White House in the latest staff restructuring by General Kelly, the new Chief of Staff.  The other key proponent for economic nationalism is Professor Peter Navarro who heads the White House Office of Trade and Manufacturing Policy.  His role has reportedly been diminished in the reorganization undertaken by Kelly, but he maintains a close relationship with the President.

How this will play out as the U.S. deals with future negotiations with the U.K. on a bilateral trade deal and with the EU on a possible re-opening of the Transatlantic Trade and Investment Partnership negotiations is unclear.  Most likely, we can expect to see ongoing tussles over the right approach to take in remaking America’s role in global trade in the coming months, with more traditionally-minded trade policy advisors in the majority, but the President himself and a minority of his staff firmly in the America First camp.


Grayling Team

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