2018 promises to be an important year for international trade. As the Trump administration enters its second year, we expect further shifts in U.S. policy toward enhanced trade enforcement, renegotiation of trade agreements, and increased sanctions. Meanwhile, new technologies that are rapidly changing global trade will present opportunities for businesses and new challenges for policymakers. We are monitoring the following issues, which could affect your business.
White House Focuses on "Unfair Trade" Practices
We expect the White House to continue to take action on "unfair trade" practices with leading trade partners, such as China and Mexico, as well as more recently in the aviation sector with Canada. The administration has indicated that it will focus on trade imbalances, trade barriers, and increasing U.S. exports. Using "old tools" in a renewed manner, the administration has launched a self-initiated AD/CVD investigation into aluminum alloy sheet from China and a Section 301 investigation of alleged intellectual property theft by the Chinese government, among other measures.
The administration continues to renegotiate NAFTA. It remains unclear whether the negotiations will result in a new version of the trade pact or in U.S. withdrawal from NAFTA. U.S. negotiators will need to take congressional considerations into account, as Congress must deliberate and pass implementing legislation. Currently, talks appear to be at a standstill, with Mexico and Canada refusing to negotiate on certain controversial U.S. demands, including modifying the rules of origin to require a higher percentage of NAFTA content and creating a U.S.-specific content requirement for automotive goods. The sixth round of NAFTA renegotiation talks is scheduled for January 23-28, 2018, in Montreal.
Iran Nuclear Deal and Sanctions
In 2018, look for collateral fallout from the White House's attempts to redo the Iran nuclear deal. The Trump administration has indicated that it may reinstate the sanctions on the Iranian regime that were waived in connection with the nuclear deal. Reinstated or new sanctions could substantially impact certain U.S. businesses, including those with foreign subsidiaries doing business with Iran. Furthermore, a reversal on the Iran nuclear deal could increase U.S. diplomatic tensions with the EU and other parties to the nuclear deal, especially if the United States seeks to impose "secondary sanctions" on foreign businesses that do business with Iran. Of course, further developments to the Cuban, North Korean and other sanctions programs may also be implemented.
BREXIT and U.S.-UK trade talks
With the UK on the threshold of leaving the European Union, the U.S. and UK will open bilateral trade talks in 2018. It remains unclear how the U.S. will approach a trade deal with the UK—the first in generations. Brussels will be an important consideration in the talks, as the U.S. will need to be mindful of where the EU comes down on certain sectors.
E-commerce and Digitization
The international trade community, like other sectors, is looking to cryptocurrencies and blockchain technologies as they develop. 2018 should present novel and potentially challenging options for the use of these new technologies and currencies.
Trump Administration's National Security Strategy
In December 2017, the Trump administration released a new National Security Strategy that includes "America First" policies that impact cross-border trade transactions. The National Security Strategy states that the U.S. will pursue "free, fair, and reciprocal economic relationships," use "economic diplomacy," and "protect American sovereignty and advance American interests and values" in multilateral forums. The policies articulated in the strategy align with many of the administration's actions taken over the course of last year. For instance, on April 26, 2017, the Department of Commerce launched separate Section 232 investigations into aluminum and steel imports to determine their impact on U.S. national security. The resulting Department of Commerce reports are due January 15, 2018, and could have major implications for the industry, depending on the reports' findings and how the president chooses to respond.
Foreign Investment in the U.S.
As foreign investment activity is expected to continue at the recent record levels, the Committee on Foreign Investment in the United States (CFIUS) will continue to feel that strain in caseload, with the length of reviews and investigations continuing to expand. Additionally, increased scrutiny of covered deals involving certain countries, most notably China, is anticipated in many business industries and areas that have not been traditionally perceived as involving threats to national security.2018 portends continued increased scrutiny for certain arrangements, such as those involving investments of state-owned or controlled investors; sensitive assets in the technology; the U.S. financial industry; potential access to personal identifier information; and risks to the U.S. government supply chain, among others.