His positions on trade, along with immigration, are President-elect Donald Trump’s signature issues. During the campaign, he spoke about trade frequently, without equivocation, yet without detail. He made bold declarations on withdrawing from current negotiations, renegotiating existing agreements, and increasing enforcement. Mexico and China received special focus. He also proposed reorganizing trade agencies. In a move targeted at China, his transition team has reportedly suggested requiring reciprocity of access in foreign investment. He has also criticized the current administration’s Iran and Cuba policies.
A president has the authority to do much, though not all, of what he has proposed. However, many of his proposals could be expected to provoke responses by trading partners, and prompt resistance from Congress. Moreover, unwinding trade agreements and increasing tariffs could disrupt the supply chains that sustain American manufacturing and retail. The net effect could be tax increases for consumers and potential job losses.
Trump stressed throughout the campaign that as a businessman he knows how to negotiate deals, and could get better deals for America. Much may depend on his key appointments, but his declarations on trade may prove to be the first stage of negotiations. It will accordingly will be important for international businesses to stay engaged in the policy process.
As articulated on the stump and on his campaign website, Trump’s proposals include:
- Trans-Pacific Partnership Agreement. He said he would withdraw from the agreement, which has been agreed upon between the 12 Asia-Pacific members, but has not been ratified and implemented. President Obama had been pressing for passage during Congress’ “lame duck” session between the election and inauguration of the new president. On the day after the election, Majority Leader McConnell said, however, that there will be no vote on TPP before Trump takes office in January. While TPP will clearly not be ratified in the near term, the Trump administration may in time reconsider its position, given the geo-strategic importance of the agreement to US interests in Asia.
- North American Free Trade Agreement. He said he would tell NAFTA partners (Canada and Mexico) that he will renegotiate the agreement and threaten to withdraw from the agreement if they do no not acquiesce. It is, however, not clear what components of NAFTA he would want to renegotiate, except that he wants to end “Mexico’s one-side backdoor tariff through the VAT” and the “sweatshops in Mexico that undercut US workers.” As president, Trump will indeed have the authority to exit NAFTA and revise tariffs, though the economic impacts could be problematic, including for the American manufacturing workers and consumers he aspires to help. Still, the authority does provide the Trump administration with considerable leverage.
- Trade enforcement. Trump has said he would direct the Commerce Secretary to “identify every violation of trade agreements a foreign country is currently using to harm our workers, and also direct all appropriate agencies to use every tool under American and international law to end these abuses.” In theory, the Commerce Department should already be doing this through its market access and trade remedy functions. While current trade remedy (anti-dumping and countervailing duty) enforcement is robust, there is room for improvement on market access. Here, Commerce, working in tandem with the U.S. Trade Representative’s Office, could play an important role in identifying and substantiating WTO claims.
- China. China is the focus of several of his proposals.
- Currency. Trump intends to designate China as a “currency manipulator”. On its own, a designation will not amount to much, though it will be significant diplomatically. The legislation providing for designations has little in the way of sanctions, which is one of the reasons predecessors have not made such a designation since the 1990s.
- Enforcement. Trump says he will bring trade cases against China, both under U.S. trade remedy laws and before the World Trade Organization. This commitment is consistent with the practices of his two immediate predecessors.
- Trade sanctions. Trump says he will use “every lawful presidential power” to get China to “stop its illegal activities, including its theft of American trade secrets.” He cites sanction authorities (s.201 and s.301 of the 1974 Trade Act and s.232 of the 1962 Trade Expansion Act). However, it is not clear whether he would first wait for WTO dispute settlement determinations before resorting to such sanction powers.
- Trade agency reorganization. Trump has proposed reorganizing government agencies dealing with various components including trade, market access, trade promotion and trade finance. According to Trump, “American trade policy is currently mismanaged by dozens of competing bureaucracies spread across the Departments of Agriculture, Commerce, Labor, State, Treasury, all of these departments, so many departments.” He proposes to create an “America Desk” at Commerce that would regroup components of other agencies. President Obama made a similar proposal that was summarily rejected by relevant Congressional committee chairmen.
Press reports indicate that the Trump team plans to have the Committee on Foreign Investment in the United States (CFIUS), the Treasury-coordinated interagency committee that vets foreign investments for national security threats, examine foreign acquisitions of US companies to ensure equal opportunities for American investors abroad. The legislation authorizing the blocking of foreign transactions limits that power to national security threats, and does not authorize requiring investment opportunity reciprocity. However, the CFIUS process is opaque and the scope to challenge decisions limited. This proposal may well also be a harbinger of legislation targeted at Chinese investment given constraints on opportunities for US investors in China.
During the campaign, Trump criticized President Obama’s Iran nuclear deal and the easing of Cuba sanctions. As president, Trump would have the authority to revisit those policies. However, the multilateral Iran deal may prove challenging to unwind. Iran has already received many of the deal’s benefits (e.g., reopening of business with companies from the European Union and other countries in sectors such as energy and shipping). It could be difficult to persuade other parties such as the EU, China and Russia to re-impose sanctions, and re-imposition of unilateral US sanctions might not be deemed effective in discouraging the Iranian nuclear program. Accordingly, the Trump administration may well decide to focus on enforcement of Iran’s commitments, at least at the outset. On Cuba, Trump’s more limited pronouncements seemed to call for the reversal of the Obama administration’s liberalization steps until the Cuban government makes political reforms. That said, it is not clear that Cuba policy will be a priority, at least in the near term. In short, we may need to wait until the confirmation of the new Secretary of State to get a sense of direction on both Iran and Cuba.