Even short of extremes, Trump protectionism ‘still damaging’
WASHINGTON: While his advisors have played down some of President-elect Donald Trump’s most extreme trade threats as negotiating tactics, economists remain worried about the potential to inflict real damage. The Republican billionaire has said that on his first day he will label China a currency manipulator, has threatened to pull out of free trade agreements like NAFTA and slap punitive tariffs of up to 45 percent on China and Mexico.
And there is no question the US president has the power to take those actions unilaterally, without the consent of Congress, economists say. In a campaign season drenched in hyperbolic rhetoric, those protectionist threats have pushed economists to issue truly apocalyptic projections, warning of job losses of four million or more, and a deep and damaging recession in 2018, with negative spillovers to the global economy.
Using threats to negotiate
Since his surprise election win November 8, Trump’s advisors have suggested his threats were designed simply to push trading partners to agree to a better deal for the US. Even so, economists say Trump’s stance already has done damage, although it is hard to quantify what might happen until he provides specifics. The Transpacific Partnership, which comprised 12 economies and would have been the biggest US trade deal, is widely considered dead following Trump’s election.
US Trade Representative Michael Froman said the deal “is in purgatory.” “We’ve seen a rise of populism, not just in this country... politics that did not always permit a full debate on the facts,” he said at a forum late Monday. It could be that Trump’s threats have worked to some extent, since Canada and Mexico each announced last week that they are willing to sit down with the new administration to reexamine NAFTA. But not factored in to the Trump team calculation is the reaction of US trading partners to Trump’s protectionist policies.
Marcus Noland, executive vice president of the Peterson Institute for International Economics, points out about US trading partners: “They’ve got complaints too” about NAFTA. Under the rules of the US free trade agreements like NAFTA, the president can pull out simply by notifying the other members. Notification triggers a 180day clock for new negotiations, but absent a new agreement-which must be ratified by all member legislatures the accord would disappear.
SHANGHAI: A farmer operates a reaper as he harvests rice in Moagang village, located on the outskirts of Shanghai.