Trump’s con­tempt for trade deals spurs anx­i­ety: What’s next?

The Trentonian (Trenton, NJ) - - BUSINESS - By Paul Wise­man

WASH­ING­TON >> Don­ald Trump is mov­ing quickly to dis­man­tle seven decades of Amer­i­can pol­icy built on trade deals and multi­na­tional al­liances that help fuel the U.S. and global economies.

And no one is sure what will re­place them.

The void risks in­ten­si­fy­ing un­cer­tainty at home and abroad. With­out know­ing whether trade will be dis­rupted, busi­ness peo­ple in the United States and abroad could be forced to re­think their plans.

“The big prob­lem comes when there is un­cer­tainty,” says Mar­cus Mo­u­far­rige of Serv­corp, a com­pany in Syd­ney, Aus­tralia, that sells of­fice space and tech­nol­ogy ser­vices abroad. “Un­cer­tainty stops busi­nesses from mak­ing de­ci­sions. It stops ev­ery­thing.”

For now, stock prices are soar­ing as in­vestors fo­cus on Trump’s pledge to cut taxes and busi­ness reg­u­la­tions. But his break with the past is rais­ing wor­ries among some. Fitch Rat­ings, for in­stance, warns that the un­cer­tainty sur­round­ing Trump’s poli­cies poses global risks — from dis­rupted trade re­la­tions to con­fronta­tions that un­nerve in­vestors.

The pres­i­dent’s hos­til­ity to­ward ex­ist­ing trade deals and sus­pi­cion of long-term al­lies is also leav­ing a vac­uum in global lead­er­ship — one that China seems ea­ger to fill. Pres­i­dent Xi Jin­ping last month be­came the first Chi­nese head of state to at­tend an an­nual gath­er­ing of busi­ness elites in Davos, Switzer­land. Xi used the oc­ca­sion to de­clare China a cham­pion of free trade, usurp­ing the tra­di­tional U.S. role as the lead­ing booster of glob­al­iza­tion. China, the world’s lead­ing ex­porter, wants to ex­pand its global in­flu­ence.

Trump has of­fered few de­tails of his trade plans, beyond pres­sur­ing U.S. com­pa­nies to keep or cre­ate jobs in Amer­ica, tak­ing a tougher line in forg­ing deals and slap­ping tar­iffs on na­tions that are deemed to ex­ploit the United States.

“There’s not a lot of sub­stance to his poli­cies,” says Gor­don Han­son, di­rec­tor of the Univer­sity of Cal­i­for­nia San Diego’s Cen­ter on Global Trans­for­ma­tion. “It con­sists of two things: Jaw-bon­ing cor­po­rate Amer­ica — ‘cre­ate more jobs here or else’ — and across-the board trade pro­tec­tion­ism.”

Com­pa­nies heav­ily in­volved in im­ports or ex­ports can’t eas­ily de­velop their busi­ness plans with­out know­ing what spe­cific moves Trump will em­brace or achieve. Among the un­cer­tain­ties: — Will Trump in­sist on tax­ing im­ports if he doesn’t get the con­ces­sions he wants from Amer­ica’s trad­ing part­ners?

— If Amer­ica aban­dons ex­ist­ing agree­ments, would al­lies trust it to ad­here to any new trade deals?

— Would Trump risk ig­nit­ing a trade war whereby other coun­tries im­pose re­tal­ia­tory taxes and sanc­tions on U.S. goods? Will Amer­ica’s old al­liances en­dure? If not, what re­places them?

Trump ar­gues that the ex­ist­ing or­der has short­changed Amer­ica — es­pe­cially blue-col­lar U.S. work­ers — ex­pos­ing them to unfair com­pe­ti­tion with low-wage for­eign la­bor­ers and to un­just trade prac­tices by China and oth­ers.

The re­sult, he said in his in­au­gu­ral speech, is “rusted-out fac­to­ries scat­tered like tomb­stones across the land­scape of our na­tion.”

“From this day for­ward,” Trump de­clared, “it’s go­ing to be only Amer­ica first.”

His words res­onate among com­mu­ni­ties that blame lowwage for­eign com­pe­ti­tion for the loss of 4.8 mil­lion U.S. fac­tory jobs since 2000 and among fam­i­lies whose in­comes have stag­nated.

Trump has pulled the United States out of a 12-na­tion Asia-Pa­cific trade ac­cord ne­go­ti­ated by the Obama ad­min­is­tra­tion. He’ s in­tent on re ne­go­ti­at­ing a pa ct with Mex­ico and Canada—and dump­ing it if he can’t im­prove the ver­sion in place since 1994. He’s ques­tioned NATO’s use­ful­ness, con­sid­ered slash­ing Amer­ica’s fi­nan­cial con­tri­bu­tion to the United Na­tions and bick­ered with al­lies Mex­ico and Aus­tralia.

Crit­ics say Trump is tear­ing down an in­ter­na­tional sys­tem that nur­tured peace after World War II, en­cour­aged global com­merce, lifted much of East Asia out of poverty and em­pow­ered the United States to be­come the world’s lead­ing su­per­power.

“This is the big­gest re­ver­sal we’ ve had since World War II ,” says Adam Posen, pres­i­dent of the Peter­son In­sti­tute for In­ter­na­tional Eco­nom­ics, a think tank that pro­motes free trade. “It does have echoes of the ‘20s and ‘30s, when the U.S. said, to its detri­ment, that every­one else is rip­ping us off.”

In Ro­seville, Illi­nois, a soy­bean and corn farmer named Ron Moore had ex­pected to ben­e­fit from the Trans-Pa­cific Part­ner­ship with 11 Asia-Pa­cific coun­tries. The TPP would have pried open Ja­pan’ s mar­ket to more U.S. farm ex­ports, thereby ben­e­fit­ing U.S. cat­tle and hog farm­ers. Moore pro­vides feed to those livestock pro­duc­ers.

“It was go­ing to add value to my soy­beans,” says Moore, whose soy­beans are shipped down the Mis­sis­sippi River to New Or­leans and of­ten on to China and other for­eign mar­kets. “We’re a lit­tle dis­ap­pointed.”

The TPP had stalled in Congress. But Trump of­fi­cially pulled out of the deal, say­ing he could do bet­ter by ne­go­ti­at­ing­with coun­tries one on one. Some crit­ics backed his ar­gu­ment. They ar­gued that the TPP would have killed Amer­i­can jobs by ex­pos­ing U.S. work­ers to low-wage com­pe­ti­tion in South­east Asia.

But the TPP was also a diplo­matic ef­fort to counter China’s in­flu­ence in Asia. Now, writes econ­o­mist Gareth Leather at Cap­i­tal Eco­nom­ics, “the demise of the TPP has cre­ated an op­por­tu­nity for China.”

“Who will ne­go­ti­ate with us if we re­nege on our deals?” asks Han­son of the Univer­sity of Cal­i­for­nia San Diego.

Also in Trump’s crosshairs: The North Amer­i­can Free Trade Agree­ment with Mex­ico and Canada, which he’s called the worst trade deal the United States has ever ne­go­ti­ated. Trump says he wants to rene­go­ti­ate NAFTA or scrap it. He’s also threat­ened to tax U.S. com­pa­nies that move to Mex­ico and ship goods back to the U.S.

Since NAFTA took ef­fect 23 years ago, the U.S. trade gap with Mex­ico has surged as fac­to­ries moved south of the bor­der to cap­i­tal­ize on cheaper Mex­i­can la­bor.

Some an­a­lysts echo Trump’s crit­i­cism that ex­ist­ing trade deals have hurt many Amer­i­cans.

“NAFTA is packed with in­cen­tives to off­shore jobs,” says Lori Wal­lach, di­rec­tor of Public Cit­i­zen’s Global Trade Watch, which op­poses many ex­ist­ing pacts. “NAFTA must be re­placed — not tweaked — to ac­tu­ally de­liver bet­ter out­comes for work­ing peo­ple.”

But U.S. ex­porters ben­e­fited from Mex­i­can pur­chases, too. And many com­pa­nies have built com­plex sup­ply chains that span the U.S.-Mex­ico bor­der. Pulling out of NAFTA would threaten their op­er­a­tions.

Trump says his shift in pol­icy —along with big tax cuts and looser reg­u­la­tion — would re­store count­less fac­tory and min­ing jobs. Most econ­o­mists are skep­ti­cal.

If the U.S. im­poses taxes on Chi­nese and Mex­i­can im­ports, they warn, those coun­tries would im­pose taxes of their own on U.S. ex­porters. The re­sult could be a job-killing trade war.

EVAN VUCCI — THE ASSOCIATED PRESS FILE

Pres­i­dent Don­ald Trump signs an ex­ec­u­tive or­der to with­draw the U.S. from the Tran­sPa­cific Part­ner­ship trade pact agreed to un­der the Obama ad­min­is­tra­tion, in the Oval Of­fice of the White House in Wash­ing­ton. Less than a month into his pres­i­dency, Don­ald Trump is al­ready dis­man­tling seven decades of Amer­i­can pol­icy by pulling back from es­tab­lished trade agree­ments, such as the TPP, and ques­tion­ing long­stand­ing global al­liances.

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