USA TODAY International Edition
Trump’s protectionist moves threaten to backfire on U. S.
If there were any doubts that Donald Trump would vigorously pursue the anti- trade agenda he campaigned on, he put those to rest on Monday.
On his first full weekday in office, Trump announced the United States’ withdrawal from the Trans- Pacific Partnership, or TPP. He signaled he would renegotiate the North American Free Trade Agreement, or NAFTA. And, for good measure, he reiterated his threat of a border tax on products made by companies that move abroad.
Taken together, these steps repudiate decades of policies, pursued by presidents of both parties, aimed at lowering trade barriers. These are also misguided moves likely to harm the U. S. economy far more than they help.
The arduously negotiated TPP is — or perhaps we should now say “was” — America’s best hope for expanding its economic influence in Asia and limiting the influence of China, which is not part of the pact. Now, the remaining 11 nations will have to decide whether to ratify the pact on their own, do nothing, or join an alternative accord that China is pitching, one that puts China at its center.
It is hard to imagine a more counterproductive policy for America’s interests than pulling out of the TPP, which was already on life support in Congress. But if one could be imagined, pulling out of NAFTA.
To be sure, Trump says only that he wants to “renegotiate” the 1994 deal among the United States, Canada and Mexico. But what he means by that is anyone’s guess. The pact eliminated tariffs on goods moving between the countries in it. Does he expect Canada and Mexico to accept U. S. goods duty- free while the U. S. imposes duties on their goods?
One potentially useful approach to renegotiating NAFTA would be to add sections on currency manipulation, and trade from the digital economy. The irony is that these provisions are it would included in TPP. It would be awkward, to say the least, to update NAFTA with provisions carved from the corpse of TPP.
Trump’s rhetoric about NAFTA being “the worst trade deal maybe ever” is way over the top. Since its adoption, Canada and Mexico have become far and away the United States’ largest export markets. At $ 312 billion annually, exports to Canada are more than our exports to all European Union countries combined. At $ 240 billion, exports to Mexico are slightly less than exports to the EU.
Canada and Mexico maintain manageable trade surpluses with the U. S. that are much smaller than those of China, Japan and Germany – none of which has a trade pact with America.
Since NAFTA went into effect, U. S. economic output per person has surged by 40% after adjusting for inflation. And rising incomes in Mexico have caused once bounteous rates of illegal immigration to slow to a trickle.
Trump’s trade policies might benefit a sliver of U. S. manufacturing workers. But protectionism is likely to set off rounds of retaliation that will end up harming the American economy as a whole and raising prices on imported goods — increases that will be most harmful to lower income people, including the many who voted for Trump.