Trump tac­tics may be un­der­cut­ting trade deals

The Buffalo News - - FRONT PAGE - By Ana Swanson

WASHINGTON – Pres­i­dent Trump is em­brac­ing a new tac­tic as he tries to re­write the rules of global trade: Don’t be­lieve a fi­nal deal is truly fi­nal.

Trump, who has called deal-mak­ing his “art form,” has used his un­pre­dictabil­ity as a source of lever­age in dis­cus­sions with Europe, Canada, Mex­ico, Ja­pan and else­where. He has dan­gled the pos­si­bil­ity of lift­ing U.S. metal tar­iffs while threat­en­ing to add new tar­iffs on automobiles at any time. He has re­peat­edly agreed to new trade terms with for­eign part­ners, then talked about un­do­ing those deals to achieve ad­di­tional goals.

Trump has ar­gued that this ag­gres­sive and un­pre­dictable ne­go­ti­at­ing style al­lows him to ex­tract greater eco­nomic con­ces­sions than past ad­min­is­tra­tions – and he may be right, at least in the short run. But his ap­proach is caus­ing con­cern among

busi­ness groups and for­eign of­fi­cials, who say the un­cer­tainty Trump loves to sow could un­der­mine the role the U.S. has tra­di­tion­ally played in set­ting and sta­bi­liz­ing the global rules of trade, ham­per­ing eco­nomic growth in the process.

His ad­min­is­tra­tion is work­ing on a slew of trade deals, in­clud­ing agree­ments with South Korea, Canada and Mex­ico and dis­cus­sions with China, Europe and Ja­pan. On Mon­day, the Euro­pean Union ap­proved a man­date giv­ing the bloc the author­ity to ne­go­ti­ate a lim­ited trade agree­ment with the United States. And Ja­panese of­fi­cials met with their U.S. coun­ter­parts on Mon­day in Washington for pre­lim­i­nary trade talks.

But con­stantly mov­ing the goal posts comes at a cost. Trade ex­perts say the pres­i­dent ap­pears to be en­cour­ag­ing some part­ners to drag their feet in deal­ings with the United States or find other trad­ing part­ners to di­ver­sify away from the re­la­tion­ship. It has also cre­ated un­cer­tainty for com­pa­nies, which could negate the ben­e­fits of the trade deals Trump strikes.

“This ad­min­is­tra­tion’s ap­proach to trade is bully, bully, bully,” said Mary Lovely, a se­nior fel­low at the Peterson In­sti­tute for In­ter­na­tional Eco­nomics. “What will be the ram­i­fi­ca­tions in the fu­ture? We re­ally don’t know. We need co­op­er­a­tion on so many things.”

Canada and Mex­ico have been forced to re­peat­edly scram­ble as a re­sult of Trump’s tac­tics. Af­ter months of painful ne­go­ti­a­tions, the United States reached a re­vised North Amer­i­can Free Trade Agree­ment with Canada and Mex­ico last year. Trump in November hailed the new United States-Mex­ico-Canada Agree­ment as “prob­a­bly the largest trade deal ever made” and called on Congress to im­me­di­ately rat­ify the pact.

He has since un­der­cut his own agree­ments, re­fus­ing to lift U.S. tar­iffs on steel and alu­minum from Canada and Mex­ico and, more re­cently, threat­en­ing to over­ride the new USMCA by tax­ing im­ports of cars and car parts from Mex­ico. The United States had signed an agree­ment with both Canada and Mex­ico as part of the deal that would im­me­di­ately pre­vent the U.S. from tax­ing auto im­ports, but Trump has since threat­ened to scrap that.

On April 5, the same day that Trump’s ne­go­tia­tors were meet­ing in Washington with their Chi­nese coun­ter­parts to hag­gle over their trade deal, Trump threat­ened to put a 25% tar­iff on Mex­i­can cars “if for any rea­son Mex­ico stops ap­pre­hend­ing and bring­ing the il­le­gals back to where they came from.”

“This will su­per­sede USMCA,” the pres­i­dent wrote.

It is not clear that the pres­i­dent, who has re­peat­edly threat­ened auto tar­iffs on trad­ing part­ners, would fol­low through with his threat. If he does, Canada and Mex­ico could rea­son­ably ar­gue that all of the agree­ments reached in the USMCA are void, re­sult­ing in the breakup of a trade pact, which is a crit­i­cal agree­ment for busi­nesses across North Amer­ica.

“Be­cause he is so un­pre­dictable, you are not sure he’ll stick to any­thing,” said Maryscott Green­wood, chief ex­ec­u­tive of the Cana­dian Amer­i­can Busi­ness Coun­cil.

Last week, the In­ter­na­tional Mone­tary Fund cited global trade un­cer­tainty, in­clud­ing Trump’s trade wars, as it slashed its pro­jec­tions for global growth. And in a sur­vey by the Busi­ness Round­table last Septem­ber, nearly two-thirds of re­spond­ing chief ex­ec­u­tives said re­cent tar­iffs and trade pol­icy un­cer­tainty would have a neg­a­tive ef­fect on in­vest­ment de­ci­sions over the next six months.

Je­sus Seade Kuri, un­der­sec­re­tary for North Amer­ica at the Mex­i­can for­eign min­istry, was in Washington ear­lier this month to meet with leg­is­la­tors and lobby for pas­sage of the NAFTA re­place­ment. He told re­porters at a news con­fer­ence that Mex­ico did not in­tend to mix dis­cus­sions of trade with mi­gra­tion and avoided com­ment on the auto tar­iff threat.

But in an in­ter­view with a Mex­i­can ra­dio sta­tion ear­lier this month, Seade laughed off the threat of auto tar­iffs. “That is be­ing talked about,” he said, chuck­ling. “The art of the threat.”

That threat also hangs over Europe, South Korea and Ja­pan, all ma­jor sources of im­ported automobiles for Amer­i­can con­sumers. The po­ten­tial for U.S. car tar­iffs has brought for­eign of­fi­cials to the ne­go­ti­at­ing ta­ble, with South Korea sign­ing an up­dated trade deal last year, and Europe and Ja­pan just now be­gin­ning ne­go­ti­a­tions. But those talks may be aimed more at re­ceiv­ing tem­po­rary pro­tec­tion from Trump’s auto tar­iffs than break­ing new trade ground.

The pres­i­dent is re­quired to de­cide whether to im­pose auto tar­iffs by May 18, but he has the op­tion to ex­clude coun­tries if they are cur­rently in ne­go­ti­a­tions with the United States. For some for­eign of­fi­cials, the pru­dent choice has been to en­ter into lim­ited ne­go­ti­a­tions with the United States, while hop­ing that will fore­stall any levies.

The Euro­pean Union gave fi­nal ap­proval Mon­day for a for­mal man­date to carry out trade ne­go­ti­a­tions with the United States but it was not with­out con­tro­versy. France and Bel­gium both op­posed the move, an un­usual step given such man­dates are tra­di­tion­ally ap­proved unan­i­mously.

Some for­eign lead­ers have de­ter­mined the best ap­proach to deal­ing with Trump is to draw out ne­go­ti­a­tions for as long as pos­si­ble, po­ten­tially wait­ing out Trump’s pres­i­dency.

Last Septem­ber, the ad­min­is­tra­tion of Prime Min­is­ter Shinzo Abe agreed to en­ter into bi­lat­eral trade talks with the United States. But those talks have been de­layed as the Trump ad­min­is­tra­tion bat­tled with China and other na­tions. For Ja­pan, that has been a wel­come dis­trac­tion.

“Yes, the guy is un­pre­dictable, but I think if there are other is­sues oc­cu­py­ing his at­ten­tion, that means less chance that he would turn against Ja­pan,” said Takuji Okubo, man­ag­ing di­rec­tor and chief econ­o­mist at Ja­pan Macro Ad­vi­sors.

Chi­nese ne­go­tia­tors have also tried to buy time and hedge against Trump’s chang­ing whims. Bei­jing has been hes­i­tant to com­mit to a sum­mit meet­ing with the United States un­til all of the de­tails of the wide-rang­ing agree­ment they are ne­go­ti­at­ing with the United States are ironed out. They are wary that Trump will de­cide at the last minute that the deal isn’t good enough and send Pres­i­dent Xi Jin­ping away empty-handed, as Trump did when he met North Korean leader Kim Jong Un in Hanoi in Fe­bru­ary.

New York Times

Pres­i­dent Trump signs USMCA with Mex­ico’s En­rique Peña Ni­eto.

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