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Thirty months into President Trump's radical trade policy, it is time to take stock. American firms tend to give the President the benefit of the doubt - that the aim is not protection (which most don't want) but opening up markets overseas, striking better trade deals, and reducing the nation's big trade deficit. So far, however, none of this has happened. Instead, there is virulent uncertainty, barriers against American firms are going up, Europe, Japan and China have struck important deals with their trading partners, and the WTO, on which American firms depend for MFN treatment is at risk of collapse.
The president promised to sign far better trade deals, ensure fair treatment of American firms and reduce the United States’ trade deficit. Sadly, none of these objectives has been met.
Instead, the policy has created a virulent uncertainty which slows the global economy and undermines the rules-based trading system on which American firms depend.
Here are the facts. As many had predicted, the U.S. trade deficit, which depends more on fiscal than trade policy, is larger than when the President took office. Tariffs are not reducing imports. Tariffs are shifting the source of imports to third parties, such as Vietnam, and increasing their cost for U.S. consumers.
Employment in manufacturing has increased, but it has just kept up with employment in the rest of the economy. This, too, was not a surprise, since jobs in manufacturing depend far more on automation and tastes than on trade policy.
As for fair treatment of U.S. firms, according to Global Trade Alert, nearly 18 percent of U.S. exports were at risk from tariff increases by other Group of 20 countries last month compared to about 8 percent in 2016. According to the Peterson Institute, while China’s average tariffs applied to all other WTO members have been cut to 7 percent, those applied to the United States have more than doubled, to 20 percent, and over the last year, China’s imports from the United States have declined by 12 percent but have increased by the same amount from third parties. China appears to intend to buy food for its 1.4 billion people anywhere but the U.S. New compensation schemes for U.S. farmers, who are hit hardest, are expensive, insufficient and inequitably distributed.
Rather than favor U.S. firms, trade policy has placed most at a disadvantage as the costs of their imported inputs has risen and their competitors benefit from deals that do not include them.
Europe has concluded trade deals with Japan, Canada and Mexico and has reached an agreement in principle with Mercosur. Japan has formed a new trade alliance with ten countries that were initially part of the Trans- Pacific Partnership (TPP) Agreement, and which the president abandoned. Dozens more countries, including G-7 member Italy, have joined China’s global infrastructure and trade scheme, the Belt and Road Initiative.
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This article was originally published on The Hill.
