Was Trump’s campaign talk just bravado, or are we about to see a trade war?<\/b>
After a campaign defined in large part by a pledge to turn the nation\u2019s trade agenda on its head, President Trump has opened his presidency with\u00a0a series of modest, more cautious steps \u2014 leaving protectionists and free-trade advocates alike wondering if Trump is ramping up to delivering on his promises or pulling back from them entirely.
A draft letter from the administration to Congress that leaked this week called for maintaining the North American Free Trade Agreement largely as it currently exists \u2014 after\u00a0 Trump during the campaign\u00a0called \u00a0the agreement the \u201cthe worst trade deal maybe ever signed anywhere.\u201d
On Thursday night, Trump\u2019s commerce secretary announced a set of small-bore duties on a few specific types of imported steel plate \u2014 and then went on cable television the next morning to proclaim that the United States is in a \u201ctrade war\u201d with the world.
The uncertainty was on display in microcosm\u00a0Friday afternoon when,\u00a0after speaking\u00a0at a White House event on a pair of trade-related executive actions, Trump left the room with the official\u00a0documents waiting for him on the desk beside the podium \u2014 unsigned. The White House confirmed the president later signed the papers, ordering studies and reviews that further frustrated advocates of free trade without satisfying protectionists.
The questions about Trump\u2019s trade plans take new urgency this week\u00a0ahead of his first meeting\u00a0with President Xi Jinping of China, scheduled for Thursday and Friday at the president\u2019s Mar-a-Lago Club in Florida. The Chinese are eagerly awaiting answers on whether\u00a0the United States will support granting the country status as a market economy under international law, a status that would protect Chinese products from certain tariffs.
\u201cIt is all about trade,\u201d Trump said of his meeting with Xi in an interview with the Financial Times. Trump argued that Chinese producers have an advantage because of tariffs and the value of the renminbi, and that U. S. negotiators could use trade to secure Chinese cooperation on North Korea and other security issues.
\u201cWe cannot continue to trade if we are going to have an unfair deal like we have right now,\u201d Trump said. \u201cWhen you talk about currency manipulation, when you talk about devaluations, they are world champions. And our country hasn\u2019t had a clue.\u201d
Some\u00a0outside observers believe\u00a0the\u00a0contradictory trade signals reflect\u00a0an internal dispute among Trump\u2019s advisers \u2014 between populists who favor more restrictions on trade, such as chief strategist Stephen K. Bannon, and Wall Street veterans such as National Economic Council director Gary Cohn.
Both proponents and skeptics of trade are waiting for the result.
The public is \u201cdefinitely seeing mixed signals coming out of the administration,\u201d said Thea Lee, an AFL-CIO economist. \u201cThey aren\u2019t resolving their issues inside. Some of them are bubbling over.\u201d
Claude Barfield, an expert on trade at the conservative American Enterprise Institute, predicted \u201ccontinual debate about this internally\u201d among Trump\u2019s staff. \u201cIt will be one way one day, and another way another day, as they try to pick and feel their way through this trade minefield,\u201d Barfield said.
The letter on NAFTA, dated March 22 and first reported by the Wall Street Journal, was a draft of a formal notification that the administration will have to send to Congress to begin the process of renegotiating the agreement. Trump has pledged to revise the accord, signed by President Clinton, or to withdraw if Mexico and Canada will not agree to make changes.
Yet apart from passages calling for limiting federal procurement to U. S. firms and restricting the amount of parts and raw materials from outside North America that can be traded among the three countries at NAFTA\u2019s preferential rates, the draft of the letter only endorsed minor changes to the agreement.
\u201cThe NAFTA notification was clearly inadequate, and a disappointment given all the rhetoric and campaign promises on that front,\u201d Lee said.
That rhetoric continued throughout the week. \u201cWe are in a trade war. We have been for decades,\u201d Commerce Secretary Wilbur Ross said on CNBC\u2019s \u201cSquawk Box\u201d Friday morning. \u201cThe only difference is that our troops are finally coming to the rampart.\u201d
It was not the first time Ross had used that line, but the contrast between his bellicose tone and the emerging lack of direction from the administration on trade was clearer than before.
The previous evening, Ross had announced a set of new retaliatory duties on steel plate from Austria, Belgium, France, Germany, Italy, Japan, Korea and Taiwan. The duties follow a finding by the Commerce Department that those countries had engaged in unfair practices, allowing U. S. customs officials to begin collecting taxes on that steel pending a final determination expected in May.
The German foreign minister objected forcefully in a statement, calling on other European countries to appeal the U. S. decision to the World Trade Organization. Yet experts in the United States noted that the levies affect only a small quantity of steel \u2014 the bulk of it from Germany and France, which sold U. S. customers products subject to the duty worth $196 million and $179 million respectively in 2015, according to Commerce. Experts also noted past U. S. presidents have also used this kind of retaliatory tariff aggressively to protect domestic factories and workers.
Trump\u2019s actions so far \u201creflect for the most part a fairly conventional approach,\u201d said John Veroneau, a former deputy U. S. trade representative under President George W. Bush. \u201cAt this point in time, there\u2019s been no decisions that I think would confirm the worst fears of folks worried that this administration was going to take a very sharp protectionist turn.\u201d
There was a hint of more protectionist policy in Trump\u2019s actions later Friday with respect to retaliation and other aspects of international trade.
One of Trump\u2019s actions orders a review of whether those retaliatory duties are being adequately collected. A second will instruct the administration to examine whether unfair policies are contributing to the U. S. trade deficit with specific countries \u2014 that is, the amount by which U. S. imports from each country exceed exports to that country.
The conceit of Trump\u2019s measures caused consternation among some proponents of free trade, who argue that trade deficits are not primarily a result of tariffs, subsidies and other forms of manipulation, but rather the fact that the United States can borrow cheaply from foreign countries \u2014 a good thing for American consumers and investors.
\u201cWhile it is important to examine the causes of our trade deficits, we know that there are many causes that have nothing to do with trade agreements \u2014 including the status of the U. S. dollar as the world\u2019s reserve currency and the widespread use of the U. S. dollar internationally,\u201d said Rep. Kevin Brady (R-Tex.) in a statement. \u201cIn fact, our trade agreements have been successful in making it easier to sell \u2018Made in America\u2019 products and services.\u201d
Yet since Trump\u2019s actions will have no practical effects besides gathering more information, the response was muted, including from those supportive of the effort.
\u201cWe\u2019re looking forward to seeing the results of it, but it\u2019s just a study,\u201d the AFL-CIO\u2019s Lee said. \u201cWe\u2019re going to judge in the end on concrete actions and what the impact on workers is.\u201d
Barfield of AEI said he thought the protectionists might have the upper hand in the White House\u2019s internal debate, noting that Trump himself has been a vocal skeptic of international trade for almost three decades.
\u201cNo matter how rational and sensible, let\u2019s say, the economists are in a meeting in the White House, they\u2019re going to have to fight Trump\u2019s instinctive sentiments,\u201d Barfield said. \u201cThey may persuade him, but it\u2019s always going to be a question of, it seems to me, persuading the president against his own fundamental instincts.\u201d
\u201cDuring the campaign, I traveled the nation and visited the cities and towns devastated by unfair trade policies \u2014 probably one of the major reasons I\u2019m here today, trade,\u201d the president said during the signing ceremony.
As Trump was stepping out the door of the Oval Office after his remarks, Vice President Pence touched him on the shoulder. The two men exchanged a couple of words. The door closed behind the president, and Pence retrieved a portfolio waiting on Trump\u2019s desk before following his boss out.<\/p>\n