Ever since he was elected US President, Donald Trump has made it his mission to make trade fairer for America. Whilst his enemies have branded him as a protectionist for imposing tariffs on China and even close allies like Canada, it has always been his short-term strategy to inflict retaliatory tariffs on those countries until they lower their own. George W. Bush made a similar decision in 2002, but he did not see it through to the extent that Trump has. The President’s experiment with tariffs has had mixed results.
Reforming the North America Free Trade Agreement (NAFTA) was one of Trump’s signature policies during the 2016 general election. He has succeeded in replacing it with the United States-Mexico-Canada Agreement. In March 2018, the President imposed tariffs on steel (25 per cent) and aluminium (10 per cent) for most countries, including Canada, Mexico and the EU. In May 2019, he said he would impose a 5 per cent tariff on all imported goods from Mexico beginning June 10, a tax that would ‘gradually increase’ until the flow of undocumented immigrants from across the border stopped. Despite this, the fact that Trump has been able to persuade Canada and Mexico to support a new trade deal that will reduce tariffs in the long-term is a substantial success for his administration.
Furthermore, Mexico has already ratified the agreement while Canada is yet to do so. The US sent approximately $300 billion and $265 billion in goods to Canada and Mexico, respectively, last year. This demonstrates how important these two markets are for American businesses and why it is vital all sides can approve of this trade deal immediately.
Considering House Speaker Nancy Pelosi is leading an impeachment inquiry against the President, it is impressive that Trump has been able to win her approval for the USMCA to a certain extent. Unfortunately, the Democrats and the Trump administration were not able to reach a compromise on the trade deal during a meeting on Thursday due to Pelosi’s concerns about labour and environmental standards under the agreement. However, the House Speaker expressed her anxiety about not approving of the USMCA before 2020, which is when Trump is up for re-election.
If the President fails to convince the Democrats to vote for the USMCA before the election, he can accuse the latter of deliberately thwarting his prized trade agreement whilst the Democrats could say Trump has failed to deliver one of his key election promises. Either way, the USMCA is likely to dominate the 2020 general election.
Trump has been able to sign a limited trade deal with Japan recently. Japanese Prime Minister Shinzo Abe signed the trade pact hoping to avoid further US tariffs on cars. Japan’s lower house approved of the trade deal last Tuesday. Although both sides have been able to conclude a trade agreement, they must resolve their differences over auto tariffs before it can be concluded as a complete success.
US National Security Adviser Robert O’Brien also expressed his confidence that America and China can end their 16-month trade war by the end of the year, but he said he was concerned protests in Hong Kong could be an obstacle to signing a trade agreement. Trump’s success with China depends upon the outcome of Hong Kong’s district elections ending peacefully, or not.
The President’s negotiations in resolving trade differences with the EU see no end in sight. Trump administration officials are considering whether to investigate the EU as the window closes for slapping Brussels with auto tariffs. Neither side has entered discussions to reach a trade agreement and Brussels has made no offer to lower its 10 per cent tariffs on US vehicles. This trade war is likely to continue into the new decade.
Trump is close to succeeding in resolving his trade wars with Japan, China, Mexico and Canada. His success here will be determined by his concluding negotiations with those countries. This will improve his chances of winning the 2020 general election. But there is still more work to do with the EU and if Brussels wants to avoid being investigated by Trump administration officials, they need to budge at some point.