President Donald Trump gave notice over the past week that he plans to fulfill his campaign promise to revamp U.S. trade deals and in the process displayed his own style of brash, tough negotiating by taking a hard line against Mexico.
Trump’s tweets and statements have stirred concern among backers of free trade, who fear his talk of stiff tariffs will jack up prices for U.S. consumers and launch trade wars, and wary support among labor unions, who still worry he’ll put corporate benefits over worker rights.
Trump has a trade policy that’s still a work in progress. But he has given every indication he intends to follow through by shifting U.S. policy toward protectionism and away from broad free-trade priorities.
Trump signed an order Monday withdrawing the United States from the pending Trans-Pacific Partnership, or TPP, trade deal.
And he has talked repeatedly about renegotiating the 23-year-old North American Free Trade Agreement, or NAFTA, with Mexico and Canada.
Trump has threatened tariffs of 35 percent on auto manufacturers with factories in Mexico, a 45 percent tariff on imports from China and, more recently, a 20 percent tax on imports from Mexico.
And his order to start building a border wall at Mexico’s expense led the Mexican president to cancel his Tuesday meeting with Trump.
He also has said he wants to close the gap in the U.S. trade deficit with the world, which stood at $737.1 billion in 2015, and to restore U.S. manufacturing jobs, which dropped — for a variety of reasons — from a peak of 19.4 million in 1979 to 12.3 million in 2015.
But questions remain about his emerging trade policy.
Here are some issues to watch:
- Will Trump withdraw from NAFTA? Experts say NAFTA needs to be updated on digital business, energy and similar issues, but a 2015 Congressional Research Report said NAFTA’s net effect on the U.S. economy was “relatively small.” Still, Trump blames the pact for destroying U.S. jobs and a nearly $60 billion trade deficit with Mexico and demands that it be reopened. He said he’s willing to walk away from it if he doesn’t get what he wants.
- Will Trump actually impose high tariffs? Trump has wielded possible big tariffs as a hammer on automakers, China and Mexico. Gary Cohen, an expert on global trade at the University of Maryland’s business school, said he thinks Trump is using the threat of tariffs as a negotiating tactic. If not, Cohen said, Trump should consider the ramifications: higher consumer prices squeezing U.S. low-to-middle income families, and retaliation by high tariffs imposed by other nations on U.S. goods, harming U.S. companies.
- How will Trump approach China? The United States imports more from China than anywhere else, and that’s a leading cause of the U.S. trade deficit. Trump said he’d label China a currency manipulator but hasn’t so far. And Trump hasn’t said whether he’ll try to replace the scrapped TPP, other than with one-on-one trade pacts.
- Will Trump put the interests of corporations over workers? Union officials say many trade pacts have favored business over labor, and they worry Trump might do the same. “The United States has withdrawn from TPP and announced its intention to reopen NAFTA. It looks like a profound change in trade policy, and we think for the better,” said Damon Silvers, director of policy for the AFL-CIO. “But we don’t know, because we don’t know what direction critical issues like labor rights and special courts for corporations are going to go.”
- Who will Trump heed on trade in his Cabinet? Trump has assembled a trade team with internal differences: a protectionist in Robert Lighthizer as U.S. trade representative, but a free trader in investor Wilbur Ross at the Commerce Department. Cohen praised Trump’s choices for State and the U.S. ambassador to China for their trade views. For Trump, Cohen said, “It really comes down to: Is he going to listen to the people who he surrounded himself with or is he going to do what he’s decided to do?”