Donald Trump's Trade Picks Point to Confrontation
January 16 2017 - 05:29AM
Dow Jones News
By William Mauldin
President-elect Donald Trump's pick of four key advisers on
trade and international affairs shows he is serious about
confronting Beijing, Mexico City and other capitals in an attempt
to open up markets for U.S. exports, while curbing imports that
compete with key American-made products.
The approaching U.S. policy shift is at the middle of a global
popular revolt against the free movement of products--and
people--across borders. In choosing to leave the European Union,
U.K. voters also chose sovereignty over the trade benefits of
Europe's common market. Other European governments could see
similar shifts after key elections this year.
The pressure has been building for years. Since the 2008
financial crisis, governments have increased the number of
protectionist policies, contributing to what has been the weakest
growth in trade volumes during an economic expansion in
decades.
Mr. Trump's warnings about tariffs on China and other leading
nations are worrying policy makers already coming to terms with
sluggish global growth. Broad tariffs launched on Beijing's $483
billion in exports to the U.S. could slow the second-biggest
economy and main contributor to global growth, they say.
Business leaders are hoping that cooler heads prevail and that
Mr. Trump's warnings about tariffs are an extreme negotiation
position, as his aides have suggested.
But his choice of advisers makes it clear that strict
enforcement of trade rules, including with import barriers, is on
the table.
Robert Lighthizer, a trade lawyer who has argued for three
decades for punitive tariffs on the overseas rivals of American
companies, was chosen this month for U.S. trade representative. The
choice complements the selection of other China critics and trade
hawks, including Wilbur Ross Jr. to lead the commerce department,
economist Peter Navarro at a new trade council at the White House
and Jason Greenblatt for overseas negotiations in general.
"The appointments are quite consistent with the campaign
rhetoric--he has four horsemen who are right on board," said Gary
Hufbauer, senior trade expert at the Peterson Institute for
International Economics, which backs free trade.
Mr. Trump has said he would pull the U.S. out of the
Trans-Pacific Partnership, or TPP, an unratified 12-nation
framework that President Barack Obama viewed as a key part of his
legacy and the economic centerpiece of his efforts to rebalance
foreign policy toward fast-growing Asia.
As recently as November, the Obama administration was hoping a
Hillary Clinton victory could allow for congressional approval of
the pact, which would have lowered tariffs among the U.S., Japan,
Mexico, Vietnam and eight other countries, as well as setting rules
of the road designed to put pressure on China.
The North American Free Trade Agreement, or Nafta, is also in
Mr. Trump's crosshairs, and he has signaled he will renegotiate the
pact or even abandon it altogether. Mexico responded this month by
appointing Luis Videgaray--a former finance minister whom Mr. Trump
has praised--as its foreign minister, with a priority on
maintaining ties with the U.S.
Since the election, Mr. Trump has reined in talk about imposing
big tariffs of 45% or so on Japan, Mexico and China. His aides have
said those proposals were more of an opening salvo in negotiations
with trading partners, rather than a policy position.
Instead, Mr. Trump lately has warned of taxes or duties on goods
made by companies that boost production abroad, putting pressure on
Ford Motor Co., General Motors and air-conditioner giant Carrier
Corp. This month he warned Toyota Motor Corp. it would have to pay
a "big border tax" on Corolla models produced in Mexico and sent to
the U.S.
Still, the risks are high: Mr. Trump has linked his trade
complaints about China to geopolitical flashpoints like North Korea
and Taiwan. Beijing is already challenging the U.S. at the World
Trade Organization over Washington's refusal to grant the country
market-economy status at the Geneva-based trade body on the 15th
anniversary of its membership in December.
If Mr. Trump imposes tariffs on Chinese goods, China could balk
at making deep concessions or retaliate. The Global Times, a
state-run newspaper, said this month that Chinese trade officials
have "fresh flowers" for the new administration but a "big stick
hidden behind" as well.
Mr. Trump could also face opposition in Congress. As an
alternative to tariffs, House Republicans have proposed a
complicated border tax designed to make U.S. exports more
competitive compared with imports, but the measure could face
retaliation or challenges at the WTO.
Senate Republicans who back free trade have reacted cautiously
to Mr. Trump's trade rhetoric and picks for key posts.
While Congress has constitutional authority over tariffs and
trade, a series of laws dating back decades gives the president
wide powers for imposing tariffs. Analysts say Mr. Trump and his
advisers are likely to defend industrial goods--steel and
autos--produced in the Midwestern states that propelled him to the
presidency.
Write to William Mauldin at william.mauldin@wsj.com
(END) Dow Jones Newswires
January 16, 2017 05:14 ET (10:14 GMT)
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