President Trump’s trade shakeup hasn’t delivered the ‘better deal’ he promised

Donald Trump
Carlos Barria | Reuters Donald Trump

President Donald Trump is shaking up trade policy just as he promised, with one exception: the part about the “better deal” for the American economy. Trump has launched, but not landed, various trade initiatives: withdrawal from the Trans-Pacific Partnership, protective tariffs on steel and aluminum, confrontation with China and renegotiation of the North American Free Trade Agreement. The details remain unresolved, and they may well produce discrete benefits for some U.S. businesses and workers. But for the economy overall – including big swaths of Trump country – trade policy veterans of past Republican administrations say the challenge now is limiting damage in the form of disrupted supply chains, higher prices and lost jobs. Trump alienated allies such as Canada and the European Union by threatening to apply tariffs on steel and aluminum to them as well as China. That creates double-barreled problems for U.S. business. With Trump this week deferring decisions on the scope of tariffs, and the EU and China threatening retaliation, uncertainty hangs over business purchasing and investment decisions. China has already imposed new tariffs on American sorghum, a blow to farmers in Kansas, and threatened similar steps against soybeans and other agricultural products that would hit Trump-friendly voters elsewhere in the Midwest. Whatever the administration decides, recent history points toward net negative economic efforts. Analyses of steel tariffs imposed by Bush found they created fewer jobs in steel production than they destroyed through higher prices for steel-consuming industries. The Trump administration wields the possibility of tariffs on Canada and Mexico as leverage to achieve U.S. goals in a renegotiated NAFTA. As the president warns of scrapping the existing deal, representatives of all sides report rising prospects that they’ll reach a new one. “Trump created a crisis for NAFTA in order to appeal to his protectionist constituencies,” said Robert Zoellick, Bush’s U.S. trade representative. “The priorities of his rewrite, if Canada and Mexico agree, are supposed to restrict North American trade and investment, not boost our competitiveness with the world.” The U.S. to exit a new NAFTA after five years. While that appeals to a president who built a reality television career around the words “you’re fired,” it undercuts the predictability corporations need for long-term planning. “The climate it creates stops investment,” said Carla Hills, trade representative under President George H.W. Bush. “We look like we no longer have reliability.” Trump’s strategy for pursuing a new NAFTA adds another danger. The administration has discussed scuttling the existing agreement at the same time it submits a new one to Congress. The idea would be pressuring reluctant lawmakers to vote yes. But that poses the risk of calamitous economic disruption if a White House with limited success on Capitol Hill fails to gather and accurately count the necessary votes.