NS3040 Fall Term 2017 Protectionism 2017 Federal Reserve Bank of Chicago, Strong Dollar Weak Dollar

Overview During election campaign, Donald Trump criticized decades of US policy and pledged to security better trade deals Put “America First” strategy Upon taking office Trump withdrew from the Trans-Pacific Partnership (TPP), but 10 months on his trade agenda remains unclear. The United States last ran an annual trade surplus in 1975 Trump has focused on the country’s trade deficits Feels the deficits are a sign the global trade regime is tilted unfairly against the United States

U.S. Trade Balance

Trump Agenda I North America Trump administration is attempting to renegotiate the North American Free Trade Agreement (NAFTA) US trade with NAFTA partners was $1.2 trillion in 2016 While the country’s interconnected supply chains are a source of competitiveness, the United States runs trade deficits with both Canada and Mexico Trump has attacked NAFTA on a number of grounds Now he apparently wants to revise NAFTA rather than start again from scratch Areas of contention include (same objections in TPP) Digital trade Cross border data flows and Labor and environmental protections Oxford Analytica, United States: Trade Plans to get Nastier Not Clearer, August 1, 2017

Trump Agenda II U.S. would also like to exclude NAFTA’s dispute settlement mechanism Doing so would make it easier to restrict imports from Mexico and Canada through antidumping and countervailing duties Canada and Mexico clear that eliminating Chapter 19 is unacceptable. Other objectives expected to prompt disagreement Strengthening rules of origin provisions and Establishing an “appropriate mechanism” to address currency manipulation. Since the U.S. listed reducing trade deficits as its top objective, may mean trade restrictive measures are under consideration.

Trump Agenda III China Trump criticized China’s economic policies throughout his campaign Threated to Label country a currency manipulator and Impose a 45% tariff on US imports from China Upon taking office instead Launched the US-China Comprehensive Economic Dialogue and Initiated a 100-day plan to reset the relationship

Trump Agenda IV As of October momentum has stalled Progress limited toward end of year China’s 19th Party Congress in autumn Fractious U.S. domestic policies and Deteriorating relations over North Korea All creating climate more likely to produce heightened nationalism than cooperation. Number of Chinese acquisitions of US companies rejected on national security grounds has increased significantly since Trump assumed office

Trump Agenda V East Asia Trump administration turned its focus in East Asia to bilateral agreements Decision to abandon the TPP has damaged the credibility of U.S. negotiators in the region The TPP’s eleven remaining countries, particularly Japan expended significant political capital on the agreement prior to US withdrawal and are reluctant to re-engage Japan Has not reciprocated US interest in negotiating bilateral talks Is unwilling to make the extensive domestic concessions U.S. negotiators would ask for while not being able to accomplish objective of countering China’s expanding influence in the region

Trump Agenda VI U.S. negotiators have also brought up the US-South Korea free trade agreement signed in 2012 South Korean government is willing to address US concerns but does not want to reopen talks Europe Diplomatic disputes between US and EU suggest dim prospects for the Transatlantic Trade and Investment Partnership (TTIP) for which negotiations started in 2013 Investor-sta