What Donald Trump is looking for is renegotiation of trade agreements on terms more favourable to the US.
US President Donald Trump’s signature move in any given context of statecraft is to challenge the status quo as his opening gambit, often preceding the move by cryptic plainspeak on Twitter.
He has amply demonstrated this over the 14 months in office. The actions range from frequent hiring and firing of senior administration figures, to jeering at, and questioning, the ability and credibility of unflattering media critics. Likewise those who are conducting investigations into possible Russian collusion in his winning bid for the presidency. And then there is his other hallmark, a studied, all round unpredictability, with his personal cards held close to his chest.
His handling of NATO allies with bills in hand has caused consternation, but pushed them onto the defensive. Similarly, the barbs and threats directed at a dysfunctional and rent-seeking United Nations (UN) have exposed the ineffectiveness of at least the General Assembly, as well as the loggerheads the UNSC is in.
Sensationally walking out of “unfair” to the US Climate Control negotiations, hit its mark, only to have Trump hinting at a reconciliation on better terms after a little while. Ditto for his growling at the runaway diktats of the World Trade Organisation (WTO), written over the years when the US sought to retain its role as the unconditional caretaker of the “free world” at all cost. Trump has also walked out of the Trans-Pacific Partnership (TPP) and threatens to leave the North American Free Trade Agreement (NAFTA) as well. All this is turning a lot of global leaders apoplectic as they know that return sanctions on America will not hurt it as much as they would like.
Nevertheless, Trump is essentially putting the world, albeit lurching from one platform to the next at different times in his trademark manner, on notice, with his mantra “America First”, leaving it ambiguous as to how he intends to flesh it out.
Trump’s foreign policy initiatives in the Middle East also seek to depart from the shibboleths of 25 years. Moving the US embassy to Jerusalem, a strong pro-Israeli action, was presaged in his very first visit, when he chose to spend the night in Jerusalem rather than Tel Aviv.
Trump has engaged with the new King of Saudi Arabia and his son, the energetic and reformist Crown Prince Mohammed bin Salman, with sales of hundreds of billions worth of military equipment. This bluntly underscores his desire to stymie Iranian ambitions in the region, including a roll-back of the Obama era accord and their nuclear weaponisation plans.
His basic willingness to do business with Russia’s Vladimir Putin is also a make-over of the chilly relationship between Presidents Barack Obama and Putin. Trump has taken up where Obama left off with India. He has moved the US closer in a security and technology embrace. This is to counter Chinese hegemony both in the Asia-Pacific-Indian Ocean theatres, and its challenge overall to American global supremacy. However, its engagement with India is very much a work in progress and the US attitude to Pakistan is tougher than before certainly, but not as much as India might have hoped for. Trump’s attitude to Afghanistan is that they need to essentially take care of their own security in the closest time frame possible. Would India take up the slack, Trump seems to be asking?
And now to the art of imposing international trade tariffs to secure “America First” advantages and create new jobs. The US Congressional polls approach at mid-term, and Pennsylvania is a steel state. But far from moving closer to a majority in both houses and an impeachment, the Democrats are beginning to admit they will be hard pressed to win on Capitol Hill.
The opening gambit began with an undiplomatic deadline. Trump indicated to China that it had a 100 days to do something about the gross trade imbalance at his initial summit with Xi Jinping conducted at his resort at Mar-a-Lago, Florida, early in his presidency. Trump promptly released this demand to the media as well. Predictably, nothing happened, as China, seasoned through several US presidencies, sat on its hands to test Trump’s resolve. The US President also asked for help from China to rein in a belligerent North Korea. He wanted China to use its influence to stop its neighbour and satellite to desist from its series of nuclear and missile tests. These are aimed to destabilise and intimidate its immediate neighbourhood such as Japan and South Korea certainly, but are also aimed, as frequently stated by President Kim Jong Un, at America.
When nothing happened and the tests continued unabated, tough US and Western economic sanctions on North Korea followed. China still did little about it and even helped North Korea violate the blockade with fuel transfers on the high seas. The next move, ratcheting up the pressure, has come recently in the form of trade tariffs on Chinese imported goods—$60 billion via a 25% tariff on steel and 10% on aluminium products from China. This was thought to be unthinkable by many US experts for the harm it would do to the US economy, and indeed the world, in the event of a trade war between the top two economies. But Trump has moved forward with it, and is sending a clear message. He has pointedly chosen to single out China amongst the suppliers, exempting Canada, Brazil and South Korea, even though China sells no more than 35% of the total that the US imports.
The same willingness to break through the logjam bypassing conventional wisdom has prompted him to indicate that he will hold direct talks with North Korea’s Kim Jong Un. This was brokered via South Korea, a US ally of long standing where he sent daughter Ivanka for informal talks, rather than China. But to emphasise its relevance and make clear it won’t be excluded, China has just held a secretive summit of its own with the North Korean leader in Beijing prior to the expected US-North Korea summit soon. China, now with a President for life in Xi Jinping, has warily countered the tariff moves by imposing mild import duties on as many as 128 items of American imports. These include products from Trump voter country, such as pork and wine.
There has been a torrent of comment, most predicting serious consequences if a global protectionist trade war ensues in earnest. Goldman Sachs says there will be a 20% drop in equity prices. Trump had earlier slapped on tariffs on imported solar panels and washing machines, but not just from China. But now, to prevent the rest of the world coalescing against his protectionist moves, Trump is concentrating tariff impositions just on China. Will it work to bring China to offer reparations on the massive theft of intellectual property rights (IPR), which is another spur to the imposition of these sanctions? Will China act to right some of massive trade imbalance in its favour? Not if you believe the current Chinese posturing, but Trump as a businessman, if not a politician so far, does have a track record for getting his way.
Not all the commentary is critical either. Some, like the respected digital portal Quartz, think the steel and aluminium tariffs make “perfect sense”, seen from the historical perspective of US trade policy. The purpose, says Carmen Dorobat, an international trade expert at Leeds Trinity University, is political. Trump has, in fact, linked the steel and aluminium tariffs on Chinese product to “national security”. It is a “disruptive” approach to trade policy, says an Indian newspaper, featuring an article from Harsha Vardhan Singh of Brookings India.
But what Donald Trump is looking for is renegotiation of trade agreements on terms more favourable to the US if his bid to get an extension of Trade Promotion Authority (TPA) to do this from Congress is an indication. Trump says, “When we’re down by $100 billion, the trade war hurts them; it doesn’t hurt us. So we’ll see what happens.” He might have exempted various countries from this first salvo, but they too have been put on notice to move away from their unequal treaties. Trump is on record that he can forego tariffs altogether given the right kind of cooperation. Though the vilification from left leaning economists is at a crescendo right now, Trump can hardly be faulted for this.