In early to mid 2018, Donald Trump declared a trade war, which he is waging on multiple fronts. He’s taking on China for engaging in unfair market practices, the North American Free Trade Agreement with Canada and Mexico because he believes it rips off American businesses, and has spoken out against the European Union’s trade practices as well. He’s either threatening or adding tariffs on a wide array of imported goods, and many of those he’s targeting have threatened retaliation. With the eyes of the world on America’s trade practices, many are looking at what Donald Trump’s overall views on trade are. By examining the overall views of Donald Trump on trade, many are trying to predict what policies and measures he may propose next. In general, Trump has always stated that he supports trade liberalization, but also opposes many of the US’s free trade agreements because he believes they were poorly negotiated and will ultimately cost American jobs. Furthermore, Trump believes that his own business background has equipped him to re-negotiate far better deals for the country, and to set past wrongs right.
NAFTA
The North American Free Trade Agreement, better known as NAFTA, has been a matter of great contention for Donald Trump. The president described the agreement as a “disaster,” and has vowed to either renegotiate it or break it during his time in office. He and the Republican Party also have goals to penalize US companies that move their business abroad through tariffs and fees. He cited Ford as an example, vowing to charge them 35 percent on vehicles they produce in their new Mexican factories and import to the US to sell. Currently, these companies receive an unfair tax advantage, because the Mexican government rebates value-added taxes paid to Mexican suppliers, while those who keep their business in America receive no such rebates. Trump hopes to combat this issue via border adjustment taxes. Mexican Economy Minister Ildefonso Guajardo said his country was planning its own tariffs on US goods, following up by stating they would issue them in a way that is most politically damaging to Mr. Trump.
Trump and the EU
When asked who the United State’s biggest foe is, Trump said there were many and mentioned China and Russia, but went on to say that the biggest is the European Union, or Eu. He said, “I think the European Union is a foe, what they do to us in trade. Now you wouldn’t think of the European Union but they’re a foe.” He continued to say, “In a trade sense, they’ve really taken advantage of us and many of those countries are in Nato and they weren’t paying their bills and, you know, as an example a big problem with Germany,” citing Germany’s reliance on Nord Stream 2, a pipeline which will increase the flow of gas to EU states which Trump has spoken out against.
When Donald Trump threatened tariffs against the EU, they drew up a $3.5 billion plan of retaliation tariffs, which included motorbikes, whiskey and T-shirts. Overall, the list included over 100 products. Trump re-retaliated, stating that he would put a 25% tax on European cars if the EU retaliated in this manner. While the Swedish Prime Minister stated, “I am convinced that increased tariffs will hurt us all in the long run,” Donald Trump is more optimistic. He believes that, given the US’s large trade deficit, they are sure to win any trade war, stating “When we’re behind on every single country, trade wars aren’t so bad.” However, there is growing concern among other politicians that this could spiral out of control. Senate leader Mitch McConnell said, “There is a lot of concern among Republican senators that this could sort of metastasise into sort of a larger trade war.”
Trade in the Pacific
Donald Trump is particularly harsh on his views regarding trade with China and Japan. He has opposed trade agreements with these countries over the years, especially with the Obama administration had proposed the Trans-Pacific Partnership, or TPP. China, in particular, he views as a currency manipulator and a thief of US intellectual property, and therefore undeserving of a fair trade agreement with the United States. He is most insistent upon the claim of currency manipulation, claiming that China only sells so many goods in the US because it has devalued its currency. However, this is a matter of contention among economists, many of whom argue that China has been spending to prop up the yuan.
Of China, Trump has stated, “The money they took out of the United States is the greatest theft in the history of our country.” He then threatened large import taxes, stating, “And you know what? They’re going to stop playing games with us. Look, they have taken our jobs, they have taken our money, and on top of that they have loaned the money to us and we actually pay them interest now on money.” When economists questioned his tactics, stating that China is a creditor that holds power over the US, Trump responded “We have a lot of power over China economically. Because we are the piggy bank that they keep robbing from.”
However, Trump did recognize that such tariffs against China could lead to higher prices. He believes this is the price we have to pay to start focusing on American-made goods, and strengthening the economy by doing so. He was questioned about what would happen when prices on Chinese-made goods rose because of his proposed tariffs, especially on the shelves of stores such as Walmart, whose target demographic is price-conscious shoppers. He responded “I see people buying five dolls for their daughters, maybe buy two dolls for their daughters. But I also say that we’ll start making the product at home.”
Sources:
- Trump on the Issues – Council on Foreign Relations
- How Donald Trump Thinks About Trade – The Economist
- Donald Trump: European Union is a foe on trade – BBC News
- Trump tariffs: President says EU makes business ‘impossible’ – BBC News