Although the course of Trump administration trade policy remains unclear, we see the potential actions discussed in this report falling into three categories:
- Most likely. It appears likely that the Trump administration will (i) increase use of trade remedies and enforcement mechanisms, including the AD/CVD laws, anti-circumvention proceedings, and safeguards; (ii) withdraw the United States from the TPP; (iii) request renegotiation of the NAFTA; (iv) bring WTO disputes more frequently, (v) eventually pursue bilateral FTAs; and (vi) make minor changes to the CFIUS review process, perhaps to target investments by foreign SOEs for additional scrutiny.
- Less likely. It is possible, though less likely than the aforementioned actions, that the Trump administration will: (i) utilize Section 301 of Trade Act of 1974 to take specific and direct action to counter perceived unfair trade practices by foreign countries; (ii) designate China as a "currency manipulator"; (iii) seek to unilaterally raise tariffs on US trade agreement partners under the tariff modification authority set forth in TPA and various FTA implementing bills; (iv) achieve a substantial renegotiation of the NAFTA; (v) continue US involvement in the TTIP, the TISA and/or the EGA; and (vi) seek to expand the scope of CFIUS's review powers beyond national security issues (to include, for example, economic security or reciprocity issues).
- Least likely. It is unlikely that the Trump administration will: (i) use statutes such as Section 232 of the Trade Expansion Act, TWEA, IEEPA and Section 338 of the Tariff Act to impose across-the-board tariffs on imports or punish "outsourcers"; (ii) achieve major, substantive renegotiation of the WTO Agreements or withdraw the United States therefrom; (iii) achieve the inclusion of trade-balancing mechanisms in US FTAs through renegotiation thereof; or (iv) withdraw the United States from FTAs.
Given the legal and practical constraints on Presidential authority over trade policy, US trade policy under the Trump administration will likely turn more interventionist but avoid Mr. Trump's most aggressive proposals. Given that the more aggressive proposals could have serious legal, political, and economic ramifications, it appears unlikely that the Trump administration will seek to implement them. Rather, it appears likely that the Trump administration will employ less controversial tactics – such as more aggressive use of US trade remedy laws and enforcement mechanisms. Similarly, while the Trump administration might be reluctant to withdraw outright from US trade agreements, it might aim to renegotiate such agreements instead.
These conclusions merit caution, given that Mr. Trump has not outlined his trade policy agenda in detail and has not announced his appointments for key trade-related positions. However, recent statements by Mr. Trump's advisors lend support to this view. For example, Commerce Secretary nominee Wilbur Ross has repeatedly downplayed the Trump administration's desire to impose an across-the-board 45 percent tariff on imports from China. Rather, Mr. Ross has stated that President Trump would use the threat of such a tariff as a negotiating tactic, and would only do so as a last resort if negotiations fail. Mr. Ross has also recently acknowledged the benefits of FTAs, even noting that Mexico's success in attracting foreign investment is due in part to the country's numerous trade agreements, including with the European Union. Treasury Secretary nominee Steve Mnuchin, meanwhile, did not give a definitive answer when asked whether the Trump administration would declare China a currency manipulator and thereby impose countervailing duties on Chinese imports. Both men also have emphasized tax and regulatory reform over protectionism. These developments suggest that President-elect Trump might take a less interventionist approach to trade policy than many have come to expect given his campaign statements.
Even if the Trump administration does not seek to implement all of the trade policies discussed by Mr. Trump during the campaign, it appears likely to abandon major efforts at trade liberalization undertaken by the Obama administration, most notably the TPP. Given this pledge and Mr. Trump's campaign statements regarding trade agreements, it is also questionable whether the United States will continue to play an active role in negotiations for new multilateral and plurilateral agreements, such as the TiSA and the EGA. If the Trump administration decides that the United States should no longer participate in the negotiation of new trade agreements and limits US involvement in the WTO to the dispute settlement mechanism, this alone would represent a significant departure from long-standing US trade policy and a major change in the multilateral trading system.
Implications of the 2016 US Presidential Election for Trade Policy
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