TRADE POLICY

Trump Ups the Ante on Trade

  • Why it matters

    Why it matters

    The Trump administration is making belligerent noises on trade, but its actions so far have been relatively restrained.

  • Facts

    Facts

    • On Friday, Donald Trump signed two executive orders on trade, signaling a “new era in trade policy.”
    • The Trump administration blames the United States’ $502 billion trade deficit on unfair trade agreements.
    • So far, changes to American trade policy have been relatively restrained, which observers put down to deep divisions within the new administration.
  • Audio

    Audio

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Salzgitter AG
Sparks are flying among foreign steelmakers over accusations by President Trump over alleged price dumping. Source: Julian Stratenschulte / DPA

Donald Trump’s media event on Friday to announce his “new era in trade policy” began like much else in his administration – with a blunder.

The U.S. president invited the Washington press corps to the Oval Office to witness the signing of two executive orders on trade intended to begin putting “America First” policies into action. “Thousands of factories have been stolen from our country,” Mr. Trump growled, adding that from now on “the well-being of America and the American worker is my north star.”

But the president lost his nerve when journalists began asking him about investigations into his campaign’s Russian ties. Flustered, Mr. Trump stormed out of the room, forgetting to sign the executive orders.

The error was quickly rectified: The orders mandating the government to investigate economic relations with America’s most important trading partners were signed in private.

Mr. Trump wants to know the reasons for America’s enormous trade deficit and has ordered the U.S. Department of Commerce to search for an empirical basis to justify a sharp increase in tariffs. The steel sector, in particular, is under heavy scrutiny. The Trump administration has accused several foreign steelmakers, including Germany’s Salzgitter and Dillinger Hütte, of price dumping.

Commerce Secretary Wilbur Ross has threatened these and other foreign firms about engaging in unfair practices. “Our steel industry today is under assault from foreign producers that dump and subsidize their exports,” he said. “We will ensure U.S. businesses and workers are treated fairly.”

The U.S. government, he said, will make a final decision on possible dumping duties by the middle of May.

“Our steel industry today is under assault from foreign producers that dump and subsidize their exports.”

Wilbur Ross, U.S. Commerce Secretary

The latest statements from Washington have alarmed the German government. “These may just be test cases,” said Economics Minister Brigitte Zypries. “But they show that the United States clearly intends to move away from free trade and existing trade agreements. We have to seek a constructive dialog and explain that the reasons for the U.S. trade deficit do not only lie with other countries.”

Ms. Zypries will meet with Mr. Ross in the United States in May. “We will work with the European Commission to ensure that the United States abides by the rules of the World Trade Organization,” she said.

Provisional estimates by the economics ministry indicate that the calculations underlying the Trump administration’s dumping accusations are problematic. A final assessment will be carried out by the European Commission. Berlin is also weighing submitting a complaint to the WTO.

The White House’s protectionist language is also causing concern among American businesses. “We need free and fair trade,” Judy Marks, chief executive of Siemens U.S., told Handelsblatt.

Ms. Marks is a voice listened to in Washington. Last month, she was appointed to the U.S. Investment Advisory Council, which is part of Mr. Ross’s department and tasked with attracting foreign investment. “Investors do not just come here to service the U.S. market,” she said, adding that “26 percent of all U.S. exports can be attributed to American subsidiaries of overseas companies.”

“These may just be test cases, but they show that the United States clearly intends to move away from free trade.”

Brigitte Zypries, German Minister for Economic Affairs

It remains unclear whether the White House will listen to these arguments. Mr. Trump’s position on free trade is one of the few constants in the president’s otherwise changeable worldview. Already in the early 1980s, Mr. Trump complained about the U.S. being exploited by its trading partners. Back then, Japan was his main target; today, it’s China and Germany.

That said, there is a striking gap between the administration’s tough talk and the comparatively minor steps it has so far taken on trade. Contrary to expectations, Mr. Trump has not accused China of “currency manipulation.” Instead, next week, he will roll out the red carpet for the Chinese president Xi Jinping at his beach club, Mar-a-Lago.

Likewise, the changes Washington is proposing to the North American Free Trade Agreement, or Nafta, are far less drastic than originally feared. And the idea of a “border adjustment tax” – which Republicans in Congress want to introduce to slow imports while encouraging exports – remains highly controversial within the United States. But the tax, which concerns Berlin, may never become law.

Two factions are competing for influence within the White House. Protectionists, led by Mr. Trump’s trade czar, are facing off against pragmatists, headed by Gary Cohn, the president’s economic advisor. Mr. Trump is said to sympathize with Mr. Navarro, while Mr. Ross leans more to the group around Mr. Cohn.

The power struggle has blurred the administration’s trade policy. Ms. Marks, the Siemens executive, advised foreign companies to be patient. “Take a deep breath, and wait to see what happens,” she said.

 

Moritz Koch has been Handelsblatt’s Washington correspondent since 2013. Dana Heide is a political correspondent for Handelsblatt in Berlin. To contact the authors: koch@handelsblatt.com, d.heide@vhb.de

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