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Donald Trump

Trump signs executive order to withdraw US from Trans-Pacific Partnership

The president delivers on campaign promise as he vows to renegotiate the North American Free Trade Agreement

PUBLISHED : Tuesday, 24 January, 2017, 1:41am
UPDATED : Tuesday, 24 January, 2017, 2:18pm

President Donald Trump began recasting America’s role in the global economy Monday, cancelling an agreement for a sweeping trade deal with Asia as one of his first official White House actions.

After meeting with business executives to discuss the US manufacturing industry, Trump headed to the Oval Office to sign an executive order formally ending the United States’ participation in the Trans-Pacific Partnership. The move was largely symbolic -- the deal was unlikely to make it through Congress -- but served to signal that Trump’s tough talk on trade during the campaign will carry over to his new administration.

Trump stressed he wants “fair trade,” claiming countries such as Japan “charge a lot of tax” on US products.

“If they’re going to charge tax to our countries -- if as an example, we sell a car into Japan and they do things to us that make it impossible to sell cars in Japan...It’s not fair,” he said.

Trump also singled out China, saying, “If you want to take a plant or you want to do something, you want to sell something into China and other countries, it’s very, very hard.”

“In some cases, it’s impossible,” he said. “They won’t even take your product.”

Trump trade strategy starts with quitting TPP - and a warning to nations that ‘violate trade agreements’

That could point to contentious negotiations over the North American Free Trade Agreement down the road. Trump repeatedly promised to reopen the 22-year-old deal with Mexico and Canada while on the campaign trail, and he reiterated his threat to punish US companies that build factories abroad in brief remarks on Monday.

Mexico will aim to keep tariff-free commerce with NAFTA partners Canada and the United States in its talks with the new US government, President Enrique Pena Nieto said on Monday, and will seek bilateral trade deals with other nations.

In a key foreign policy speech, Pena Nieto underlined the importance of open dialogue and negotiation with new US President Trump’s administration.

“Neither confrontation nor submission. The solution is dialogue and negotiation,” Pena Nieto said.

Trump’s protectionist rhetoric is part of a global backlash against the drive toward greater internationalisation that has existed since the end of World War II. British Prime Minister Theresa May, who is in the midst of navigating her country’s own break from established trading partners, is slated to visit with Trump later this week. A White House spokesman said meetings with Canadian Prime Minister Justin Trudeau and Mexican Prime Minister Enrique Pena Nieto are in the works.

“What we want is fair trade,” Trump said during his meeting with executives. “And we’re gonna treat countries fairly, but they have to treat us fairly.”

Among the business leaders Trump met with Monday was Dow Chemical Chief Executive Andrew Liveris, who said the president tasked the executives to return in 30 days with a plan to shore up the manufacturing industry. He said there was extensive discussion of Trump’s threat to impose border tax on US companies that build factories in other countries and ship the goods back home -- a proposal that is shaping up to be a centrepiece of Trump’s trade policy.

“What we want is fair trade. And we’re gonna treat countries fairly, but they have to treat us fairly”
US President Donald Trump

“I would take the president at his word here,” Liveris said. “He’s not going to do anything to harm competitiveness. He’s going to actually make us all more competitive.”

Still, it remains unclear exactly how the tax would be implemented. Testifying before the Senate finance committee last week, Trump’s nominee to lead the Treasury Department said any border tax would be targeted at specific businesses.

However, the president does not have the power to levy taxes, and international trade experts have warned singling out companies could violate existing treaties.

As Trump kills the TPP, can China-backed RCEP fill the gap?

House Speaker Paul Ryan has proposed allowing businesses that export goods to deduct many of their expenses, while those that import would not receive the same benefit. But in a recent interview with the Wall Street Journal, Trump dismissed the plan, known as border adjustment, as “too complicated.”

Economists have warned that many of Trump’s proposals -- including suggestions that he would impose blanket double-digit tariffs on goods from Mexico and China -- could backfire on the American economy by causing prices to rise or igniting a trade war.

And business groups such as the US Chamber of Commerce had lobbied extensively for passage of TPP, touting the deal as an engine of job growth and an important check on China’s growing ambitions.

“TPP withdrawal will slow US [economic] growth, cost American jobs, & weaken US standing in Asia/world,” said Richard Haas, president of the Council on Foreign Relations, said in a tweet early Monday. “China could well be principal beneficiary.”

But other industry groups argued that Trump’s approach would better leverage America’s status as the world’s largest economy. Scott Paul, president of the Alliance for American Manufacturing, said his group is hoping that opening up NAFTA could provide more leeway to combat currency manipulation in countries outside the agreement. His group, which represents both industry and unions, is also seeking more stringent rules of origin that dictate how much production must occur with member countries to qualify for free trade status.

“The details are going to matter a lot,” Paul said. “Renegotiating NAFTA obviously entails some risks and some rewards.”