Under Donald Trump, America may go from trade rule-maker to rule-taker

Matthew P. Goodman says that as the Trump administration escalates the trade conflict and undermines prior agreements, one consequence will be that it is no longer active in writing the trade guidelines that have been beneficial to American interests

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US President Donald Trump listens during a news conference in the White House in Washington on July 30. Photo: Bloomberg

Published: 5:00pm, 3 Aug 2018Updated: 10:31pm, 3 Aug 2018

Critics of Donald Trump’s trade policies are understandably focused on the damage to short-term US economic interests and to the broader global economic order. These costs are real and measurable. But the most lasting impact of Trump’s approach could be to concede to others the role the United States has played since the second world war as the leading rule-maker in the global economy. Early signs of this shift are appearing around the world, from Brussels to Hanoi to Beijing.

The tally of economic harm from Trump’s tariffs on steel, aluminium and US$34 billion worth of goods from China (so far) is getting longer and more specific. It ranges from anecdotes about workers being laid off in US manufacturing plants dependent on imported steel to a new estimate by the International Monetary Fund that, if Trump follows through on his pledge to tax another US$200 billion of Chinese imports, this will knock half a percentage point off global growth by 2020.

The Peterson Institute for International Economics has estimated that imposing a 25 per cent tariff on imported automobiles and auto parts, as the Trump administration is threatening to do by the end of the summer, will cost nearly 200,000 American jobs – or more than triple that number if other countries retaliate.

Trump’s harsh trade actions and statements have also rocked the global system of institutions and rules that the US created and championed for 70 years. This may not be the president’s intent, but it is an approach that will have real costs for US economic and strategic interests. The use of Section 232 of a cold war-era trade law for the transparently commercial objective of limiting competition from imported steel and automobiles violates the spirit, if not the letter, of World Trade Organisation rules and gives licence to other countries like China to cite “national security” as an excuse for protectionism against US exporters and investors.