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China-US relations

Did the Trump administration just announce plans for a trade war with ‘hostile’ China and Russia?

‘I don’t think we’ve ever seen this aggressive and protectionist a tone before in a trade agenda’

PUBLISHED : Thursday, 01 March, 2018, 9:06am
UPDATED : Friday, 23 March, 2018, 1:07pm

The Trump administration on Wednesday warned that it would vigorously defend US national interests against “hostile” powers such as China and Russia, vowing to use “all available tools” to combat unfair practices – a sign that the president may be preparing to erect new trade barriers. 

“Countries that refuse to give us reciprocal treatment or who engage in other unfair trading practices will find that we know how to defend our interests,” said the annual report to Congress on the president’s trade agenda. 

The report, the first by US Trade Representative Robert E. Lighthizer, comes as US President Donald Trump  was expected to act on Commerce Department recommendations to impose new limits on imported steel and aluminium.

Trump also is considering retaliating against China for forcing foreign companies to surrender their intellectual property and is seeking to renegotiate a pair of major trade deals. 

Other countries are frustrated as well. The only way to rein in China is by working with like-minded countries
Economist Christine McDaniel of George Mason University

“The tone is very different,” said economist Christine McDaniel of George Mason University’s Mercatus Centre. “I don’t think we’ve ever seen this aggressive and protectionist a tone before in a trade agenda.” 

Philip Levy, senior White House trade economist for President George W. Bush, said the Trump administration “comes off as belligerent” in the document. 

The 359-page report was made public as US officials were in Mexico City for the latest round of talks aimed at renegotiating the 1994 North American Free Trade Agreement. Trump has repeatedly threatened to quit the accord unless Mexico and Canada agree to concessions that return lost manufacturing jobs to the US 

The administration took credit for launching “a new era in American trade policy,” reversing decades of multilateral trade policies that it said had damaged US workers and intensifying enforcement efforts. Over the past 13 months, the Commerce Department has initiated 102 anti-dumping and countervailing duty investigations, nearly double the prior-year figure. 

“We have to get more jobs back to America. We have to reduce the deficit and that will ultimately put pressure on wages and raise wages,” Lighthizer said earlier this week on the Laura Ingraham show, calling it “nonsense” that the administration was preparing to start a trade war with China. 

The nearly US$20 trillion economy gives the US leverage to extract better trade terms from other nations and “fairer treatment for American workers,” the report said, echoing a point that Lighthizer has stressed.

The administration assailed China for “undermining true market competition” with state subsidies that encouraged excess production that depressed the price of key goods including steel. 

But McDaniel criticised the administration’s reliance upon tariffs as damaging to US economic growth and ineffective in compelling countries such as China to change its trading practices. 

“Other countries are frustrated as well. The only way to rein in China is by working with like-minded countries,” she said. 

The president’s desire for wholesale change in US trade policy also has met with increasing resistance from congressional Republicans as well as the business community, normally a reliable GOP ally. The report “doesn’t resolve any of the conflicts they have,” said Levy. 

Despite the president’s claims of progress, he has little to show for some of his central promises after more than a year in the White House. Though he promised to narrow the yawning US trade deficit, it reached US$566 billion last year, a 12.1 per cent increase over 2016 and the highest mark in nine years. 

The US deficit with China last year hit a record US$375 billion, the Commerce Department said last month. 

The report was critical of the World Trade Organisation, which it said is not functioning properly and thus “undermining our country’s ability to act in its national interest.” 

Lighthizer has been a vocal advocate of WTO reform and the report detailed several desired changes, including overhauling its mechanism for resolving disputes between member countries 

“It doesn’t spell out exactly how the United States will pursue these goals, but it is quite a clear and ambitious agenda for reform of the WTO,” said Edward Alden, a trade expert at the Council on Foreign Relations. 

The administration reiterated the president’s intention to pursue new trade deals in talks with individual nations rather than large groups. But no countries have yet agreed to enter negotiations, making the claim “empty,” Levy said. 

The report also underscored the mixed messages emanating from the administration on trade, particularly on a Pacific trade deal that Trump withdrew the US from on his first working day in the White House. 

On Tuesday, Treasury Secretary Steven Mnuchin said that he had engaged in “high-level” discussions with foreign counterparts aimed at enabling the US to rejoin the treaty with Japan and 10 other nations. President Trump in January said for the first time that he might seek to re-enter the trade pact that he earlier had disparaged. 

The USTR report, however, quoted Trump’s campaign statements that there “is no way to ‘fix’ the TPP” and that “we do not need to enter into another massive international agreement that ties us up and binds us down.”