Donald Trump doesn’t fully understand how global trade works, former US negotiators say amid trade war tariff action

Ford pushes back after the president’s tweet about its decision not to import a new model to the US

PUBLISHED : Tuesday, 11 September, 2018, 5:28am
UPDATED : Tuesday, 11 September, 2018, 10:33pm

Former trade officials have decried US President Donald Trump’s understanding of international trade and tariffs after his remarks on Sunday that Ford’s decision not to sell an upcoming car model in the United States was a triumph for the country.

Tweeting on Sunday, the president quoted a CNBC report that Ford would no longer be selling its Chinese-build Focus Active in the US, saying: “This is just the beginning. This car can now be BUILT IN THE U.S.A. and Ford will pay no tariffs!”

Ford promptly shot down such a prospect, responding that “it would not be profitable” for the company to build the car in the US because of the relatively low sales volume it has forecast. The vehicle will be built in both Chongqing, China, and Saarlouis, Germany, a Ford spokesman said in an interview on Monday.

Ford said the decision not to import the Focus Active to the US was made because of the “negative financial impact of new tariffs on vehicles imported from China”. The Trump administration levied 25 per cent duties on US$34 billion of Chinese imports, including motor vehicles, in July.

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The notion that a US manufacturer’s decision not to sell one of its products in the US is a victory for Trump’s “America first” trade agenda has bewildered observers, including a number of former US trade officials.

“If Trump’s trade policy is designed to stop the global supply chain from functioning the way it historically has, then that’s a victory for Trump’s trade policy,” said Claire Reade, a former assistant US trade representative for China affairs, who served in the administrations of George W. Bush and Barack Obama.

There was a “logical gap” in Trump’s statement that the car not being imported to the US somehow meant it could be built in the US cost-effectively, said Reade, who now advises clients on US and Chinese governmental issues at the Washington-based law firm Arnold & Porter.

Reade characterised Trump’s grasp of trade issues not as an “understanding” but as a “philosophy and a kind of gut feeling”.

Sharing the view that Trump’s remarks suggested a lack of understanding of the many factors at play in multinational trade decisions is Wendy Cutler, former acting deputy US trade representative.

Trump did not recognise “the complexity of supply chains and the types of inputs that go into decisions of where to locate one’s production of different vehicles”, she said.

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Cutler, now vice-president of the Asia Society Policy Institute, was responsible for negotiations leading to the Trans-Pacific Partnership (TPP) agreement under Obama. Withdrawing from the TPP was one of Trump’s first actions upon taking office.

“It seems that the president views these decisions by companies and where to locate their production as being a black-or-white proposition,” Cutler said.

This binary approach, said Reade, was potentially a legacy of Trump’s background in real estate and narrow focus on the “deal”.

“When you’re going to analyse trade and trade impact, you really have to look beyond the surface of the single transaction that you may be focused on,” she said.

You have to look beyond the surface of the single transaction that you may be focused on
Wendy Cutler, vice-president of the Asia Society Policy Institute

Trump’s remarks on Sunday came just days after he announced that the administration would go ahead with proposed tariffs on US$200 billion worth of Chinese imports. Speaking aboard Air Force One, the president also renewed his threat to impose duties on all goods entering the US from China.

The decision to proceed with tariffs on US$200 billion of Chinese imports dismayed US business figures, industry associations and trade experts, thousands of whom recently provided testimony to the US Trade Representative’s Office, warning the government of the damage they would cause for small- and medium-sized businesses and their consumers.

Trump’s understanding of and attitude towards trade policy is facing renewed scrutiny after two explosive publications detailed mounting strife between Trump and his closest aides.

According to veteran journalist Bob Woodward’s new book, Fear: Trump in the White House, the president has to be persistently talked out of making drastic decisions like pulling out of the World Trade Organisation and a trade deal with South Korea.

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A recent New York Times op-ed written anonymously by a senior administration official accused Trump of being “anti-trade”, among other things, and said there was a concerted effort within the administration to thwart the president’s “more misguided impulses until he is out of office”.