When U.S. President Donald Trump, on his first Monday in office, struck down the Trans-Pacific Partnership trade agreement, he was not just fulfilling a major campaign promise; he was signaling that a new era of U.S. trade policy lay ahead. Trump — flanked by advisers and cabinet members including Peter Navarro, the head of his newly formed National Trade Council, Robert Lighthizer, Trump’s U.S. Trade Representative designate, and Wilbur Ross, the commerce secretary — is the standard bearer of not “free” trade, but “fair” trade.
When Trump speaks of “fair” trade, he’s not talking about paying fair prices to commodity producers and farmers in developing countries. Instead, Trump wants to make sure that existing U.S. trade arrangements are working well for the United States. As a result, everything from the North American Free-Trade Agreement to existing unformalized trading partnerships are under this administration’s microscope.
On Friday, Trump signed his first majority affirmative executive action on trade policy, directing various parts of the U.S. federal government to review ongoing U.S. trade deficits with other countries. Deficit-reduction is the primary objective of Trump’s trade policy, with Navarro in particular having long argued that negative net exports lead to lower GDP — an idea that may be premised on an elementary error in understanding how GDP is computed.
In any case, Trump’s new executive order instructs the office of the U.S. Trade Representative to prepare an “Omnibus Report on Significant Trade Deficits.” The order notes that the report should examine the origins of that deficit, with an eye toward “unequal burdens” the trading partner may be imposing on the United States “by law, regulation, or practice.” The order also calls on the report to “assess the effects of the trade relationship on employment and wage growth in the United States,” and to “identify imports and trade practices that may be impairing the national security of the United States.”
Incidentally, the signing of this executive order coincided with the release of the USTR’s 2017 National Trade Estimate (NTE), which already points out where various trading partners are falling short of free trading practices. The NTE, for instance, devotes a long section to trade violations by China, just as it did during previous administration. The difference with Trump’s request for an “omnibus” report is that the findings will ostensibly inform U.S. policy going forward and even begin to bear on high-level diplomacy.
It’s unclear, for example, just how the findings coming out of the USTR’s office will affect burgeoning talks with Japan on a bilateral free trade agreement (or economic partnership agreement). U.S. Vice President Mike Pence is slated to travel to Tokyo this month to meet Deputy Prime Minister and Finance Minister Taro Aso. The two leaders will kick off economic talks, but it’s unclear if Pence will arrive with a comprehensive list of sectors where the Trump administration sees potentially “unequal burdens” being imposed on the U.S. by Japan. Trump has, for example, long complained of Japanese trade practices and even accused Japan of being a currency manipulator, as I’ve discussed before.
For Southeast Asian states like Vietnam — a proud signatory of the TPP and the trade pact’s poorest member — the additional scrutiny under Trump’s executive order may be both unwelcome and a harbinger of more difficult relations with the United States writ large. Trump wrote to Vietnamese President Tran Dai Quang over the weekend, expressing his interest in promoting cooperation “on economics, trade, regional, and international issues,” but it’s unclear how the large U.S. trade deficit with Vietnam may come to bear on the relationship.
These questions will arise for other Asian states, including India, Indonesia, Thailand, Singapore, and South Korea, to name a few. What Trump’s obsession with deficit reduction misses are the structural reasons that have led to the United States running deficits in the first place. As a high-income, high-consumption, demand-driven economy, U.S. consumers benefit from lower-cost goods that originate in export-driven economies. Total deficit elimination and the conversation of the United States into a country that runs net exports year after year will not be easily achieved.
In a sense, Friday’s executive order restores the Trump administration’s foreign policy back to the core that was seen on inauguration day: America First. As I explored in the February 2017 issue of our magazine, Trump’s “America First” is something of an overriding ideological vision — a grand strategy of sorts — for what how and why the United States interacts with the world. If Trump’s latest executive order sticks, then Asian states should brace themselves for overt scrutiny of their trade deficits with the United States and a less friendly relationship overall.