Trump’s International Trade Agreements

Andamento del mercato - 31/01/2018

NAFTA – TPP and Trump


President Trump, at times, has threatened to withdraw from the agreement without satisfactory results. The 115th Congress faces numerous issues related to NAFTA and international trade. On May 18, 2017, the Trump Administration sent a 90-day notification to Congress for its intentions to begin talks with Canada and Mexico in order to renegotiate NAFTA.

The North American Free Trade Agreement (NAFTA) between the US, Mexico and Canada entered into force on January 1, 1994. NAFTA was controversial when first proposed, mostly because it was the first FTA involving two wealthy, developed countries and one developing country. The overall net effect of NAFTA on the U.S. economy has been relatively small, primarily because the total trade with both Mexico and Canada accounts for less than 5% of U.S. GDP.

The Trans-Pacific Partnership (TPP) free trade agreement is among the United States, Canada, Mexico, and 9 other countries. Some observers contend that the withdrawal from TPP could damage even more the U.S. competitiveness and economic leadership in the region, while others see the withdrawal as a way to prevent lower cost imports and potential job losses. Trump administration continues to try to force its neighbors to accept a revised trade deal on its own terms.

On January 23, Trump issued trade tariffs on imported solar panels and washing machines. The tax on washing machines starts from 20% for the first 1.2 million imported machines and after that 50%. Negotiators from the U.S. and South Korea are meeting in Seoul today, Wednesday, to discuss how to revise their free-trade deal, just a week after the U.S. government imposed safeguard tariffs that hit South Korean washing machine makers. The two days of negotiations, which follow a first round in Washington earlier this month, are likely to focus on resolving barriers to American exports, according to U.S. Trade Representative Robert Lighthizer. While the conflict over washing machines isn’t specifically on the agenda, Korea disputes the U.S. action and it could cloud the broader FTA talks.

On January 29th, Mexico says NAFTA talks are at a “much better” point.

According to a Washington Post report, NAFTA negotiations could stretch into 2019. President Trump has called for renegotiations of the North American Free Trade Agreement since his first day in office, and has even called for a border tax and exit from the treaty.

An economic analysis for the Business Roundtable prepared by Trade Partnerships Worldwide found that the termination of NAFTA would result in the loss of nearly 1.8 million U.S. jobs in their first year. The analysis showed that it would reduce U.S. exports to Canada and Mexico and make American companies less competitive in the global market due to higher tariffs; and the benefits of the tax reform could be cancelled out.

 

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