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Commercial Considerations: How Will President Trump Change Trade Policy?
12/12/2016 FreeTrade Andrew S
keywords: China jobs Mexico tariffs Trump

Donald Trump is known for breaking with tradition, and nowhere is this more evident than with trade. The Republican Party has supported free trade for decades, yet Trump opposes it, demanding a more protectionist approach to the US economy. His election may thus represent a substantial shift in US policy, though he will face significant barriers to enacting his agenda.

Trump On Trade

Along with his call to block Mexican immigrants, opposition to free trade has been one of Trump's most consistent positions. The President-Elect believes that unrestricted trade, and particularly trade with Mexico and China, have harmed the US economy. He has singled out particular trade agreements for criticism, calling NAFTA "the worst trade deal maybe ever signed anywhere" and the Trans-Pacific Partnership "almost as bad as NAFTA." He has also considered withdrawing the US from the World Trade Organization, especially if it tries to obstruct his trade agenda.

Once in the White House, Trump has promised to immediately withdraw from the TPP, and will likely do the same with NAFTA. He would then place a 20% tariff on all imported goods, a 35% tariff on goods that cross the Mexican border, and a 15% tax on companies that outsource jobs. Trump has also promised to punish China for currency manipulation and other activities that, in his view, contribute to US trade deficits.

Opportunities & Obstacles

As president, Trump will have the power to withdraw from the TPP and NAFTA immediately. He could also withdraw from the WTO, but doing so would complicate his plans to punish China for trade violations. The WTO's dispute settlement process is the most effective way to prosecute perceived trade violators, and the US has used it against China effectively in the past. Whether he withdraws from the organization thus depends on how strongly it opposes his agenda and how badly he wants to punish China.

Trump's proposal for tariffs and outsourcing taxes would need Congressional approval, and here he will likely encounter opposition from his own party. Most Republican officials strongly support free trade, and many have openly criticized his protectionist agenda. Nonetheless, recent polls suggest that more than 70% of Republican voters support tariffs on companies that outsource jobs. Republican legislators may thus have to side with Trump in order to be elected. The President-Elect may also be able to enlist the support of certain Democrats, such as Senator Sherrod Brown of Ohio, who have been critical of free trade.

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