Trump creates global chaos to claim trade victories

By Carlton  Joseph

Carlton Joseph

January 2020 may be recorded as one of the most critical months in the United States (US) history. 

The Senate started the impeachment trial of President Donald Trump; it ratified the Canada, Mexico and US Trade Agreement; and it is reviewing the Phase One US-China Trade Agreement.  Critical because it sets the stage for the upcoming presidential elections in November 2020. 

The trial will reveal to the world if  the US is a nation of laws and no one is above the law.  The trade deals will reveal if it has now rejected “free trade” for “managed trade.” 

And the presidential election will reveal if America’s middle and lower classes accept the status quo and return the president to office.

The trial in the House of Representatives brought two articles of impeachment against President Trump: abuse of power and obstruction of Congress. It states that “President Trump has acted in a manner contrary to his trust as President and subversive of constitutional government, to the great prejudice of the cause of law and justice, and to the manifest injury of the people of the United States.” 

The trade war against China, Canada and Mexico was initiated by Trump early in his presidency.  He rejected the “free trade” policies that the US and major industrialized economies have been forcing countries to accept and replaced it with “America First” policy. 

William Reinsch, a former US trade official, remarked that Trump’s policy was essentially “Might makes right. We’re big and important, so we can push other countries around.’’  From my perspective “America First” has always been America’s policy, Trump is just not diplomatic about it.

Impeachment proclaims to the world that America is a country of laws and that no one, not even the President, is above the law. The senators are supposed to be impartial, review the evidence and make their decisions based on the facts presented. They should put the welfare of the country over narrow political partisanship. 

However, this impeachment trial is different.  Republican Senator Mitch McConnell    announced that the trial is not a legal event, but a political event and that he had no intention of being an impartial juror, and was going to coordinate with the White House regarding a strategy for the trial. 

He and other Republican senators decided that regardless of the facts, they are not going to impeach “their president.”   Clearly, America is not a country of laws, and if you are rich or aspiring to be rich, you are above the law.

On the trade front, armed with tariffs, threats and combative rhetoric, Trump forced concessions out of China, Mexico and Canada.    Before Trump initiated the trade war with China in 2017, the US was China’s top agricultural supplier for 18 years running. China relied on the US for almost 20 per cent of its farm goods imports, amounting to $24 billion a year.  Imports from the US tumbled 45 per cent in 2018 as the two countries hit each other with tariffs.  The duties gave Beijing crucial leverage over Washington, prompting Trump to announce a $28 billion bailout for US farmers faced with a devastating loss in business. 

In the Phase One deal, China has committed to increasing its US imports by at least $200bn over 2017 levels, boosting purchases of agriculture by $32bn, manufacturing by $78bn, energy by $52bn and services by $38bn.  Also, China has agreed to take more action against counterfeiting and make it easier for companies to pursue legal action over trade secret theft.  The US will maintain up to 25 per cent tariffs on an estimated $360bn and China will maintain levies on $100bn worth of US products.

The new USMCA replaces the North American Free Trade Agreement, which had eliminated most trade barriers among the US, Canada and Mexico.  US trade representatives embraced aspects of managed trade with the US-Mexico-Canada Agreement, by setting complicated “rules of origin” and quotas governing the content of imported automobiles getting trade preferences.

To qualify for USMCA’s duty-free benefits, automakers must derive 75 per cent of their production content from within North America – up from 62.5 per cent under NAFTA.  At least 40 per cent of vehicles would also have to originate in places where workers earn at least $16 an hour and  Mexico would have to adopt labor reforms that will encourage unions.  The US and Canada seem to benefit from these concessions and unions in Mexico would help Mexicans improve their standard of living.

Trump is also readying tariffs on the European Union over subsidies to the aviation giant Airbus and on France over a digital services tax that targets US tech giants like Google and Amazon.

My concern is that Trump has created global chaos in order to claim trade victories prior to the November US Presidential elections.  The trade disputes have hit American farmers, industrial producers and workers very hard and there were fears that an all-out escalation could drag down the entire economy, going into an election year, and perhaps cause a big fall in the stock market causing voters to turn against Trump.

The reality is that there were not many changes to the NAFTA agreement, and the China agreement is a reversal of how the US has tried to do business for the last 50 years.  The targets violate international trade norms of giving equal treatment to trading partners based on price and quality.

The impeachment trial will reveal to the world that America is not a nation of laws, but a nation of plutocrats, who only consider their personal interest.

I predict that China will re-evaluate its relationship with the US and decide that its food security is paramount.  It will also diversify its agricultural trade with Brazil, Argentina, Russia and all other countries that can meet its food security needs. 

China is also Canada’s second-largest export market which absorbed $4.7 billion of Canadian agriculture and agro-food products in 2014.  Canada should use this period of chaos to increase its exports of soy, barley and other agricultural products to China because China has become the third-largest destination for agricultural products worldwide and is expected to become the world’s largest agricultural importer this year.

This is January 2020.  Trump trade disputes has disrupted trade flows, dampened global economic growth and unnerved investors globally.  The fanfare of a president signing bilateral trade deals is propaganda since only a small proportion of the tariffs are being reversed and relatively minor concessions granted by both sides. Tariffs remain on around two-thirds of the goods Americans buy from China. 

The trade deals give Trump a chance to claim victory months from the November presidential election; he will also claim victory when the Republican-controlled Senate does not impeach him. It will be up to the people of the US to decide in November if they will continue to allow Trump to lead the country.  The stage is set, the actors are in place, and only time will tell the story.

(Trinidad-born Carlton Joseph who lives in Washington DC,  is a close observer of  political developments in the United States.)