While he has had limited wins with his domestic policy agenda since being elected two years ago Trump has been a one-man wrecking ball when it comes to trade.
On just his third day in office he withdrew the US from the Trans Pacific Partnership before hitting his stride this year with tariffs on steel and aluminium imports and a big chunk of US imports from China.
He also threatened to pull out of both the North American Free Trade Agreement (Nafta) and the World Trade Organisation (WTO) before renegotiating the former and continuing to block judicial appointments to the latter, which, he says, is biased against the US.
A former top US trade official and now Washington DC consultant whose clients include Fonterra and Beef + Lamb New Zealand, Craig Thorn of DTB Associates, says till now Trump has used authority delegated to the president by Congress to ram through much of his trade agenda.
Thorn was surprised normally pro-trade Republicans did not make a more serious attempt to pass legislation to curb the president’s authority to act unilaterally when it comes to trade but with the Democrats back in control of the House of Representatives after the recent mid-terms that is now more likely.
However, while Congress will probably act to stop Trump should he move to withdraw the US from Nafta or the WTO it is unlikely it will do much to stand in the way of his escalation of the trade war with China.
“We are at a point where pretty much the entire US political establishment is sour on China.”
In the meantime, US tariffs on US$200b of Chinese imports are due to rise from 10% to an eye-watering 25% on January 1, with Trump threatening to hit the remaining US$250 billion imported annually from China if a peace agreement cannot be reached.
“I am afraid we are going to have to go through some more pain before people come to their senses on that issue.”
NZ-US Council chairman Leon Grice agrees and says his contact with US businesses over the past year tells the same story – increasing frustration for US companies in China facing competition from heavily subsidised local rivals and theft of intellectual property.
Grice said with corporate America agreed on the need to curb Chinese mercantilism, politicians are hardly in a position to rein in Trump’s tit-for-tat tariffs.
However, the Government’s agricultural trade envoy Mike Petersen sees a back-down looming for Trump on China.
He says China’s retaliation with tariffs of its own against US farmers must soon bite and eat into Trump’s popularity in states that had till now been strong supporters of the president.
Recently returned from China, Petersen says it is clear the country is digging in for a long trade war with the US.
It has shut off its imports from the US of soybeans used as animal feed and instead is sourcing them from Latin American countries and building stockpiles.
Further pressure could come on Trump from his rural supporters later this year when the TPP enters into force and cuts tariffs for US rivals in the key Japanese beef market.
It is possible a dive in US exports of soy and beef to China and Japan respectively could force Trump to abandon tit-for-tat tariffs and seek new deals with both China and Japan.
Otherwise, Petersen says, it is hard to see the US reversing its increasingly protectionist trade policies and the recent midterm election results might even undo some of the limited progress made in freeing up trade with other countries.
In particular, Democrats might seize the chance to score points against Trump and block his recent trade deal with Mexico and Canada, which would replace Nafta but first needs to be approved by Congress.
That would be a negative for the NZ dairy and wine industries, which had cheered provisions in the deal reining in Canadian milk subsidies and restrictions on imported wine sales.
