Sanity in May? Most of the Trump team start getting practical

The rhetoric from Trump and some of his team is still inconsistent with sensible international trade

  • He personally loathes free trade. On May 25, Trump harangued EU leaders about Germany’s “bad, very bad” trade surplus with the US, claiming that reducing that surplus is an “absolute priority” for him. He appears still obsessed with his belief that German brands’ sales in the US are caused by some kind of market manipulation, and appears unaware that German car manufacturers’ share in the US (7%) is half that of US car makers in Germany (15%) – or that, while German makers sold a million cars in the US in 2016, they manufactured 850,000 in the US, directly employing 110,000 American workers.

But most key people on his trade team took increasingly pragmatic public stances during May

  • The White House team seem uninterested in border taxes. Treasury Secretary Steven Mnuchin was publicly critical throughout May of across-the-board hikes on import taxes. Trump’s Republican party in Congress appeared to reject them – though there’s still a hard core in the House of Representatives pushing for them.

Exporters seem safe in assuming there’ll be no sudden rise in the cost of selling to the US this year.

  • NAFTA renegotiation will proceed at a conventional pace. US TradeRepresentative Robert Lighthizer on May 17 gave Congress the notification of NAFTA renegotiation needed to start formal talks with Canada and Mexico by mid-August.

Lighthizer’s letter included none of the bluster and hostility that President Trump had earlier directed at America’s NAFTA partners, Canada and Mexico. The administration briefed media it expected talks to be completed by the end of 2017 – though I think they’re ambitious.

  • China no longer seems public enemy no 1. Commerce Secretary Wilbur Ross announced on May 11 a set of trading agreements with China as evidence of the two countries’ new, productive relationship. It looks likely there’ll be no fundamental change in America’s policies towards China for the next year or so.
  • But there are lots of nitty-gritty new attempts to protect US traders. Trump’s team have shown great initiative in finding ways of punishing specific foreign exporters – like Canadian timber companies or Chinese steelmakers – they believe are unfairly damaging US businesses. They’re also loudly lobbying the World Trade Organisation to make it easier for the US to hit imports it doesn’t like. It’s unlikely, though, this will mean any action on apparel or textiles.