Apparel Sourcing Intelligence - Worldwide

Trump Revolution, April 2017: the first shoots of pragmatism?

Donald Trump’s team during April began announcing practical programmes for dealing with the trade issues they’d previously been merely vocal about:

  • China On April 12, Trump publicly abandoned his campaign pledge of telling the US Treasury to label China a currency manipulator. A few days earlier, he’d agreed with the Chinese President that their two teams would develop a plan to address trade imbalances between the US and China “within 100 days”
  • NAFTA A campaign pledge to announce on his first day in office the renegotiation of America’s NAFTA trade deal with Canada and Mexico hasn’t turned into anything concrete. Congress has to approve the team’s objectives 90 days before talks start, the team hasn’t produced them yet, and Congress can’t consider them now till well into May.

Early drafts of the objectives, though, suggest a lengthy agenda of technical issues, likely to take at least a year to get through negotiations – plus time for legislatures to endorse them. No immediate import surcharges – and no change likely for a year or so in America’s trading rules with either country

  • “Unfair” trade deals The campaign promised to “to identify all foreign trading abuses that unfairly impact American workers”. On March 31, Trump signed an Executive Order directing the Commerce Department to examine the causes of U.S. trade deficits, country-by-country.

Commerce Secretary Wilbur Ross said his department would complete a comprehensive analysis within 90 days of why the US is trading at a deficit with China, Japan, Germany, Mexico, Ireland, Vietnam, Italy, South Korea, Malaysia, India, Thailand, France, Switzerland, Taiwan, Indonesia and Canada.

He said the analysis will assess whether a trade deficit is caused by one of seven factors: cheating, ineffective free trade agreements, poor US enforcement, bad policy decisions by previous US administrations, cheap currencies, WTO constraints on US behaviour, deliberate overcapacity in some industries or unfair foreign barriers.

Cynics may note the absence of other possible factors – like poor-quality US products. But realism was never part of Trump’s campaign.Whatever Ross’s team concentrate on, he’s not even going to have a list of changes he wants to make before the end of June.

  • Border taxes Trump’s campaign promised lower taxes: he said he’d have a plan offering ordinary people a 35% tax cut with Congress by now. An important part of the case was going to be some mechanism for higher import taxes to fund the cuts.

After Trump abandoned attempts cut the cost of America’s health system to the US government, cash for tax cuts is scarcer and his team doubt they’ll get Congressional approval for a new tax system quickly. As for what form, if any, higher import taxes might take: no-one on the team is prepared to comment.

An April 21 Trump claim about a “tax plan within the following week” resulted in an April 26 content-free list of objectives. They neither included nor ruled out border taxes. Trump’s Treasury Secretary, Steven Mnuchin, conceded on April 17 that “it’s unlikely that we’re going to have a plan passed before August.” Most Congresspeople think agreement on tax reform is unlikely before the end of 2017. Most commentators believed Trump’s  the obsession with border taxes inside the Trump team is a distraction from any real work on stimulating the US economy.

So on four key planks of Trump’s promised trade  revolution – NAFTA, China, “unfair” trade deals and border taxes overall  –  it looks very unlikely we’ll see any changes affecting our industry approved by Congress and turned into law this year.

Trump’s team can act faster. It’s recently:

  • Made life tougher for foreigners to sell in the US. In mid-April, for example, it changed the rules on how to determine Korean manufacturers were dumping oil piping below cost in the US
  • Helped the US government to extract more cash from importers. On March 31 another Trump Executive Order gave border officials wider powers to collect antidumping fines because in the 15 years to September 2016 they had failed to collect $2.8 billion of antidumping duties. Sounds a lot – but most of that $187 mn a year was for honey, crawfish and wild garlic.

On marginal issue like these, some decisions are now getting decided and implemented quickly. On the big trade issues, though, the team is beginning to realise that conforming to legal requirements and avoiding retaliation from trading partners just takes a lot of time.

…but leopards rarely change their spots

That, of course, isn’t an attitude that comes easily to Donald Trump. So no sooner did his press secretary admit how long it would take to get NAFTA talks started than the President started attacking the laws on managing trade negotiations as “rules and regulations that are horrendous”

Clearly a few pragmatic decisions don’t mark an outbreak of grown-up governance.

But Trump’s team can’t go on attitudinising forever. Sooner or later, they’re going to have to govern – and that means persuading Congress to pass laws.