The US announcement of tariffs on steel and aluminum was supposed to be a fit shot in the US-China trade war but left many US allies behind in disarray. Former US official Harry Broadman tries to make sense out of the mess Donald Trump has created, for Forbes.
When President Trump signed an Executive Order on March 11, 2018 that set forth a plan to impose prospectively import tariffs on steel of 25% and on aluminum of 10% for countries exporting those products to the U.S., most of us trade negotiation veterans were startled. Literally. You should be too.
We were taken aback for two reasons. First, the legal basis on which the Executive Order appealed is arcane and rarely invoked. Second, the mechanics of how the tariffs would be applied—under a dangled threat, where countries would have to belly up to the table one-by-one and seek exclusions from Mr. Trump until the Executive Order becomes effective on March 23, 2018—are unprecedented, set in motion a dynamic that
threatens to unravel the multilaterally agreed rules-based world trading system for which the U.S. has been the primary champion for more than 70 years, and plunges an extraordinarily wide swath of industries lying at the core of world economic growth into uncertainty.
Only Canada and Mexico were provisionally excluded in Trump’s Executive Order—since they are in the midst of a U.S.-forced re-negotiation of the North America Free Trade Agreement (NAFTA). But if the NAFTA renegotiations do not go Mr. Trump’s way, the only two neighboring countries of the U.S. and our 2nd and 3rd largest trading partners, respectively, would also fall under the Trumpian Sword of Damocles.
Some of the smartest trade policy observers in Washington, Brussels, Tokyo, Beijing, New Delhi, Mexico City, Ottawa and Canberra, among others, are scratching their heads as to why Trump proceeded in this fashion. Actually, the answer can be found in the way the President has conducted his business dealings in the private sector for years. Regrettably, these practices are fundamentally at odds with the rules governing global trade negotiations, which, after all are among sovereign not commercial entities.
Are you looking for more strategy experts at the China Speakers Bureau? Do check out this list.