In this episode, Andrew and the Trade Guys discuss developments in the US-China deal and the USMCA, what’s going on with the trade deficit, and why India is the president’s latest trade target.
What We’re Reading
“Beijing is worried that Trump may walk away from the table, like he did with North Korea”
“After last week’s fumbled nuclear summit in Vietnam, Beijing is worried President Donald Trump might walk away from the negotiating table.”
“Nuclear talks between Trump and North Korea’s Kim Jong Un were cut short after the two sides failed to reach an agreement. The collapse of the Hanoi summit came as a surprise as many experts had predicted that both leaders would try to reach a deal on smaller items.”
“That diplomatic snafu led Chinese officials to grow worried Trump could do the same in trade talks, a senior administration official told CNBC on Friday.”
Why it matters: News reports this week indicate that Chinese President Xi Jinping may be having second thoughts on a late-March summit at Mar-a-Lago with President Trump. President Xi may be concerned that President Trump will walk away from the negotiating table just as he did with North Korean leader Kim Jong Un earlier this month. That outcome would be a diplomatic disaster for President Xi.
Key questions: Is President Xi right to be skeptical of meeting with President Trump later this month? What will need to be done by the lower level negotiators to inspire confidence that a presidential level meeting won’t end in failure? What consequences would stem from President Trump walking away? Would President Trump be likely to abandon talks once he and President Xi are sitting face to face?
“Despite Trump’s Promises, The Trade Deficit Is Only Getting Wider”
“The U.S. trade deficit soared to a 10-year high in 2018 on the heels of a strong economy, despite President Trump’s ongoing efforts to bring it down through tariffs on imported goods.”
“For 2018 as a whole, the deficit grew to $621 billion — the highest since 2008, the Commerce Department said Wednesday. When the service sector is excluded, the gap was even greater, rising to a record $891.3 billion.”
“The overall trade deficit has grown by $119 billion in the two years since Trump took office.”
Why it matters: President Trump has failed to deliver on one of his top trade priorities: reduce the U.S. trade deficit. The exploding deficit under his presidency is a sharp rebuke to his trade policy approach and the theory that trade deficits negatively impact the U.S. economy.
Key questions: Why have the administration’s efforts to reduce the U.S. trade deficit failed? Will the data change anything about the administration’s trade policy? What is the trade deficit’s relevance to the U.S. economy?
“Trump will submit NAFTA replacement to Congress ‘very shortly’”
“President Donald Trump today said he plans to send the new U.S.-Mexico-Canada Agreement to Congress very soon, which would start a 90-day clock for lawmakers to approve or reject the plan without any changes.”
“’Mexico, Canada is done. We’ll be submitting to Congress very shortly. And that’s a great deal for the United States, so we’re very happy about that,’ Trump told reporters at the White House before departing for an event in Alabama.”
“The comment came as many Democrats are demanding the Trump administration reopen the agreement to strengthen labor and environmental enforcement provisions and address concerns about pharmaceutical issues.”
Why it matters: Sending the USMCA to Congress for consideration would start a shot clock for lawmakers to vote on the deal by the end of the spring or beginning of the summer. The administration may be jumping the gun, however. An economic analysis of the report by the government is yet to be completed, Democrats remain want certain rules to be renegotiated, and members on both sides of the aisle want steel and aluminum tariffs on Canada and Mexico to be removed before they consider the deal.
Key questions: Is the administration in danger of moving too fast if they submit USMCA for congressional approval in the coming weeks? Can congress do anything to slow down consideration of USMCA once it has been submitted? What does each side want before they support the agreement?
“India Becomes Trump’s Latest Trade Target”
“In his latest salvo against unfair trade practices in a major Asian market, President Trump says he plans to end preferential trade treatment for India, which sought to downplay the significance of the move.”
“In a letter sent to Congress on Monday, Trump wrote he is taking the step because ‘I have determined that India has not assured the United States that it will provide equitable and reasonable access to the markets of India.’”
The Office of the U.S. Trade Representative says the change will be enacted by presidential proclamation but not for 60 days.”
Why it matters: The administration has fired a shot across India’s bow, revoking duty-free treatment for certain Indian goods due to market access barriers U.S. companies face in that market. India’s tariffs on U.S. goods, including motorcycles, have drawn President Trump’s ire throughout his presidency. It’s not clear if the revocation of these preferences is an opening salvo from the administration to ratchet up trade pressure over time, or if it is a one-time shot.
Key questions: What are the next likely steps for India and the United States? Will India retaliate and will the United States continue to apply trade pressure on India to resolve other irritants? What motivated the United States to take action against India now?