After a relatively quiet first year in the White House, President Donald Trump is delivering on his campaign promises to get tough on trade, especially with China. In 2017, the Trump administration launched a number of investigations into foreign trade practices but took little action beyond abandoning the Trans-Pacific Partnership, which the Obama administration had negotiated with 11 Pacific Rim countries. Trump also threatened to withdraw from the North American Free Trade Agreement if Canada and Mexico did not bow to his demands to renegotiate the deal. NAFTA talks are still ongoing.
But then, in just the first few months of this year, Trump imposed tariffs on imports of solar energy equipment, washing machines, and steel and aluminum, while also concluding negotiations to amend America’s existing free trade deal with South Korea. In the first significant action aimed directly at China, the Trump administration last week released a list of 1,300 Chinese exports worth $50 billion that could be subject to 25 percent tariffs if Beijing does not change its policies related to intellectual property and forced technology transfer that disadvantage American companies. When China threatened to retaliate with its own tariffs on $50 billion in American exports, mainly agricultural commodities like soybeans and pork, Trump doubled down, raising the possibility of an additional $100 billion in tariffs against China. If implemented, the tit-for-tat could set off a trade war.
The odd thing about these moves, with the notable exception of Trump’s latest China threats, is that they mainly hit close American allies, rather than Beijing. So depending on how things play out, Trump’s trade policies are likely to have more serious and far-reaching implications for Washington’s political relations, rather than for the U.S. economy. Relying on the little-used authority to impose tariffs on steel and aluminum for alleged national security reasons, as the Trump administration did, risks opening a huge loophole for protectionism while increasing trade tensions globally. Exempting allies in Europe—albeit after the fact and only temporarily, while not exempting allies in Asia—raises a host of other troubling geopolitical issues.