Why Trump’s Exit From the Paris Agreement Could Spark a Trade War

Why Trump’s Exit From the Paris Agreement Could Spark a Trade War
The coal-fired Plant Scherer, one of the top carbon dioxide emitters in the United States, Juliette, Ga., June, 3, 2017 (AP photo by Branden Camp).

President Donald Trump’s protectionist “America First” trade policy has stoked significant fear about the prospect of a trade war. Although certain aspects of his trade agenda so far have temporarily eased the concerns of business leaders and policymakers, Trump’s decision last week to withdraw from the Paris climate agreement should generate renewed anxiety over the stability of the international trading system.

As president, Trump has walked back some of his most aggressive campaign promises on trade, such as imposing a 45 percent tariff on all imports from China. However, in addition to exiting the 12-country Trans-Pacific Partnership (TPP), Trump’s provocative rhetoric continues to keep U.S. trading partners on edge. In April, Trump threatened Canada and Mexico, the United States’ second- and third-largest trading partners, with the termination of the North American Free Trade Agreement. He simultaneously escalated long-simmering trade disputes with Canada over lumber and dairy.

In light of this aggressive approach, U.S. trading partners are responding more forcefully to Trump’s provocations. Last month, Trump used his participation in the NATO and G-7 summits in part to criticize German Chancellor Angela Merkel over the U.S.-Germany trade relationship. On Twitter, Trump called Germany’s trade relations with the U.S. “very bad” given a “MASSIVE trade deficit with Germany.” Merkel responded by announcing that Europe can no longer rely on the U.S. and must “take our fate into our own hands.”

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