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Opinion: Breaking down the latest trade results from Trump

From Canada and Mexico to Europe and China, President Trump kept negotiators on the other side of the aisle, as well as the rest of the world, guessing.

One thing about those global summit meetings: they are either mostly show and practically a bust or they are the catalyst to moving stalled initiatives forward. There seems to be no in between. Since President Trump is not much for treading water, if he is going to fly somewhere and do meetings, he intends to make things pop.

Buenos Aires for the G-20 Summit provided a sideline for the three “formerly known as NAFTA” countries to do the final signing of the USMCA. Problem is, those steel and aluminum tariffs Trump imposed  --  and the retaliatory tariffs from Canada and Mexico --  were still in place leading up to the summit. 

Mexico made noises about not signing the USMCA if some agreement regarding lifting tariffs, or whatever was going to replace them, was not in place. Canada hadn’t committed to sign or not to sign. One official still retaining that vaunted Canadian grit with humor, suggested Prime Minister Justin Trudeau send some fourth a minister from some obscure department with a bag over his head to sign.

That humor should not gloss over the damage that has been done to friendly U.S./Canadian relations over this renegotiation. The Canadians cannot come to grips with Trumps’ results over style, sometimes brash  bulldozer approach, any more than the never-Trumpers in the U.S. seem to be able to. 

Person-to-person relationships at the level of cattlemen doing actual business will overcome this over time, but the damage is there and Americans must deal with it.

Trudeau did eventually sign the deal, probably because he had little choice.  The major carrot in a side letter to the deal was that signatories of the USMCA will be exempted from a number of auto and auto parts tariffs if President Trump imposes that long threatened 25% tariff on cars and parts.

But the mood was somber, not celebratory. Canada supposedly sent word ahead—no champagne. Mexico said it was hoping for an agreement on the steel and aluminum tariffs by year end. It is considered likely that the tariffs would be replaced by a quota system.

Canada, on the other hand, was hoping for court victories against the tariffs and/or holding out for a better deal, even if it takes longer. While Trump and Lighthizer see many tariffs—although not so much in the steel and aluminum case—as a short-term stick to get countries to the negotiating table, Canada’s Foreign Minister Chrystia Freeland felt they should not have been part of this renegotiation at all. Canada has filed legal complaints with the WTO and under the existing NAFTA rules.

Getting rid of those metals tariffs to get trade in agricultural commodities like pork, soybeans, etc. back on track is taking longer than many thought.  That is because, I believe, Trump is not willing to just drop the steel and aluminum tariffs, believing that some form of protection to some extent is necessary to keep some semblance of a steel and aluminum industry intact.  I also believe he thinks it’s necessary to his political career.

Then there’s Europe and China

As for the EU negotiations, they are not moving along as fast as the President would like. The EU negotiators are dragging their feet and they especially don’t want agriculture to be included in the discussions. 

That is a fat target for the beef industry, as the EU has been intractable on non-tariff trade barriers to us. Washington, on the other hand, has been holding meetings with the big three German automakers, leveraging their fear of that 25% tax on imported cars. That has irritated the EU negotiators, who see their influence diluted and don’t want more pressure from the automakers.

Speaking of autos, President Trump claims that China as much as agreed to get rid of the tariff on U.S. cars imported into China. China is staying mum.  Most likely, Trump will hold them to that and given that it is a chip but not a huge chip, it’s a beginning on a steep, rocky climb from President Xi and Trump’s dinner on the side of the G20.

Again, the gamesmanship at these negotiations is something else. Trump and the U.S. side claim the timeframe agreed upon at the dinner has a 90-day time period during which Trump will hold off on bumping the 10% tariff on $250 million worth of goods to 25% as long as negotiations are loping along. 

Since Sunday, the sides have parried and thrust on whether the 90 days was agreed on, when the 90 days starts, whether there is a framework or when the meeting on frameworks will occur. I imagine the collision between the speeding Trump locomotive and these diplomatic negotiators who move and think in increments of millimeters over years would be hilarious to us common folk.

But it looks like the Chinese have changed their thinking in several ways.  They’ve discovered Trump will not be bought off by a few hundred million dollars in soybean purchases. He is serious and he is not like our negotiators of the past. 

He is out to fundamentally change the way China does business with the rest of the world. He does not shrink from using the tariffs as a prodding tool. He listens to USTR Robert Lighthizer, who would probably have already piled more tariffs on. There is that other half of total trade with China that Lighthizer is itching to put tariffs on.

Oh, and by the way, while the Chinese over recent months have tried negotiating with Commerce Secretary Wilbur Ross and Treasury Secretary Robert Mnuchin, figuring they’d get better deals from them, that ploy has failed. Trump said Lighthizer will lead the upcoming negotiations.

And yes, at Washington’s insistence, the negotiations will be over intellectual property, patents, technology transfer to Chinese corporate profits, subsidies to state-owned corporations and other serious topics that no administration has ever forced the Chinese to address. And yes, the rest of the world is rooting for us.

And while those topics are critical economic issues that carry huge impact for the future of America, I believe Trump is looking beyond just the economics. He believes, as Reagan did, that the long-term military security of our country rests on a prosperous economy. 

He also believes that the Chinese have been copping our technology and intellectual property not just to beat our companies to the next quarterly profit report but to build the military strength to rule the world.

Steve Dittmer is a longtime beef industry commentator and executive vice president of the Agribusiness Freedom Foundation.

 

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