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Where is Trump’s Trade Policy Headed?

President Trump wasted no time in his first week in the Oval Office to fulfill a number of his campaign promises – and trade was among his top priorities.

Recall that he campaigned on pledges to increase jobs by keeping manufacturing on U.S. soil. For him, it is as simple as that – if manufacturers are incentivized to make products here – be it through avoiding tariffs, an improved tax rate and a generally attractive access to the market – then companies will need to hire American workers to fulfill orders.

Thus, news of potentially trade-distorting policies out of Washington bombard us daily. Automakers are announcing production decisions in the U.S. that Trump claims to broker, though such corporate moves may or may not maintain market status quo if increased production costs are passed on to consumers.  Trump also formally removed the United States from the Trans Pacific Partnership (TPP) agreement of 12 Pacific-rim countries. He then announced plans to build a wall along the U.S.-Mexico border, which aims to crack down on illegal immigration but could have a detrimental impact on the movement of goods across the border. And although he was against a “border adjustment tax” during the campaign, Trump has not signaled opposition to the Congressional proposal, which is part of a broader tax reform package but could do more to stifle trade and impact Americans’ pocket books than to ensure Mexico pays for a wall.

However, Trump does not oppose trade and indeed is interested in negotiating agreements – just not with a group (as the TPP) but instead with individual countries. He also wants to ensure a level-playing field by holding governments accountable for policies that give their companies an unfair advantage through subsidies, discrimination, and unfair protectionism. 

ISRI has started a series of engagements with key Administration and Congressional leadership to educate them on the impact of such policies on the industry. Some will win and some will lose, but there is a glimmer of hope: gains and losses from trade will not be immediate (market forces notwithstanding as they react to Trump’s pronouncements). Trade is one of the most clear-cut examples of the checks and balances our forefathers envisioned for the American government. The Constitution gives Congress the authority over the imposition of tariffs and regulation of foreign trade, including upholding U.S. law, implementing trade agreements and providing remedies against unfair imports. The Congress delegates some of its authority to the Executive Branch, including the negotiation of trade agreements and the right to impose emergency tariffs to protect against harmful import surges. But, the Congress ensures these functions are not pursued in a vacuum, maintaining the power to enact trade agreements and to approve emergency actions.

All this is to say that while President Trump will continue to make pronouncements that could impact business, they are more signals of how his trade policy is taking shape and will not affect business immediately. He will continue to look for opportunities to create jobs through manufacturing and investment growth, even if that means insulating the U.S. economy from trade-inducing harm. His announcements certainly should be taken seriously, and to the extent that market disruptions or trade barriers are starting to impact your operations, please let us know immediately. On-the-ground anecdotes will resonate more with lawmakers than hypothetical scenarios. And, in the meantime, we will continue to follow the pursuit and implementation of these policies to advise our membership on the expected implications of President Trump’s pronouncements.

Please join us on February 17 for a webinar in which we will dive deeply into this topic, including discussions of any additional policies that emerge

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