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.
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