Overall mood and managing the new global business environment
As is well discussed among trade pros and well reported in the business press, what Trump’s plans are for trade are not precisely known as he forms his economic and policy teams. However, based on campaign policy statements and campaign trail rhetoric, American businesses that operate globally are well advised to plan for administration positions on trade that will prove more aggressively protective; seek changes to trade regimes (both domestic and international), as well as understand that Trump’s policy (and political) preferences will focus on returning jobs and manufacturing to the United States.
Three main themes:
The United States will be more aggressive on China
First, plan for the Trump administration to restrict the imports of steel and aluminum from China. In the past, American manufacturers have relied on anti-dumping (AD) and countervailing duties (CVD) litigation to seek tariffs on dumped and subsidized imports. Through appointments and policy directives at the Commerce Department and the US International Trade Commission (ITC), a Trump administration could encourage more litigation to address unfairly priced imports. The President also has broad power to grant “safeguard” relief in situations where the ITC finds that imports have been a substantial cause of serious injury to a domestic industry.
It is important to note however, there have been no major cases seeking safeguard relief since a 2001 case on steel. In large part, because domestic producers doubted past President’s willingness to grant relief and/or previous governments have not encouraged litigation and have instead relied on good faith negotiations to smooth out trade irritants. However, planning for new cases brought by business and/or the new government directly would be wise under a Trump administration.
Second, plan for the Trump administration to hit China with the currency manipulation label. Labeling a nation a currency manipulator is more symbolic, but it provides an easy bumper sticker political win that easily understood by the voters that sent Trump to the White House. Once a nation receives this label, the US Treasury Secretary will need to "take action to initiate negotiations … for the purpose of ensuring that such countries regularly and promptly adjust the rate of exchange."
So more consultation and meetings must take place between Washington and Beijing, but Beijing will have to respond in some fashion to the move - be it delayed licenses, deferred contracts, less market access, etc. Many in the US-China business and diplomatic community believe that a move by the US to label China a currency manipulator would launch a slow and negative tit-for-tat trade relation environment between the two nations. It important to note China was last labeled a currency manipulator in 1994.
Third, plan for the new Trump administration to make more use of intelligence, national security, foreign policy, and trade staff and ideology to engage China as mean to lessen intellectual property theft and the import of products/components/parts used by America’s military. Trump will likely increase enforcement actions to ensure that China is playing by the existing WTO rules as well as seek greater protection of US intellectual property and technology used in China.
Trump will make trade between the US and China not just about simple economics, but more about complex and thorny issues of “America First,” national security, intellectual property protection, and military responsibilities.
The United States will reevaluate trade agreements - especially NAFTA
The Trump administration will most certainly seek to renegotiate the North American Free Trade Agreement (NAFTA), if not entirely depart from the agreement. As president, Trump will have authority to terminate trade agreements without asking for permission from Congress. Such authority will most certainly encourage America’s NAFTA trading partners to come to the negotiating table.
Trump has yet to announce specific areas for renegotiation, but businesses that make use of this trilateral supply chain to move parts and components back and forth for production and assembly, as well as importers of lumber, livestock, and agriculture goods will be under threat.
American business needs to understand that that the rules of trade within North America will soon change powerfully. Already, Canada's Finance Minister Bill Morneau announced Canada aims to hold bilateral and trilateral talks with the United States and Mexico over their trade agreements.
Retain and return manufacturing jobs back to the United States
The Trump administration will be driven by the ethos to "Make America Great Again." During his campaign, Trump repeatedly criticized American blue-chip companies that shifted manufacturing, jobs, and assembly from the United States to Mexico or other countries. He even went so far with threats to impose tariffs on production that moves offshore - Ford Motor Company, Mondelez, and Carrier were some of his frequent targets on the campaign trail.
While it is not clear what legal authority a Trump administration would have in implementing new tariffs without Congressional approval, business could see other burdensome custom regulations and market access impediments put in place by executive order and/or regulatory policy. Furthermore, an aggressive and determined Trump administration could use the bully pulpit and put significant pressure on companies trying to decide where to establish manufacturing and assembly operations outside of the United States. Such actions could impact other business operations beyond trade, supply chains, manufacturing, or logistics.
As the above examples show, it will be wise to plan that a Trump administration will lead to dramatic changes in trade policy – both in the United States and around the world. Global American companies with significant exposure to the effects of trade policy would be well served to recognize the potential for such changes and develop a game plan utilizing communications, government relations, public affairs, and legal tools to respond to what will be a vastly different US trade environment under the Trump administration.
Trump campaign and vision
Withdraw from the Trans-Pacific Partnership
Appoint strict and smart trade negotiators to fight on behalf of American workers
Direct the Secretary of Commerce to identify every violation of commerce agreements a foreign country is currently using to harm our workers, and also direct all appropriate agencies to use every tool under American and international law to end these abuses.
Tell NAFTA partners that we intend to immediately renegotiate the terms of that agreement to get a better deal for our workers. If they don’t agree to a renegotiation, we will submit notice that the U.S. intends to withdraw from the deal. Eliminate Mexico’s one-side backdoor tariff through the VAT and end sweatshops in Mexico that undercut US workers
Instruct the Treasury Secretary to label China a currency manipulator
Instruct the US Trade Representative to bring trade cases against China, both in this country and at the WTO. China's unfair subsidy behavior is prohibited by the terms of its entrance to the WTO
Use every lawful presidential power to remedy trade disputes (use of tariffs and/or make use of national-security justification for import barriers) if China does not stop its illegal activities, including its theft of American trade secrets
How the opening months of the Trump administration could play out
Trump’s trade plan is based on six important principles:
Renegotiating or withdrawing from NAFTA
Stopping the Trans-Pacific Partnership deal
Stopping unfair imports
Ending unfair trade practices
Pursuing bilateral trade deals
Retaining and return manufacturing jobs with a focus on lowering the business tax rate and eliminating regulations and restrictions on domestic energy
Per CNN, President-elect Donald Trump will begin the process of reshaping America's trade policy on Day 1 of his administration, according to a memo drafted by his transition team. "The Trump trade plan breaks with the globalist wings of both the Republican and Democratic parties," the document notes. "The Trump administration will reverse decades of conciliatory trade policy. New trade agreements will be negotiated that provide for the interests of US workers and companies first."
Reform NAFTA, including ordering the Commerce Department and International Trade Commission to begin a study on what the ramifications of withdrawing from the treaty would be, and what would be required legislatively to do so
Have the US Trade Representative notify Mexico and Canada that the US intends to propose some amendments to the treaty such as currency manipulation, lumber, country of origin labeling and environmental and safety standards
Announce formal removal from the Trans-Pacific Partnership (TPP)
Submit legislation to Congress on currency manipulation
Order the Committee on Foreign Investment in the US (CFIUS) to review food security in trade and reciprocity in international corporate takeovers - for example - whether a US company would be able to buy a Chinese company like a Chinese company would be able to buy an American company
Continue NAFTA renegotiations
Pursue China by labeling the nation a currency manipulator
Increase the use of the intelligence community in trade negotiations and trade management
Consider a formal withdraw from NAFTA
Seek to expand Trade Promotion Authority -- current law expires in 2018 and new administration would seek an extension until 2021
Pursue bilateral trade agreements with Mexico, Canada, and the United Kingdom