Trump’s trade agenda comes to a head in May
President Trump’s trade agenda is at a crossroads, with the White House facing a series of key decisions this month that could determine whether he can successfully map out a new course on one of his signature issues.
On at least three different fronts, Trump is likely to have big decisions to make in May.
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U.S. Trade Representative Robert Lighthizer is scheduled to meet his counterparts in the North American Free Trade Agreement (NAFTA) on Monday, with the administration hoping to complete talks on a revised NAFTA this month.
High-level talks will take place in China on Thursday and Friday between Washington and Beijing.
The talks, where the U.S. delegation includes Lighthizer, Treasury Secretary Steven Mnuchin and National Economic Council Director Larry Kudlow, are centered on the escalating fight over intellectual property disputes and tit-for-tat tariffs between the world’s largest two economies.
A fight also is brewing with Europe and other U.S. allies over Trump’s proposed tariffs on steel and aluminum imports.
The administration extended an exemption for the European Union and several other allies on Monday with a final decision set for June 1.
All of the talks come amid growing angst over whether the various trade fights will slow the U.S. and broader global economy.
In Congress, Trump’s actions have unnerved GOP lawmakers in an election year — particularly in farm states that might find themselves a target of retaliation.
It’s possible that by the end of May, Trump will have imposed steep tariffs on longstanding allies, withdrawn from NAFTA and escalated a trade war with China.
There are more favorable possibilities, too.
By the end of May, Trump’s trade team may have a negotiated a new NAFTA, worked out deals on the steel and aluminum tariffs and launched a new era of U.S.-China trade.
Some trade observers say the Trump administration is more likely to punt on trade and delay making any key decisions this month.
“It’s hard to know because Trump is so unpredictable, but I would expect that we would, at the end of the day, see big threats and very small results,” said Rob Scott, director of trade and manufacturing research at the left-leaning Economic Policy Institute.
He said the Trump administration has “a tendency to kick things down the road.”
“I think they’re just going to keep kicking the can down the road, settle for some small victories, issue a press release and move on,” Scott said.
Trump has defended his saber-rattling, arguing that trade wars are good and “easy to win.”
Some trade watchers express skepticism that Trump’s team will more clearly lay out its trade agenda and intended goals.
“What we haven’t seen so far is real strategic thinking from this administration,” said Derek Scissors, a trade expert at the American Enterprise Institute. “Are they primarily strategic thinkers, or are they just protectionists? In that sense, this is a very important month.”
The most pressing topic is NAFTA, which faces a narrow window to reach an agreement if Congress is to consider it this year.
Lighthizer is scheduled to meet with Canadian Foreign Minister Chrystia Freeland and Mexican Economy Minister Ildefonso Guajardo on Monday.
“If we can get a good agreement, I’d like to get it done a week or two after that. If not, then you start having a problem,” Lighthizer told the U.S. Chamber of Commerce on Tuesday.
May is pivotal because the administration must adhere to the timeline set out by Congress under trade promotion authority, which has specific schedules for the House and Senate to consider trade agreements.
The trade rules require Trump and his trade team to clear several procedural hurdles, which includes the U.S. International Trade Commission getting up to 105 days to produce a report on the economic effects of a final deal.
Once the agreement reaches Congress it could take months to go through committees and attract enough votes to win approval.
Trump has threatened to cancel NAFTA altogether if a deal that benefits the United States can’t be reached.
“If you don’t finish NAFTA this month for whatever reason, you’re probably not going to be able to do anything with NAFTA for the rest of the president’s term, and really beyond,” Scissors said.
In this week’s talks in China, the administration has yet to say what they will ask of Beijing’s leaders.
“We haven’t seen what they want and China is a little concerned they don’t know,” said Chad Bown, a trade expert with Peterson Institute of International Economics.
Most of the issues, especially around intellectual property, will require a long-term commitment for any change to occur because China’s practices such as forcing companies to hand over technology can’t simply be stopped overnight, Bown said.
Trump wants to force China into reduce the $375 billion trade deficit between the two nations by $100 billion.
If the two sides follow through on their threats, consumers and businesses could be hurt by rising prices.
Trump has threatened to impose tariffs on $150 billion worth of Chinese imports and China is poised to retaliate.
In the fight over steel and aluminum imports, Trump has leverage since his trading partners are negotiating under the threat of U.S. tariffs.
Trump also has tremendous discretion to add or subtract countries and products to the penalties imposed by the United States under the statute he is using to justify the tariffs.
European allies including French President Emmanuel Macron and German Chancellor Angela Merkel lobbied Trump to ditch the tariffs during their visits to Washington last week.
The EU has threatened its own set of retaliatory measures and has made clear it won’t negotiate under the threat of tariffs.
Separately Lighthizer had tied the steel and aluminum tariff negotiations to the NAFTA talks, saying they “will go hand-in-hand.”
Canada and Mexico have rejected linking the completion of the trade deal with the tariffs, arguing they should be exempt from tariffs and quotas outside of any NAFTA deal.
Bryan Riley, the free trade director at the National Taxpayers Union, said that it’s impossible to tell how the various talks will play out, a dynamic that lends uncertainty to markets.
“If you’re a U.S. farmer and you decide what kind of crops you’re going to be planting, or a U.S. manufacturer deciding where you’re going to get the metal for your goods, you can’t sit around and wait,” Riley said.
“The instability being injected into the U.S. economy is self-destructive,” he said.
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