The risk of near-term trade disruptions from U.S. trade policy changes has fallen this summer. After 200 days in office, the Trump Administration has not yet followed through on much of their most significant trade policy proposals from the 2016 campaign. The initial quick withdrawal from the TransPacific Partnership and threats to NAFTA, have not seen equivalent follow up from the Administration or in Congress. Targeted attention-grabbing trade moves, such as duties on Canadian softwood lumber and the prospects of new imported steel duties, have had little impact on overall trade.
Further broad trade policy initiatives from the Administration have not been forthcoming since the reciprocal tax, which replaced the Border Adjustment Tax (BAT), did not advance in Congress this summer.
The Congress is distracted with other major political issues and seems unlikely now to shift attention to trade policy this year. Major trade policy isn’t a high enough priority for the Administration or Congress compared with still-unresolved issues such as health care or taxes. Consequently, the policy-related impacts on U.S. trade in 2017 have been more a result of earlier risk perceptions and risk mitigation instead of actual 2017 interventions in trade.
Because the Administration and Congress didn’t continue with major trade policy changes this year, trade relationships are reflecting underlying business conditions more than politics. The trade policies that have advanced are more moderate-scope trade policy negotiations. The Administration’s threat to withdraw from NAFTA has turned instead into a treaty renegotiation, much less likely to dramatically or quickly affect trade. NAFTA renegotiation could ultimately even improve trading conditions if Canadian optimism welcoming needed updates to NAFTA after 23 years is believed.
The Administration’s recent increased need to deal with North Korea has meant the bandwidth for dialog with China about trade has instead been taken up with discussions of the security threat. Thus, with time and attention of the Administration and Congress elsewhere, trade policy developments are ending up as under other Administrations, much driven by sanctions against certain countries for foreign policy reasons rather than a focus on the underlying U.S. trade deficit or ‘fair trade’ itself.
Paul Bingham is a Director at Hackett Associates. He can be reached at email@example.com