DIIS Report

An international trade war in the making?

US trade policy under Trump

A few weeks ahead of the Ministerial Conference of the World Trade Organization (WTO), to be held in Buenos Aires from 10 to 13 December, the international trade community is gripped with a mixture of angst, disbelief and despair.

Although US President, Donald Trump, made radical statements during his presidential campaign – including the infamous statement that the “WTO is a disaster” [for the US] – few expected much of that to translate into actual policies when he was elected and appointed President. Yet, this is very much what has in fact happened over the past 10 months.

This DIIS report finds that out of seven key promises on trade policy made by Trump on the campaign trail, four have been fulfilled, two have been partially fulfilled, and only one has been dropped. With respect to the WTO, the Trump administration is obstructing its dispute settlement mechanism, by blocking new appointees to its Appellate Body, to the point of potentially paralyzing it. EU Commissioner of Trade, Cecilia Malmström, commented recently that the Trump administration risks “killing the WTO from the inside”.

As late as 29 November 2017, the US initiated an anti-dumping case against China, not – as is normally the case, by request of a US industry – but on the initiative of the US Commerce Department. This is the first time since 1985, that a US administration has taken such action. Chad Bown, leading US trade policy expert from the prestigious Peterson Institute of International Economics, comments that the US administration, by taking such action, “is sending an aggressive signal that it is eager to impose import protection”.

This latest trade action by the US – taken just weeks after Trump’s return from meetings in China, with Chinese leader Xi Jinping, which both sides claimed enhanced their already strong personal relationship – sharply raises concerns for what is to come on the other side of New Year.

In April, the Trump administration initiated two so-called section 232 investigations on US imports of steel and aluminium, which gives the US President discretion to unilaterally impose high tariffs on imported products found to be a threat to US “national security”. The official deadline for the US Commerce Department to release the two section 232 reports is mid-January 2018.

Trade experts refer to the imposition of tariffs in the name of national security as the “nuclear option” in trade policy. Many fear that if the US does in fact impose high tariffs on steel imports from China and other steel exporters to the US (including several European ones) – as many now expect – it could trigger an international trade war.

The report is the first of a series of outputs reporting the findings of an ongoing research project on current US trade policies and their international implications.

The same theme is the topic of an international conference hosted by DIIS on 10 January 2018, co-financed by the Danish Central Bank and the Danish Ministry of Foreign Affairs. Registration for the event will open in mid-December, when the conference program is released.

For background reading, in Danish, see articles by Jakob Vestergaard on his Global Economy blog:

Amerikansk-kinesiske forhandlinger står i stampe (31/7-2017).

Stålsat. Trump sætter kurs mod handelskrig (30/6-2017)

Amerikansk handelspolitik på slingrekurs (4/5-2017)

Grænsejusteret skat: Uenighed i Det Hvide Hus og i Kongressen(13/2-2017)

Handelskrig i sigte(27/1-2017)

Trump gør klar til konfrontation med Kina(9/1-2017)

Trumps protektionisme, trussel mod verdenshandlen?(9/1-2017)

Regioner
China
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US Trade Policy Under Trump
Assessing the Unilateralist Turn