It's not just Mexico. Trump is taking on free trade dogma

US President Donald Trump threatened to hit Mexico with new tariffs on May 30.
US President Donald Trump threatened to hit Mexico with new tariffs on May 30. PHOTO: REUTERS

WASHINGTON (NYTIMES) - US President Donald Trump on Thursday (May 30) threatened to hit Mexico with new tariffs, escalating his immigration fight with America's largest trading partner. And with that, he showed, once again, that he's ready to employ trade as an all-purpose tool for his policy goals.

Mr Trump is juggling multiple trade conflicts today, with allies and rivals alike. His demands, often first disclosed through Twitter, have caught trading partners off guard.

Just eight months ago, Mr Trump's negotiators struck a deal with Mexican and Canadian officials that they said would replace the North American Free Trade Agreement (Nafta). His new threat comes even before Congress has approved the deal and signals to US partners that continuing disputes and threats are now the norm in global trade - at least as long as Mr Trump is in office.

Of course, Mexico isn't Mr Trump's only target. Far from it. In fact, what he's taking on is broader than any particular country. He is challenging the post-World War II consensus that free trade enriches the world.

Here's a look at the many fronts in Mr Trump's war on the world's established trade relationships.

CHINA

The clash with Beijing has been Mr Trump's biggest trade conflict and the one that has spooked economists and investors the most. It could affect more than US$730 billion (S$1 trillion) in goods and services that flow annually between the two countries.

 
 
 

For now, it has no end in sight. Talks broke down in early May after the US accused China of backtracking from offers made earlier in the negotiations.

Mr Trump then raised tariffs to 25 per cent from 10 per cent on US$200 billion a year in imports from China and threatened to target even more Chinese goods. China soon retaliated and is looking for other ways to strike back. That could mean using the value of its currency as a trade war weapon or leveraging its hold on key minerals and processes that the world depends on.

The effects could be huge if the trade war lingers or intensifies. US companies count on China for a significant share of their profits and for the critical role it plays in making many of the world's goods.

China needs the US export market to keep its economy going and wants advanced technology like computer chips and software from the US to foster its economic development.

Still, trade hawks within the Trump administration argue that the US has grown too dependent on China and see decoupling the two countries as a long-term goal. Already many companies are rethinking their dependence on China. For China, any move to retaliate against the US risks speeding up that process.

JAPAN

Mr Trump has called the relationship between the US and Japan "a treasured alliance" and says he enjoys a close relationship with Prime Minister Shinzo Abe. That hasn't exempted Tokyo from his threats.

 
 
 

Though he has postponed his decision, Mr Trump still says he will put tariffs on Japanese auto imports unless the two sides reach a trade deal. The White House wants greater access to the Japanese market for American farmers and ranchers. He also wants Japanese automakers to build more factories in the US so more cars can be assembled by American workers.

Striking a deal is crucial for Mr Abe, whose years long effort to rev up Japanese growth faces a major challenge from an economic slowdown in China, a major buyer of Japanese equipment and goods. Adding to the political pressure on Mr Abe, Mr Trump has said any deal would wait until after Japanese elections in July.

Criticism of Japan from Mr Trump is hardly new. His comments in the 1980s, when Japan's export machine was more widely perceived as an economic threat to the US, suggest those early clashes helped form his views on trade.

MEXICO

The Mexican conflict was supposed to be over.

But on Thursday, Mr Trump reignited trade tensions by threatening to impose tariffs on Mexico beginning June 10 unless it stops the illegal flow of immigrants across the border into the US.

If he follows through on the threat, severe disruptions could be felt on both sides of the border. Thanks in part to the tariffs on China, Mexico is now the largest trading partner for the US, accounting for more than US$150 billion in trade in the first three months of this year, according to IHS Markit Global Trade Atlas, a data provider.

Trade has already been hindered because of shifts in how American personnel police the border, leading to longer waits. And just as he has with Japan, Mr Trump has also threatened to put tariffs on imports of cars made in Mexico. A number of American and Japanese auto factories are in Mexico, with supply chains that run deeply into the US.

Trump's threat calls into question the fate of the United States-Mexico-Canada Agreement, which the three countries hammered out last year as the successor to Nafta. Already the US has lifted tariffs on metal imports from both Mexico and Canada as a way to get the deal ratified.

But Congress has signaled some skepticism, showing how Mr Trump - whatever the fate of his various conflicts - has changed the tenor of the discussion on trade in the US.

EUROPE

The prospect of punishing tariffs from the US has loomed for several months after steel and aluminum tariffs imposed last year rattled US allies in Europe.

Mr Trump has contended that imports of foreign cars and car parts are causing harm to the US automobile industry and threatening national security.

 
 

"The European Union treats us, I would say, worse than China. They're just smaller," he said in May. "They send Mercedes-Benzes in here like they are cookies."

He has threatened tariffs of 25 per cent on the millions of foreign cars and car parts imported by the US each year. The move could inflict damage in states like Alabama and South Carolina, which are home to big Mercedes-Benz and BMW assembly plants.

In May, the White House put off a decision on imposing these tariffs, leaving six months to negotiate a trade deal to address the problem.

The US was already struggling in negotiations with the EU, which has refused to consider demands to allow more US agricultural products into Europe.

The Trump administration says that a deal without agriculture would not pass Congress, but populist politicians in Europe have seized on some U..products and practices - like the use of chlorine to sterilise chickens - to justify retaining trade barriers.

Countries like France and Belgium have also balked at joining talks because of the Trump administration's refusal in 2017 to sign a global pact on climate change. And leaders of the Green coalition in the European Parliament have said that they will not sign trade agreements with countries that have not ratified the climate accord.

CANADA

Last fall, Mr Trump appeared to reach a settlement over trade differences with Canada with the United States-Mexico-Canada Agreement, the revised Nafta. Among other things, the pact is supposed to make it easier to sell US dairy products in Canada. But his announcement Thursday could derail his efforts to secure congressional approval of the pact.

Canada has been in an uncomfortable middle ground in the trade war between the US and China. It became the centre of a diplomatic row after Canadian authorities arrested Meng Wanzhou, a top executive at the Chinese tech company Huawei who was wanted on fraud charges by US officials.

Perhaps in retaliation, China has arrested two Canadians and accused them of espionage and has placed restrictions on some Canadian agricultural products.

"China and the United States have escalated their dispute, and Canada has been caught in the crossfire," Ms Carolyn Wilkins, senior deputy governor at the Bank of Canada, said in a speech Thursday.

Mr Trump has implied he would intervene in Meng's extradition to the US if it would help Washington land a trade deal with Beijing.

But the new North American trade deal signed this past fall also included a clause, known as the "China clause," which many saw as a blatant push to block any free trade deal between China and Canada.