TPP's uncertain future - United States

Trump's moves could hurt firms, say experts

US President Donald Trump speaks after signing one of five executive orders related to the oil pipeline industry in the Oval Office of the White House in Washington, DC, on Jan 24, 2017.
US President Donald Trump speaks after signing one of five executive orders related to the oil pipeline industry in the Oval Office of the White House in Washington, DC, on Jan 24, 2017.PHOTO: BLOOMBERG

Several countries swung to making efforts to salvage the Trans-Pacific Partnership after President Donald Trump's decision to dump the pact left its future in doubt.

WASHINGTON • President Donald Trump's first moves on trade have cast a pall over US trade relations and could hurt US businesses, said trade experts.

Mr Trump's first order of business on Monday was to sign an executive order officially withdrawing from the 12-nation Trans-Pacific Partnership (TPP).

"It is a sign of a brake on global integration," said International Monetary Fund official Alejandro Werner, who heads the Western Hemisphere Department.

The withdrawal followed Mr Trump's threat in a meeting with corporate chief executives on Monday to impose "a substantial border tax" on products coming into the United States, to encourage firms to move manufacturing into the country.

But trade experts caution that such moves risk retaliation and, in an extreme event, a trade war.


An anti-TPP protester in Washington. Mr Trump signed an executive order on Monday to withdraw from the trade pact. PHOTO: AGENCE FRANCE-PRESSE

Discriminatory tariffs are "just chaos", said Mr Barry Bosworth, chair of international economics at the Brookings Institution, a Washington think-tank. "They always respond," he said of China. "Then we have the significant risk of trade war, because there is no underlying principle, it is just, does Donald Trump like them or not?"

That would impose "a high cost to American companies" like Boeing, as China would switch to Airbus, he said. "How is that going to help us?"

  • Ambitious 12-nation pact aimed at boosting investment and economic growth

  • One of the most ambitious free trade agreements ever attempted, the Trans-Pacific Partnership (TPP) involves 12 countries - the United States, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

    The pact aims to deepen economic ties among these nations and is expected to substantially reduce tariffs, even eliminating them in some cases, and help open up trade in goods and services.

    It is also expected to raise investment flows between the countries and boost their economic growth.

    For the US, the TPP represents 40 per cent of world trade and a destination for more than 60 per cent of US exports.

    Initial estimates claim the TPP would add US$305 billion (S$433 billion) in exports per year globally, with nearly half accounted for by an increase in US exports by an additional US$123.5 billion.

    The TPP is also a strategic arrangement using free trade as an anchor.

    As China is not among the participants, the pact provides an economic counterweight to Beijing in the region by securing preferential access to Asia's markets for US companies over Chinese firms.

On Sunday, Mr Trump repeated his pledge to begin renegotiating the North American Free Trade Agreement (Nafta) in talks with the leaders of Mexico and Canada.

Trade experts said they are at a loss to understand his aims, warning that manufacturing in the region is highly interconnected, and change could be disruptive.

Mr Chad Bown, a senior fellow at the Peterson Institute for International Economics, said Mr Trump did not invoke the Nafta article governing renegotiation, which would have "triggered a ticking clock" dissolving the treaty in six months unless an agreement was reached.

AGENCE FRANCE-PRESSE

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A version of this article appeared in the print edition of The Straits Times on January 25, 2017, with the headline 'Trump's moves could hurt firms, say experts'. Print Edition | Subscribe