Trump & Trade: Uneasy Partners?

Trump does have  business experience in the UK. Photo from the BBC

Trump does have business experience in the UK. Photo from the BBC

Democratic politics often produces surprises and while most would agree 2016 so far has produced a few of note, what usually marks the strength of any system is the ability to adapt and change as a result. Therefore I can see the value in looking for positives and trying to make successes as a result of referendum result on 23 June and the recent US presidential election. There have already been a few voices suggesting that this now means a UK-US free trade deal might now be, to quote James Forsyth in the Spectator this weekenda relatively simple affair.

While it’s true that there have been one or two positive noises about such a deal from some Repubican members of Congree it remains very much in the realm of fantasy rather than reality. To be fair all trade deals have to start somewhere but the path to a UK-US deal would seem rather longer and more uncertain than some more may hope.

During the June referendum campaign President Obama’s assertion that the UK outside the EU would be “at the back of the queue” for any such trade deal didn’t impress many. The UK’s impending exit from the EU and possible exit from its Customs’ Union means that it now have to leave its seat at the table on the current EU-US trade deal negotiations. This might not be such a loss at the moment given that that deal (usually known as TTIP) is widely acknowledged to be dead, killed first by the UK referendum result and now to be put in cold storage or buried altogether following Trump’s election victory. The irony here is that this talks table was largely laid by the UK itself in County Fermanagh in June 2013, following a decade or so of talks.

The EU’s own difficulties in passing comprehensive trade deals were recently laid-bear with the recent EU-Canada deal, however while this may have increased Brexiteers’ demands for the UK to be able to strike its own tailored deals that day is still far-off and not been made closer by Trump’s victory.

There is still no clarity on what post-EU Britain’s trading relationship will be with the outside world and even if Article 50 is triggered by May and enacted by Spring 2019 that still leaves the UK with the need to establish itself with its own trading position vis-à-vis the EU (not to mention hire some trade negotiators).

The other great uncertainty is what Donald Trump’s international trade policy will look like, but noises during the campaign don’t suggest a ‘full speed ahead’ approach, more like rowing back. Throughout his campaign Trump targeted the NAFTA deal (arguably the US’ most important trading partnership with Canada and Mexico) repeatedly signalling his desire to either kill it or re-negotiate it. How he how intends to make-good on that pledge remains to be seen, Mexico and Canada may be less-willing to agree.

The ‘queue’ for future trade deal with the US is rather long already and even further ahead than the EU’s TTIP deal is the Trans-Pacific Partnership (TPP), a potential deal with 12 countries in Asia and Australasia, which was supposed to be done and dusted but now looks less likely. Tuesday’s election kept the Republicans control of the senate, which is needed to ratify trade deals. Some of the other countries involved (Australia, Japan, New Zealand and Singapore) intended to allay fears about the deal in a Tuesday press conference, but in a potentially portentous sign, the conference was cancelled. Most Washington watchers now say the deal is dead.

NPR’s Marilyn Geewax listed the how a Trump presidency may affect US trade policy in three steps

“1. Kill TPP, 2. go after NAFTA, 3. Impose Tariffs”

On option 3 Trump has often said he wants to go after China, with talk of imposing an eye-watering 45% tariffs on imports.

Currently the US and UK do no impose many tariffs on each other’s products, any successful trade deal would need to focus more on regulatory equivalency, mostly in the area of financial services. But of course areas such as agricultural products (consider cheap beef imports) may be worried about other contents of any such deal.
No-one is quite certain what a Donald Trump trade policy looks like, but his campaign style suggests it may be anything but a smooth ride for any UK-US free trade deal. The president elect hasn’t yet signaled whom he will appoint as his trade representative, but in August one of his team said it will be

“…the toughest, smartest SOB on trade that Mr Trump can find”.

Early rumours are that it will be Dan DiMicco, executive chairman of Nucor, the US’ largest steel producer, there is little in his background that suggests he is likely to be favourable to the UK.

Given the energy likely to be required to enact some of the promises it seems unlikely that Trump will want to spend much political capital on a new foreign trade deal. Obama only started the Pacific and European negotiations into his 2nd mandate, whether or not Trump will get to a second mandate remains firmly within the realm of speculation at the moment, same as any UK trade deal.

The US is far from clear on what its future trade deals will look like, so of course is the UK. The presumption that a US-UK free trade deal is in the near distance should perhaps be put away with the ‘vote Clinton’ posters.

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