US: Start of a new era in trade policy? - NAB

Research Team at NAB notes that the trade was one of the key themes of Mr Trump’s campaign and as his inauguration as President nears, attention focuses on what trade policies the Trump administration will pursue.

Key Quotes

“Mr Trump’s call for radical reform in US trade policy to lift domestic employment and wages reflects his strong criticism of what past policies have delivered. He has advocated imposing higher tariffs on countries that trade unfairly (with particular criticism of China), re-writing or scrapping the North American free trade agreement (NAFTA), taking a more aggressive line in bringing cases to the World Trade Organisation (WTO) and avoiding big new multi-country trade deals like the Trans-Pacific Partnership.”

 “The difficulty that Mr Trump faces is that sweeping trade measures would best achieve his ambitious jobs agenda, but those are precisely the reforms most likely to lead to WTO cases and trade wars.”

“A trade war could also appreciate the US dollar via a ‘flight to safety’ in financial markets, working against the improved trade balance that the protectionist policy was intended to achieve. In summary, we see a significant move towards protectionism that still proves unable to generate enough jobs to re-build the US industrial sector and which is generally not positive for Australia.”

“The economic impact of using potential measures already on the US statute book ranges from fairly minor to presenting quite a shock to established economic patterns.”