Past Event

Implications of the new US trade policy by the incoming president Trump

An event about the implications of Donald Trump's emerging trade agenda on global trade.

Date: January 19, 2017, 12:30 pm Global Economics & Governance Tags & Topics

SUMMARY

International trade played a prominent role in Donald Trump’s presidential campaign. The now President of the United States of America argued for protectionist trade policies, ranging from a renegotiation of the NAFTA agreement and an exit from the WTO and the TPP, to imposing a 35 percent tariff on Mexican imports and a 45 percent tariff on Chinese imports.

At this event, Bruegel hosted Adam Posen, President of the PIIE, to elaborate on the implications of the views expressed by President Trump on trade policy.   As a result, two main ideas have emerged:

A double-edged sword

While the convictions expressed by President Trump may be taken at face value, these reflect a world view in which bilateralism is superior to multilateralism; in which the system is biased against the U.S. and in which trade deficits are inherently bad. Despite the facts being in opposition to these views, actual policies are expected to align accordingly. In this sense, the United States are likely to ramp up pressure on Mexico. This strategy, however, may be counter-productive given its effect on exchange rates.

Following the U.S. elections, the Mexican peso has dropped 13.4 percent against the American dollar. Given the American planned fiscal expansion and the response of the Fed, the dollar is expected to appreciate in the long-run – a weakened peso vis-a-vis the U.S. dollar, in turn, might lead to an expansion of trade deficits rather than the anticipated contraction, catalysing more aggressive measures against Mexico.

In fact, exchange rate movements prior to the election accounted for a 0.3 p.p. revision on the 2020 U.S. current account deficit, rising to 4.63% of GDP. While in the past trade deficit pressure was resolved through exchange rate agreements, such realignments require an appropriate institutional set-up. Thirty years after the Plaza Accord, the set-up has changed with more players involved and a lower likelihood of an agreement.

Fighting fire with water

It is true that the U.S. President has executive power to change trade agreements. Nonetheless, the argument is raised that Europe does not have to wait for protectionist measures to be implemented to defend its interest in a rules-based system. It was pointed that the current framework may provide an opportunity to not only discuss existing rules but even extend them to other grounds, such as global investment.

The consensus in the room was that direct confrontation is unlikely to solve problems. Likewise, scenarios such as the EU reaching agreements with Canada while the U.S. disrupts NAFTA, or partnering with Asia while the U.S. forestalls TPP, could also be deemed controversial.

It is nonetheless legitimate and appropriate for China and Europe to make use of existing platforms – such as the WTO – to defend the rules-based system and hold the United States accountable, if necessary. A reinforcement of commitment in existing agreements is also a possibility. In a hypothetical scenario of provocations, is up to the EU and China’s to lead the negotiations in a constructive manner.

Event notes by Inês Gonçalves Raposo

Video recording

 

Schedule

Jan 19, 2017

12:30-13:00

Check-in and lunch

13:00-14:00

Panel discussion

Chair: Guntram B. Wolff, Director

Adam Posen, President of PIIE

André Sapir, Senior Fellow

Xiang Yu, First Secretary for commercial affairs, Chinese Mission to the EU

14:00-14:30

Q&A

Chair: Guntram B. Wolff, Director

14:30

End

Speakers

Adam Posen

Adam Posen

President of PIIE

André Sapir

André Sapir

Senior Fellow

Guntram B. Wolff

Guntram B. Wolff

Director

xiang yu photo

Xiang Yu

First Secretary for commercial affairs, Chinese Mission to the EU

Location & Contact

Bruegel, Rue de la Charité 33, 1210 Brussels

Matilda Sevón

Matilda Sevon

matilda.sevon@bruegel.org

Read article More on this topic More by this author

Blog Post

André Sapir

Trump’s U-turn on trade with China is good news, but the EU should not be complacent

President Trump has so far been softer on China than his campaign promises predicted. This is welcome. However, the EU has a lot at stake, and should be ready to steer a tactical course between its two main trade partners.

By: André Sapir Topic: Global Economics & Governance Date: April 19, 2017
Read about event More on this topic

Past Event

Past Event

Global outlook and policy priorities

At this event the Managing Director of the International Monetary Fund, Christine Lagarde, will speak about the global outlook and policy priorities, ahead of the 2017 IMF Spring Meetings

Speakers: Christine Lagarde, Jean-Claude Trichet and Guntram B. Wolff Topic: Global Economics & Governance Location: Brussels Date: April 12, 2017
Read article More on this topic More by this author

Blog Post

Lagarde picture

Building a more resilient and inclusive global economy

Curtain raiser speech ahead of the 2017 IMF Spring Meetings delivered at Bruegel by the Managing Director of the International Monetary Fund.

By: Christine Lagarde Topic: Global Economics & Governance Date: April 12, 2017
Read article More on this topic More by this author

Blog Post

Silvia Merler

The American opioid epidemics

What’s at stake: The US Department of Health and Human Services (HHS) declares that the country is “in the midst of an unprecedented opioid epidemic”. Since 1999, the rate of overdose deaths involving opioids - including prescription pain relievers and heroin - nearly quadrupled. We review contributions looking at the economic drivers and implications of this phenomenon.

By: Silvia Merler Topic: Global Economics & Governance Date: March 27, 2017
Read about event More on this topic

Past Event

Past Event

Artificial intelligence: challenges and opportunities

Rob Atkinson, the founder and president of the Information Technology and Innovation Foundation presented his research work on the impact of artificial intelligence on our lives.

Speakers: Robert Atkinson, Anna Byhovskaya, Merja Kyllönen and Georgios Petropoulos Topic: Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: March 23, 2017
Read about event More on this topic

Past Event

Past Event

Conversations on the future of Europe

On the occasion of the 60th anniversary of the signing of the Treaty of Rome, we held an event of four conversations between Bruegel scholars and European thinkers.

Speakers: Maria Demertzis, Ivan Krastev, Emmanuel Mourlon-Druol, Johanna Nyman, André Sapir, Catherine Schenk, Andre Wilkens and Guntram B. Wolff Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: March 22, 2017
Read article More on this topic More by this author

Opinion

Guntram B. Wolff

Europe should lead the way with multilateralism

Despite the unique partnership with the USA, Europe needs to reflect on its place in an unstable world. Especially if the US Administration moves towards protectionism, the EU will need to build and deepen relationships with other partners.

By: Guntram B. Wolff Topic: Global Economics & Governance Date: March 16, 2017
Read about event More on this topic

Past Event

Past Event

Intellectual Property and Competition Policy in Europe and Japan

Intellectual property (IP) is a cornerstone for incentivising innovation initiatives. It defines a framework within which firms and individuals can produce creations of intellect.

Speakers: Peter Alexiadis, Reiko Aoki, Michael Koenig, Kai-Uwe Kühn and Georgios Petropoulos Topic: Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: March 14, 2017
Read about event More on this topic

Past Event

Past Event

Trump’s energy policy: America first, climate last?

This event seeked to discuss the potential way forward for the US energy and climate policy, and its implications for both global energy markets and global climate change mitigation efforts.

Speakers: Kristine Berzina, Tim Boersma, Connie Hedegaard, Simone Tagliapietra and Zhang Xumin Topic: Energy & Climate Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: March 7, 2017
Read article More on this topic More by this author

Blog Post

photo2016

NAFTA in play: How President Trump could reshape trade in North America

How will the story of NAFTA unfold under the Trump presidency? Uri Dadush examines three possible scenarios and provides an overview of the policy implications for the various trading partners of the United States.

By: Uri Dadush Topic: Global Economics & Governance Date: March 1, 2017
Read article More on this topic More by this author

Blog Post

Simone Tagliapietra

Trump’s Energy Policy: America First, Climate Last?

What will the new US administration mean for the fight against global warming? Climate change is not even mentioned in the ‘‘America First Energy Plan’’, and Simone Tagliapietra fears a reversal of recent positive steps.

By: Simone Tagliapietra Topic: Energy & Climate Date: February 28, 2017
Read article More on this topic More by this author

Blog Post

dsc_0809

The Mexican automotive industry and Trump’s USA

Trade with Mexico is a controversial topic for the new US administration. And the automotive sector is emblematic of Trump’s promise to bring manufacturing jobs back to the USA. But a look at the numbers reveals risks in any shake-up of cross-border trade. 22% of US automotive exports to Mexico are later reimported as part of cars “made in Mexico”. And disrupting production chains could have repercussions around the world.

By: Filippo Biondi Topic: Global Economics & Governance Date: February 27, 2017
Load more posts