Trump Signals More Trade Deficit Initiatives

As everyone knows in international trade circles, for every 'action' taken to impose trade barriers there will always be a 'reaction' by those affected.

International trade negotiations are somewhat of an art form, because sometimes it isn't always about trade and trade-offs, as broader economic and security aspects can be 'woven into' an overarching reciprocal agreement and bilateral relationship.

As President Trump has signalled, after lengthy negotiations of trying to elicit better trade deals, the optimum approach is now to lead out with telegraphed sanctions or protectionism statements to gain the attention of the other party. Whilst violations against WTO Trade Rules can pose a threat, the reality is that such disputes take years to reach an outcome or conclusion to reach reciprocal agreements or impose sanctions.

Yesterday, President Trump made the following announcement in-line with the foregoing comments (selective passages of text have been chosen):-

' ....... But in particular, with China, we’re going to be doing a Section 301 trade action. It could be about $60 billion but that’s really just a fraction of what we’re talking about.'

'I’ve been speaking with the highest Chinese representatives, including the President, and I’ve asked them to reduce the trade deficit immediately by $100 billion. It’s a lot. So that would be anywhere from 25 percent, depending on the way you figure, to maybe something even more than that. But we have to do that.

The word that I want to use is “reciprocal.” When they charge 25 percent for a car to go in, and we charge 2 percent for their car to come into the United States, that’s not good. That’s how China rebuilt itself. The tremendous money that we’ve paid since the founding of the World Trade Organization — which has actually been a disaster for us. It’s been very unfair to us. The arbitrations are very unfair. The judging has been very unfair. And knowingly, we always have a minority and it’s not fair.

So we’re talking to World Trade, we’re talking to NAFTA, we’re talking to China, we’re talking to the European Union. And I will say, every single one of them wants to negotiate. And I believe that, in many cases — maybe all cases — we’ll end up negotiating a deal...........

...... We have, right now, an $800 billion trade deficit with the world. So think of that. So let’s say we have 500 to 375, but let’s say we have 500 with China, but we have 800 total with the world. That would mean that China is more than half. So we’re going to get it taken care of. And, frankly, it’s going to make us a much stronger, much richer nation.

The word is “reciprocal.” That’s the word I want everyone to remember. We want reciprocal — mirror. Some people call it a mirror tariff or a mirror tax. Just use the word reciprocal. If they charge us, we charge them the same thing. That’s the way it’s got to be. That’s not the way it is. For many, many years — for many decades, it has not been that way.

.......... Ambassador Lighthizer, thank you.

AMBASSADOR LIGHTHIZER: Well, thank you very much, Mr. President. First of all, for those of you who don’t know, Section 301 is a statute that gives substantial power, authority to the President to correct actions in certain circumstances where there’s unfair acts, policies, or practices by our trading partners.

In this case, the area is technology. Technology is probably the most important part of our economy. There’s 44 million people who work in high-tech knowledge areas. No country has as much technology-intensive industry as the United States. And technology is really the backbone of the future of the American economy.

Given these problems, the President asked USTR to conduct a study. We conducted a thorough study. We had hearings. We reviewed tens of thousands of pages of documents. We talked to many, many business people. We had testimony, as I say.

And we concluded that, in fact, China does have a policy of forced technology transfer; of requiring licensing at less than economic value; of state capitalism, wherein they go in and buy technology in the United States in non-economic ways; and then, finally, of cyber theft.

The result of this has been that the President has analyzed it — we have a 200-page study which we will put out — and he has concluded that we should put in place tariffs on appropriate products — we can explain later how we concluded what products they are; that we would put investment restrictions on China with respect to high technology; and that we’ll file a WTO case. Because one of the actions here does involve a WTO violation..........

......... THE PRESIDENT: Thank you very much, Bob. Secretary Ross.

SECRETARY ROSS: Intellectual property rights are our future, and it’s no accident that in June of this year, the U.S. Patent and Trademark Office will issue its 10 millionth patent — 10 million patents. There’s no country in the history of the world that remotely approaches that.

So the steel and aluminum actions we’ve taken deal more or less with the present. This action on intellectual property rights deals with the future. So we’re trying to solve both today’s problem and problems that otherwise will be forthcoming. That’s why these actions are so important and so important in unison with each other. We will end up negotiating these things, rather than fighting over them, in my view........

THE PRESIDENT: Mike Pence, would you like to say something?

THE VICE PRESIDENT: Thank you, Mr. President, and to all our honored guests. Today’s action sends a clear message that this President and our entire administration are determined to put American jobs and American workers first.

The action the President will take today under Section 301 also makes it clear that the era of economic surrender is over. The United States of America is taking targeted and focused action to protect not only American jobs, but America’s technology, which will power and drive an innovation economy for decades to come.........

....... The President: We have some of our great business leaders — and leaders, period — right behind me. I may ask Marillyn — Lockheed — the leading woman’s business executive in this country, according to many. And we buy billions and billions of dollars’ worth of that beautiful F-35. It’s stealth. You cannot see it. Is that correct?

MS. HEWSON: That’s correct, Mr. President.

THE PRESIDENT: Better be correct. Right?

MS. HEWSON: Absolutely.

THE PRESIDENT: Marillyn, please say a few words.

MS. HEWSON: Well, thank you, Mr. President. I would just say that this is a very important moment for our country, in that we are addressing what is a critical area for the aerospace and defense industry, and that is protecting our intellectual property. As has been expressed, that is a threat to us if we have that stolen from our companies, because that is the lifeblood of our companies.

And so, we very much welcome this action on the part of the Trump administration and the President of the United States. Thank you.

THE PRESIDENT: Thank you, Marillyn.

This is the first of many. This is number one, but this is the first of many.'

Interesting times, the clear signal is that there are more 'reciprocal' announcements and actions to follow; standby for the international trade and protectionism ride ahead.

Regards,

Russell Wilkinson

CEO & Founder - World Customs Portal and Trusted Trader International