News Summary 30 January 17

A summary of the most important trade news stories from the past week. This summary is emailed to our subscribers every Monday morning, along with the latest comment and analysis from The Channel Group. If you would like to receive this direct to your inbox, you can sign up at the bottom of this article or click here.

Good morning,

It’s been another eventful week in international trade. Theresa May visited the US to meet Donald Trump, just as the US President signed a number of executive orders that signalled a move towards protectionism.

Mr Trump proposed a 20% border tax on Mexican goods to pay for his southern border wall (find out why this is economically unsound below). He also withdrew the US from TPP and reiterated his promise to renegotiate NAFTA. Despite these protectionist moves, he backed a US-UK free trade deal as soon as it could be negotiated.

Thomas Dempster

The Channel Group

News Summary

May meets Trump

Theresa May became the first foreign leader to meet the new US President, Donald Trump. Her visit started well, with warm words exchanged and a photo-shoot in front of the reinstated bust of Winston Churchill. However, after a series of controversial executive orders, May was under pressure to distance her from the President.

During a press conference, Theresa May said:

The president and I have mentioned future economic cooperation and trade. Trade between our two countries is already worth over 150 billion pounds a year. The U.S. is the single biggest source of inward investment to the U.K., and together, we have around $1 trillion invested in each other’s economies.

We are discussing how we can establish a trade negotiation agreement, take forward immediate high-level talks, lay the groundwork for U.K.-U.S. trade agreement and identify the practical steps we can take now in order to enable companies in both countries to trade and do business with one another more easily.

And I’m convinced that a trade deal between the U.S. and the U.K. is in the national interest of both countries and will cement the crucial relationship that exists between us, particularly as the U.K. leaves the European Union and reaches out to the world.

President Trump has previously expressed his ambition to deliver a trade deal within 90 days of Brexit. Theresa May has echoed Mr Trump’s enthusiasm but has said that any deal must be in the UK’s own interest – keen to confront the accusations that the US will seek favourable terms in any deal under the new “America First” regime.

Trump on Trade War Path

Donald Trump caused tensions with Mexico to rise further, when he signed an executive order paving the way for the US-Mexico border wall. He insisted that Mexico would pay for it, saying that the US would add a 20% import tariff to Mexican goods. Not only has this angered Mexicans – with the President refusing to visit Trump as planned this week – but it also make little economic sense. the most of an import tariff is generally passed on to consumers in the importing country, so Mr Trump will likely find that Americans are indirectly paying for the wall.

Trump also signed an executive order on the US’s involvement with the TPP. Toby Illingworth explains:

🇺🇸 United States to withdraw from TPP

by Toby Illingworth

The TPP was signed in February 2016, in Auckland New Zealand by twelve countries, all of whom border the Pacific Ocean. Collectively these countries represent around 40% of the world’s economic output. The negotiations took severn years and all that remained was the ratification of the agreement by each member country. The TPP would have been one of the largest free trade agreements ever to be signed and proposed to remove over 18,000 tariffs, significantly cut non-tariff barriers and encourage closer economic ties between the signatories.

On 23rd January, President Trump issued an executive order effectively killing the US involvement in the agreement and jeopardising the entire pact. The United States was seen as the Linchpin of the TPP deal. The modeling suggested that with all twelve countries involved, each would benefit greatly from the increased trade. Without the US the benefits may not be as great, especially for countries like Australia. Therefore the future of TPP would seem bleak. This is emphasised by Shinzo Abe stating that TPP without the US would be “meaningless”. However, a number of signatories have signalled their intention to rework TPP without the US. Steve Ciobo, the Australian trade minister said “There are quite a number of countries that have an interest in looking to see if we could make a TPP 12 minus one work,” and spoke of the need to find “ways to lock in the benefits from the TPP”

Others have talked about the possibility of approaching South Korea and China to replace the Americans in the deal. The current signatories to the deal are: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, Vietnam.

In Brief:

  • Spain backs early trade deal talks between UK and EU.
  • Theresa May is planning a China trade mission to bolster economic ties between the two countries.
  • The US trade deficit is caused the slowest growth in the economy for 5 years, according to the latest statistics from the Bureau of Economic Analysis in Washington.

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Thomas Dempster

Thomas has a background in politics, having worked in Parliament for a number of years. He worked alongside a wide range of stakeholders from business, local and supra-national government, and charities on various projects.

Before this, he worked for GlaxoSmithKline and as a theatre producer. Thomas enjoys playing cricket, cycling, and reading.

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