WASHINGTON — Who would have thought that global trade would rival groping as a hot-button issue in the presidential election?
Donald Trump’s upset victory over Hillary Clinton was based partially on his vow to make the U.S. more protectionist when it comes to trade, including dropping the proposed Trans-Pacific Partnership deal and renegotiating the North American Free Trade Agreement.
Either could spark a trade war — or at the every least slow the trade agenda to a crawl. But experts believe there could be some areas of opportunities for new channels of negotiation under a Trump administration.
Republicans maintained control of the House and Senate, which should prove critical for advancing Trump’s campaign agenda. But there could also be a Congressional leadership shake-up, particularly in the House where Speaker Paul Ryan (R., Wis.) is seen to be tenuously holding on to his job. Ryan reluctantly backed Trump during the campaign and has also faced challenges from the divided GOP faction in the lower chamber.
David Spooner, a partner at Barnes & Thornburg and a former chief textile and apparel negotiator at the U.S. Trade Representative’s Office, said it was a distinct possibility Ryan would either look to step down as speaker or be asked to, and return to being chairman of the House Ways & Means Committee.
“The rumor is that Paul Ryan never wanted to be speaker,” said Spooner, who also served as assistant secretary of Commerce for import administration under President George W. Bush. “He’s a policy wonk. He hates fighting his own caucus and the Republican Caucus is, of course, divisive.”
He noted that the House will gather next week for a leadership vote.
Ryan held a post-election press conference on Wednesday and said, “Donald Trump will lead a unified Republican government and we will work hand in hand on a positive agenda to tackle this country’s big challenges.”
On the campaign trail, Trump released his “Contract With the American Voter” outlining proposals he said he will implement in his first 100 days in office. He has vowed to cut the corporate tax rate, seen as a positive by retailers, but also to withdraw from TPP, renegotiate NAFTA and label China a currency manipulator.
“Trump has a mandate to change course on immigration policy and on trade policy,” said Phillip Swagel, a professor of international economic policy at the University of Maryland and former Treasury Department official under Bush. “He ran clearly on those issues and won, and he has considerable authority as president on those issues. On trade, expect an increased focus on trade prosecutions.”
Michael Singer, vice president of customs compliance at Macy’s and chairman of the U.S. Fashion Industry Association, said, “I do see some opportunities believe it or not, and I had to struggle really hard to come up with something positive. From the regulatory basis, there may be an opportunity” for some easing of government laws and mandates.
“One of the key issues we now face is how the administration and Congress will handle trade issues in 2017,” Singer said. “We all know how important trade and the access to world markets is in our ability to provide our customers the choices and products they expected, and yet there is no doubt the protectionist sentiment in our country is at historic levels. USFIA will be doing our best to make sure that this remains a top priority and we clearly communicate the importance and benefit of trade to U.S. consumers and the U.S. economy.”
A Trump victory likely means the end of the pending 12-nation TPP deal. But industry experts are divided over whether Trump will hold true to his word and withdraw the U.S. from the agreement out of the gate.
The prospects for Congress taking up the TPP deal in a lame-duck session, slated to begin next week, appear slimmer with the Republican sweep, but President Obama could still send implementing legislation to Capitol Hill and try to push it through.
Jennifer Safavian, executive vice president of government affairs at the Retail Industry Leaders Association, said while Trump has raised concerns about trade agreements, he has also said he “wants to make sure trade deals are done in a different way.”
Stephen Lamar, executive vice president at the American Apparel & Footwear Association, said, “We’re trying to determine along with the rest of the trade policy [community] whether the opportunity to move TPP during a lame duck still exists. That is really a function of a lot of things, not just the election but also a function of to what extent the [Obama] administration and Congress can still resolve some of those outstanding issues.”
Beyond TPP, Trump has targeted NAFTA and said he would withdraw the U.S. from the trade deal with Mexico and Canada if the two countries refuse to come to renegotiate it.
As for his vow to label China a “currency manipulator,” the move would set in motion a process that could ultimately lead to sanctions against the country.
Experts aren’t counting out a potential trade war with China if such a move occurs, as well as with Mexico, stemming from Trump’s threats to impose high tariffs on imports from both countries. But the new president could run into resistance from pro-trade Republicans in Congress.
Augustine Tantillo, president and chief executive officer of the National Council of Textile Organizations, said he would be surprised if Trump does not take some steps to crack down on currency devaluation, particularly as it relates to China.
The Obama administration has taken a more diplomatic approach, prodding China through high-level dialogs to raise the value of its currency, as opposed to punitive measures, and the yuan has appreciated some in the past few years.
But Tantillo noted he thinks there will be a “level of caution,” when it comes to renegotiating NAFTA. “This agreement has been in place for a while and it would be clearly disruptive to simply walk away from it at this point.”
As Trump pivots to build his cabinet and fill key positions such as Commerce and Treasury Secretary, and U.S. Trade Representative, he will also seek to crack down on “foreign trading abuses.”
Spooner said Trump’s chief trade advisers during the campaign were Peter Navarro, a professor of economics and public policy at the University of California, Irvine; Dan DiMicco, former ceo of Nucor Steel, and financier Wilbur Ross, former majority owner of ITG, which owns Cone Denim and Burlington Worldwide. ITG recently was acquired by L.A.-based private equity group Platinum Equity.
“All three of these guys are very protectionist, although Ross is more pragmatic,” said Spooner, noting that they all could play some role in advising on trade or serving in some capacity.
“You should be concerned,” Spooner told the crowd gathered for USFIA’s annual conference in New York. “Trump talked about renegotiating NAFTA and not passing TPP, and generally being more protectionist and look at the three advisers that are backing him up. That said, there are people behind the scenes who are free traders.”
While he and Jon Fee, senior counsel at Alston & Bird, both said TPP is dead, Spooner added, “If Trump brings in new faces at USTR and is rethinking trade policy, it might give us an opportunity to convince the new administration to do new things in trade policy. For goodness sake, we’ve been [saddled] with the yarn-forward rule of origin [on textiles and apparel in free trade agreements] for decades.”
Fee noted that Trump has threatened to impose 45 percent duties on goods from China and penalize companies for moving their goods abroad. He said the President can withdraw from NAFTA without the consent of Congress.
Fee said the fallout of that action would mean diminished trade with Mexico and Canada and the old Canada-U.S. FTA would return to force. He noted that Trump also threatened to withdraw the U.S. from the World Trade Organization, which he has the authority to do.
“The United States would then enjoy the same economic trade status as Iran, North Korea and Syria,” Fee added. “The U.S. would be free to raise tariffs against any country and those countries would also be free to raise tariffs against the United States. It would also be a threat to protection of intellectual property and might trigger retaliatory trade wars.”