The United States’ trading partners are working swiftly to maintain trade levels amidst a protectionist environment ushered in by Donald Trump’s presidency. In response to the increasing barriers from the US, countries are reviving a strategy they employed during Trumpโs earlier administration, which involved forging new trade agreements with each other.
Since Trump’s election, the European Union (EU) has successfully negotiated a long-awaited trade agreement with the Mercosur bloc of South American nations, updated a free trade deal with Mexico, and reignited discussions with Malaysia that had stalled for over ten years.
In the early days of his administration, Trump proposed steep tariffs of up to 100% on China and 25% on Canada and Mexico while also contemplating broad tariffs on all imports to the US. He directed federal agencies to investigate trade-related issues such as currency manipulation and counterfeit products.
Malaysiaโs Trade Minister, Tengku Zafrul Aziz, noted that the prospect of Trumpโs return could encourage nations to diversify their trade relationships further. He referred to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which advanced with 11 member countries in 2018 after the US opted out, as evidence of nations collaborating in the absence of traditional economic powers like the US.
The EU’s trade commissioner, Maroลก ล efฤoviฤ, highlighted significant interest in forming agreements with the EU, citing a schedule packed with meetings with ministers from various Gulf countries and beyond. The entire team of EU commissioners is set to visit India to advance discussions on trade and technology partnerships in the near future.
According to a European official, countries actively engaging in trade negotiations are doing so independently of the US’s situation, pointing out a significant discrepancy between Washingtonโs aspirations and actual developments. During Trump’s first term, the EU secured trade deals with Japan, Singapore, and Vietnam, while also initiating talks with New Zealand and Chile. An EU official humorously remarked that Trump was โthe best EU trade commissioner ever.โ
Cecilia Malmstrรถm, the former EU trade commissioner, observed that the tumultuous trade environment created by Trump’s unpredictable policies prompted the EU to seek stronger partnerships. She anticipates progress on deals with Mexico and potential agreements with Australia, Indonesia, as well as discussions with the Philippines and Thailand during Trump’s tenure.
Bernd Lange, chair of the European Parliament’s trade committee, suggested that the EU’s approach to Trump would involve both retaliatory tariffs and the enhancement of trade alliances with other countries, including the UK, Mexico, Japan, and Canada. He advocated for ratifying existing agreements such as the EU-Mercosur deal and finalizing negotiations with Australia and Indonesia.
In 2020, the Regional Comprehensive Economic Partnership (RCEP) was established among ASEAN countries and several others, most notably aiming to diminish non-tariff barriers to trade, affecting 2.3 billion people and representing 30 percent of global GDPโcompared to 25 percent for the US. The African Continental Free Trade Area, which will eliminate 90 percent of tariffs progressively, commenced in 2021.
Despite the global rise in protectionism and the impact of the Covid-19 pandemic, trade in goods and services has continued to flourish. Observers, such as Scott Lincicome from the Cato Institute, noted that regardless of Trumpโs future policies, other nations are unwilling to pursue isolationism and are proceeding with their trade agendas unaffected. Currently, approximately 370 trade agreements are in effect, with little indication of a significant reversal.
China has also recently signed agreements with countries such as Serbia, Cambodia, Nicaragua, and Ecuador, reinforcing its position as a formidable player in global trade, representing around 30% of global manufacturing. Meanwhile, a senior trade official expressed skepticism regarding the eagerness for new agreements, citing that the remaining accords are more complex to negotiate, noting that though Trump’s return could spur new bilateral deals, many regions, especially Asia, appear to be largely settled.
photo credit: www.ft.com
