Speaking before the election, Mr Trump’s senior trade adviser, Dan DiMicco, the former boss of Nucor, a big steelmaker, set out several actions the president will take in his first 100 days. These include starting to renegotiate trade pacts such as the NAFTA accord with Mexico and Canada (and threatening to pull out if they won’t play ball). Every future trade agreement, among them the Trans-Pacific Partnership (TPP) between America and 11 other Asia-Pacific countries, and the Transatlantic Trade and Investment Partnership (TTIP) with the European Union (EU), will be put on hold. “Whether they go forward depends on whether we can return to balanced trade, and whether they add to GDP growth,” Mr DiMicco said. “The era of trade deficits is over. It will be: let’s talk, but otherwise we put tariffs on.”
Mr DiMicco cited the decision by Ronald Reagan (a favourite of Trump supporters) to impose a 45% tariff on Japanese motorcycles in the 1980s: “That brought people to the negotiating table.” Yet it seems implausible that trading partners will stand idly by should America raise tariffs. A trade war would come as protectionism is already on the rise. The World Trade Organisation predicts that global trade this year will grow less quickly than the world’s GDP for the first time in 15 years.
The Peterson Institute for International Economics (PIIE), a think-tank, has estimated the impact of Mr Trump’s trade policies under three scenarios, ranging from “aborted trade war”, in which Mr Trump is forced to lower tariffs within a year of imposing them, to a “full trade war” with Mexico and China. In the former case, global supply chains are disrupted and 1.3m private-sector American jobs are lost; in the latter, the damage includes the loss of 4.8m American jobs and would spill over into the services sector, too. Adam Posen of the PIIE says Mr Trump’s trade policies would be “horribly destructive”.
