The End of Free Trade?

As promised during the campaign, several decisions adopted by President Donald Trump, on his first working day, were on international trade.

The first casualty was the signed agreement with 11 governments on the Trans Pacific Partnership (TPP). A Presidential Memorandum signed by President Trump, on January 23, decrees the United States withdrawal from the TPP agreement. The decision was largely symbolic, because the agreement had been ratified only by the Japanese government. But it sent a clear signal that such mega-regional agreements will not be pursued by the new administration. The decision also indicates turning away from the Republican Party traditional support for free trade. Additionally, US absence from the Pacific trade agreement gives the Chinese government an opportunity to fill the void left behind.

Another decision was on the future of the most significant existing US trade agreement. The White House revealed that President Trump will meet soon with Mexico’s President Enrique Peña Nieto and with Canada’s Prime Minister Justin Trudeau, to start negotiations on the North American Free Trade Agreement (NAFTA). This differs from the campaign promise of “dismantling” the agreement, perhaps because looked closely it is complicated to manage a trillion dollar trade relationship, carried out by thousands of companies and millions of workers. As clarified by the Secretary of Commerce designate Wilbur Ross, in congressional testimony, the objective is to renegotiate, not to dismantle.

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