President Donald Trump wasted no time in taking action and following up on his campaign promises. On Monday, our 45th president signed 3 executive actions, the first of which unravels former President Barack Obama’s signature trade agreement before it ever went into action. With the Trans-Pacific Partnership deal, what comes next?
What Would Be TPP’s Replacement?
Barack Obama signed the Trans-Pacific Partnership to gain a bigger foothold into a region dominated by China’s increasing economic and military control. The Trans-Pacific Partnership (TPP) trade agreement was a deal meant to monitor trade among a dozen Pacific Rim countries – not including China. But the countries the deal does include account for a third of global trade. And while the U.S. has agreements in place with many of the countries, the TPP offered a strong opportunity to build a partnership with Japan and Vietnam. The deal, which focused on lowering tariffs and regulating standards and regulations for service and investments between member countries – was built to take away some of China’s trade advantages.
That deal is dead. And China is more than happy to step in and take over the U.S.’s trade role.
But as one trade policy dies, another has to take its place. What can we expect from Trump to replace the TPP?
Trump’s plans will now focus on bilateral trade agreements. And that has its pros and cons. A bilateral trade agreement is one in which two nations deal with each other as favored partners, meaning that each gets expanded access to the other’s markets by tariffs and quotas. And while this can benefit the U.S. as far as making it cheaper for companies to produce and export goods and materials to partner countries, it does not necessarily reduce trade deficits for the U.S. There is an equal trade aspect where imports from partner countries have no taxes or tariffs to deal with, making foreign goods cheaper for the U.S., meaning consumers and companies may import more goods.
As for any country which doesn’t partner with the U.S., Trump has threatened high tariffs, making the likelihood of those countries shipping goods to the U.S. less likely. Will it work? That remains to be seen.
Watch this report from CBS News as President Trump signs executive orders, including withdrawal from TPP:
But one thing is clear; Trump is sticking to his campaign promises and reshaping how the U.S. trades to focus on increasing middle-class American manufacturing jobs.
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