US postponing tariffs by month but not for TPP leader Japan

Trade correspondent L.C. writes:

At the very last moment Monday night, the Trump administration announced that it will be postponing for another month its threatened tariffs against the European Union, the two NAFTA partners of the US (Canada and Mexico), and three other countries (Argentina, Australia, and Brazil). But no tariff relief has been afforded Japan, the key security partner of the US in the Pacific. The Trump administration is demanding a bilateral trade treaty with Japan. That country, however, wants the US to join the eleven-nation Trans-Pacific Partnership (TPP).

Joining the TPP would be beneficial to the US economically as well as bolstering Pacific security versus. an increasingly hostile and bullying China.

Why the last minute announcement? Reportedly because the Trump administration remains split internally on trade policy toward China, toward US allies, and the security dimensions of trade policy.

Bigwigs to China

Ironically, the biggest US effort to forge a trade deal will be made with China rather than US allies. On Thursday, the Washington Post reports, “A high-powered delegation will go to Beijing to hold talks on trade….The group will include Treasury Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross, U.S. Trade Representative Robert E. Lighthizer, National Economic Council head Larry Kudlow and Peter Navarro, assistant to the president for trade and manufacturing policy. Terry Branstad, the U.S. ambassador to China, will join the group.”

The President made it clear this week that he sees the purpose of the trip to reach agreements that will remove the need to impose the steel and aluminum tariffs. But there doesn’t seem to have been much US preparatory work for the hastily-arranged trip.

Few informed observers believe Beijing will offer meaningful concessions on the areas of real economic and strategic concern to the US – Chinese intellectual property theft and forced technology transfer. The Chinese will instead try to placate US officials with offers of tariff cuts and regulatory reforms — meeting some US complaints.

Many US observers don’t want a quick agreement to be reached at the expense of continuing pressure on China for more meaningful changes. This would likely only come about if the US acts together with allies and largely through the World Trade Organization (WTO).

NAFTA

Putting more pressure on the US in the NAFTA talks, the Mexican Senate ratified the Trans-Pacific Partnership (TPP) in a 73-24 vote on April 24th. This was the first ratification by a TPP signatory. The pact will take effect once five more countries follow. The Japanese Diet is expected to ratify during its current session.

Mexican ratification comes just after the agreement-in-principle for a reworked Mexico-EU free trade agreement (FTA) and amid Mexico’s negotiations for deals with Brazil and Argentina. This flurry of deals is part of the country’s push to diversify trade away from the US.

Click here to go to previous Founders Broadsheet post (“President Trump’s non-Bismarckian, Kaiser Wilhelm II trade strategy”)