How the U.S. is ‘walking out’ on global trade

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Oct 15, 2024 View in browser   By Ari Hawkins With help from Doug Palmer and James Bikales Former Assistant U.S. Trade Representative Michael Beeman says both Donald Trump and Joe Biden have undermined the U.S.’ position when it comes to global trade. | Adam Gray/AFP via Getty Images QUICK FIX — Neither Donald Trump nor Kamala Harris are likely to reassert the United States’ dominant role in the multilateral trading system, former Assistant U.S. Trade Representative Michael Beeman told Morning Trade. — U.S. Trade Representative Katherine Tai thinks her agency’s use of the USMCA’s “rapid response mechanism” to investigate Mexican labor abuses should get more attention. — Canadian industry compared Trump’s universal tariff proposal to a policy levied by former President Richard Nixon that resulted in a reduction of imports into the U.S. from Canada. It’s Tuesday, Oct. 15. Welcome back to Morning Trade. Want to chat? Got tips or suggestions? Let us know at ahawkins@politico.com, gbade@politico.com and dpalmer@politico.com. You can also follow us on X: @_AriHawkins, @GavinBade and @tradereporter. Want to receive this newsletter every weekday? Subscribe to POLITICO Pro. You’ll also receive daily policy news and other intelligence you need to act on the day’s biggest stories. Driving the day THE GREAT U.S. RETREAT: Michael Beeman, former assistant U.S. trade representative for Japan, Korea and Asia-Pacific Economic Cooperation, says a Donald Trump presidency risks accelerating a shift away from the United States’ decades-old free trade consensus. But he added that Harris is just as unlikely to restore U.S. trade engagement with the Asia-Pacific and developing countries and suspects she won’t resume Trump-era negotiations with the United Kingdom and Japan. “There is no doubt that if former President Trump is reelected, that the degree of change and shift will be pretty sharp,” Beeman told Morning Trade in an interview. He said Trump’s trade proposals reflect a “much more austere and dramatic” approach now, compared to his first term. “With the Harris administration, it’s the same trajectory,” Beeman added. “Even if it’s with a smile, it doesn’t mean that it’s appreciated by other nations, including allies.” Beeman, who served as AUSTR during the Trump presidency and for half of Biden’s term, writes in his new book — “Walking Out: America’s New Trade Policy in the Asia-Pacific and Beyond” — that the U.S., over the last several years has been stagnating on the world stage and straining relations with allies and adversaries alike. “The general trajectory where there was a greater overlapping consensus on what to do about trade policy congealed around finding ways to create new barriers to the U.S. market. That’s where the new right and the progressive left have met,” Beeman told your host. On Biden’s IPEF: Another example is the U.S.-led Indo-Pacific Economic Framework arrangement. The Biden administration opted to reject the trade pillar after facing pushback from Democrats. “Call it a trade-curious-at-best agreement. It’s a very different kind of model, and it’s not clear it’s the kind of model that the rest of the world is terribly interested in,” Beeman told your host. Trump longs for the 1930s: Beeman also criticized Trump’s proposals, which include universal tariffs as high as 20 percent. He suggested the fallout could be similar to what followed then-President Herbert Hoover’s signing of a 20-percent tariff into law under the Smoot-Hawley Tariff Act of 1930. “The reality is that increasing tariffs and barriers is going to lead to retaliation. And that is exactly where the United States found itself in the 1930s and what Franklin Roosevelt campaigned on in 1932 — on the recognition that this [trend] was contributing to the economic depression, and on the need to pull back from that and be more measured and realistic,” Beeman said. Your host has the full interview here. (For Pros!) REGULATORY REVIEW TAI’S LAMENT: USTR Katherine Tai expressed frustration Friday that her agency’s use of the USMCA’s “rapid response mechanism” to investigate Mexican labor abuses doesn’t get more press coverage. The provision, she said, allows “us to hold accountable corporations that offshore American production” and is the “most consequential, concrete outcome” of the Biden administration’s worker-focused approach to trade policy. She made this remark at a Cleveland-Cliffs steel production facility in Coatesville, Pennsylvania, after company CEO Lourenco Goncalves asked Tai to highlight an achievement she believes has not gotten the attention it deserves. Her appearance with Cliffs comes in the final few weeks of the presidential campaign, as both Vice President Harris and former President Trump vie for votes in the key battleground state. Tai said the Biden administration has invoked the “rapid response mechanism” almost 30 times over the past several years, helping over 30,000 Mexican workers form stronger unions and negotiate collective bargaining agreements, often for the first time. That helps American workers by reducing the incentives for companies to move production south of the U.S. border to take advantage of lower wages and weaker labor protections, she added. On Biden’s tariff approach: Tai also defended what she described as the administration’s targeted use of tariffs to help U.S. industry. “A tariff is like a slab of steel. You can either put it into a design and architecture to make something powerful and strong that stands tall, or you can use it to create chaos,” she said. Whole lotta love: Tai described the U.S. steel industry as the “backbone of the modern economy,” saying that Biden and Harris would continue to “defend the space for the American steel industry to thrive and survive.” At the event, Goncalves and Bernie Hall, director of the United Steelworkers’ 50,000-member district in Pennsylvania, praised the Biden administration and the Inflation Reduction Act for boosting domestic steel demand. Reminder: Both Cliffs and the USW are also putting pressure on Biden to block Nippon Steel’s proposed purchase of U.S. Steel on national security grounds. Around the World TRUMP-TARIFF WARNING: The Canadian Chamber of Commerce is warning that Trump’s 10 percent universal tariff proposal could spark a trade war that ends up costing Canadian and American citizens hundreds of dollars annually. It’s the latest indication of growing anxiety among the international business community over the former president’s policies. “If enacted, Trump’s tariffs and an ensuing trade war would result in roughly $800 USD ($1,100 CAD) in foregone income annually for people on both sides of the border,” said Stephen Tapp, chief economist at the Canadian Chamber of Commerce, in a summary of a report published earlier this month. “Nixon shock”: Trevor Tombe, the author of the report and director of fiscal and economic policy at the University of Calgary’s School of Public Policy, also examines the so-called “Nixon Shock” of 1971. When then-President Richard Nixon levied a universal 10 percent tariff, which lasted four months, Tombe noted that it resulted in a 2.6-percent reduction in total imports into the United States from Canada, according to a 2012 study. Keep in mind: Trump has proposed universal tariffs as high as 20 percent, as well as a 60 percent tariff on Chinese imports. The Center for American Progress said the policies would amount to about a $3,900 tax increase for a middle-income family. BIDEN IS GERMANY-BOUND: German ambassador to the U.S. Andreas Michaelis confirmed in a post on X that Biden is set to visit the country at the end of this week, after the president canceled an earlier visit over Hurricane Milton. TRADE OVERNIGHT — Andrew Overton is now press secretary at the Export-Import Bank. He previously was a managing director on FGS Global’s Energy & Sustainability team and is a Democratic National Convention alum. — France freaks out over proposed sale of paracetamol-maker to American fund, per POLITICO Pro. — ‘Isolated’ France faces political storm over EU-South American trade deal, reports POLITICO Europe. — EU tariffs on Chinese EVs to accelerate plant closures in Europe, Stellantis CEO Carlos Tavares says, per Reuters. THAT’S ALL FOR MORNING TRADE! See you again soon! In the meantime, drop the team a line: dpalmer@politico.com, gbade@politico.com and ahawkins@politico.com. Follow us @POLITICOPro and @Morning_Trade.   Follow us on Twitter Ari Hawkins @_AriHawkins Doug Palmer @tradereporter Gavin Bade @GavinBade Adam Behsudi @ABehsudi Emily Cadei @emilycadei   Follow us

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