Trump's Trade Agenda in Asia: It Could Have Been Worse
President Donald Trump’s 12-day tour of five Asian countries in November featured three themes from his agenda on trade: deals, warnings, and scoldings—directed both at US trade partners and previous US administrations. The tour reinforced his protectionist image, but without protectionist acts. Departing Asia, Trump’s reputation was intact: “huff and puff,” not “blow your house down.” Bad as the tour was for those concerned about potential protectionist acts, it could have been much worse.
President Trump prides himself on making deals, not designing institutions. His maiden foreign trip, to Saudi Arabia in May 2017, was burnished by a Saudi commitment to buy $110 billion of US military equipment. The Asia tour started in the same spirit, with Trump urging more military wares on Prime Minister Shinzo Abe who seemingly agreed—but Japan’s chief cabinet secretary cautiously affirmed that the government would stick to its existing military plans without new purchases. More to Trump’s taste, Japanese auto parts producer Denso announced $1 billion of investment in its Tennessee facility.
During Trump’s visit to Seoul, Korean business firms announced their intent to launch $17.3 billion worth of US investment projects over the next four years, together with future purchases of US goods and services amounting to $57.5 billion, including natural gas. It’s likely that these deals were already underway before Trump’s visit, and any changes were incremental.
In Beijing, Trump announced $250 billion of commercial deals agreed by US and Chinese firms. China Energy Investment Corporation announced its plan to invest $83.7 billion in power generation, chemical manufacturing, and underground storage of natural gas liquids and derivatives in West Virginia. Sinopec agreed with Alaska to jointly develop a liquefied natural gas (LNG) project amounting to $43 billion. Boeing won $36 billion in orders and commitments for 300 jets, while Qualcomm signed three agreements to sell $12 billion of semiconductors to Chinese companies. The time horizon and incremental character of these deals is highly uncertain.
Trade history is littered with presidents and prime ministers who practiced the same brand of commercial diplomacy, with no resulting boost in national exports.
Collectively, the Asia deals make for self-congratulatory talking points. They may persuade some Americans that Trump is delivering on his fiery campaign rhetoric. But trade history is littered with presidents and prime ministers who practiced the same brand of commercial diplomacy, with no resulting boost in national exports. The best that can be said of Trump’s deal making is that it deflects attention from bilateral trade deficits—which from the start was a misguided metric for judging trade agreements. Even Secretary of State Rex Tillerson minimized the impact of the trade deals with China. “The things we have seen thus far are pretty small," he said, in light of the trade deficit with China in excess of $300 billion, and noted that "in terms of really getting at some of the fundamental elements behind why this is happening, there's still a lot more work to do."
Japanese Prime Minister Abe was spared new warnings, despite Japan’s $69 billion trade surplus with the United States in 2016. Moreover, Japanese officials deflected Trump’s quest for a bilateral trade agreement, instead placing their diplomatic chips on a Trans-Pacific Partnership (TPP) agreement with the United States not participating—a so-called TPP 11.
Korean President Moon Jae-in was not so lucky. Trump characterized the Korea-US Free Trade Agreement (KORUS) as “unsuccessful and not very good for the United States,” and demanded expedited amendments. He argued that US trade deficits with South Korea could be reduced by an increase in purchases of American military equipment. Prior to Trump’s Asia tour, he instructed advisers to prepare for US withdrawal from KORUS. That initiative was shelved in the wake of North Korea’s nuclear and missile tests. But the possibility of termination is not forgotten—in Washington or Seoul. Korean Trade Minister Kim Hyun-Chong preemptively sought approval from the National Assembly to terminate KORUS, if US demands prove too extreme.
Chinese President Xi Jinping got on famously with Trump in person. But in separate occasions during his Beijing visit, Trump complained about America’s $500 billion trade deficit with the world, attributing the Chinese portion to China’s unfair trade practices that expand US imports, and Chinese barriers to market access that limits US exports. Trump ironically praised Chinese negotiators for outsmarting their US counterparts. Tillerson tried to soften Trump’s remarks, answering to a reporter that, “there was a little bit of tongue-in-cheek in that characterization, but there was also a lot of truth to it.”
At the Asia-Pacific Economic Cooperation (APEC) meeting in Vietnam, Trump told the assembled leaders that the United States was a patsy no more:
“What we will no longer do is enter into large agreements that tie our hands, surrender our sovereignty, and make meaningful enforcement practically impossible.”
After hearing these words, the other 11 members of the TPP announced their intent to ratify the pact, without the United States.
Trump reserved his harshest remarks for his predecessors in the Oval office and their trade ambassadors. In remarks before a business group in Danang, Vietnam prior to the APEC summit, Trump had this to say:
"I do not blame China or any other country of which there are many for taking advantage of the US. If their representatives are able to get away with it, they are just doing their jobs. I wish previous administrations in my country saw what was happening and did something about it. They did not, but I will. From now on, we will compete on a fair and equal basis, we are not going to let the US be taken advantage of anymore…."
With these words, Trump poured scorn on distinguished Americans since the administration of President Jimmy Carter. The honor roll includes Ambassadors Robert Strauss, Reubin Askew, William Brock, Clayton Yeutter, Carla Hills, Mickey Kantor, Charlene Barshefsky, Rob Portman, Susan Schwab, Robert Zoellick, and Michael Froman.
As well, Trump indirectly praised a generation of European, Japanese, Mexican, Korean, and Chinese trade ministers. Every cloud has a silver lining. The Asian downpour could have been much worse.