Trump's Rhetorical Reality Show

7 MINS READJan 26, 2017 | 01:42 GMT
Trump's Rhetorical Reality Show
In his first few days in office, President Donald Trump has signed a raft of executive orders outlining a more protectionist direction for U.S. policy.

U.S. President Donald Trump has been in office for less than a week, and in that time he has issued 12 executive orders and presidential memoranda — with more in the works — that advance his boldest campaign promises. The list of actions includes pulling out of the Trans-Pacific Partnership (TPP) trade pact, maximizing U.S. content in revived pipeline deals with Canada, placing curbs on immigration and directing the construction of a wall along the U.S.-Mexico border. The Trump administration is now reportedly preparing executive orders that would curtail U.S. funding for certain international organizations and review multilateral treaties. The implicit message behind the executive orders is: For those who thought his assertions on the campaign trail were all empty talk, think again. Trump means what he says.

And while some of the directives, such as withdrawing from the TPP, will yield direct results, others will take a more convoluted path. Many of these measures, particularly the memoranda, are more statements of policy intent and direction and do not contain the details needed to work through constraints to shape a final outcome. Government agencies now must assess the feasibility and financial, political and social costs of carrying out those orders. Businesses, foreign governments and other interest groups will lobby Congress and the White House to clarify the costs and implications of the measures. Lawmakers will exercise their approval, oversight and funding authority in deliberating the options while taking into consideration their own re-election prospects. More legally questionable elements, such as the imposition of local content measures, may be litigated within NAFTA and the World Trade Organization (WTO) — and potentially under U.S. law.

While Washington will be worked into a frenzy trying to reconcile the intent of the orders with the realities of carrying them out, governments abroad will have to engage in their own contingency planning. No one has the answers on how every one of Trump's policy initiatives will ultimately shake out, but everyone can see that there has been little light between what Trump said on the campaign trail and what he has so far undertaken from the Oval Office. Based on that observation alone, key players worldwide will have to now assess which carrots and sticks they might wield should it become necessary in an evolving negotiation with the global superpower.

Mexico, which has much to lose from a dramatic shift in U.S. policy, does not have many good cards to play. Canada, an advanced economy that faces many of the same challenges as the United States and is consequently not on Trump's trade target list, already has indicated that it would be fine with engaging Washington bilaterally to update their trade relationship, effectively leaving Mexico to fend for itself. Mexico is readying for this fateful negotiation by lobbying affected U.S. businesses and state governments in hopes that their voices will resonate with the Trump administration. Mexico will try to steer the immigration debate toward mutual cooperation in securing Mexico's borderland with Central America, but it will also hold out the option of easing its own border controls or withdrawing security and intelligence cooperation in other areas, such as drug trafficking, to try to pressure the United States if pushed in a corner. Mexico has even threatened to pull out of NAFTA if the United States tries to impose unfair terms, but the reality is that it has little room to do so. Most of Mexico's manufacturing base is oriented toward producing goods to sell in the United States, and most investment in Mexico has been made under the assumption of it having preferential access to the U.S. market. Mexico's economic livelihood depends on its ability to keep those trade doors open, and so it will have to proceed cautiously.

Between a targeted economic campaign against cheap Chinese imports and ambiguously assertive comments from the Trump team on protecting South China Sea sovereignty, Beijing, too, must consider multiple scenarios as it devises the strategies it will employ to contend with the Trump administration. The White House will try to use China's heavier export dependency on the United States to bend Beijing's will, but China must mind its own political imperatives to maintain domestic stability as it implements a challenging restructuring of its economy. Beijing will thus keep a number of pressure points of its own in reserve. China could impose anti-dumping and countervailing duties on the United States to squeeze sensitive sectors (Beijing, for example, has recently imposed higher duties on U.S. feed grains amid heightened trade tension.) Beijing can also use anti-monopoly and cybersecurity laws to muscle U.S. companies operating in China and to reduce governmental purchases of U.S. goods. Like Mexico, China will undertake an active campaign in Washington to emphasize the cost of trying to disrupt deeply integrated supply chains. Even as Trump and his advisers have been focused on Chinese heavy industry, the reverberations of a U.S.-China trade battle could result in severe backlash to the U.S. tech industry. And, as China signaled late last year with its seizure of a U.S. naval drone, China has options, from the maritime sphere to the cybersecurity realm, to raise the cost of a trade tussle with the United States.

Germany is not only green with envy over the United Kingdom's special relationship with Trump but also green with nausea in imagining the ways in which U.S. policy could accelerate the unraveling of the European Union. Chancellor Angela Merkel and her team have reportedly studied Trump's rhetoric carefully as they try to discern just how far he would take his protectionist battles. Trying to target the German automobile manufacturing industry through claims of currency manipulation would be a particularly complex undertaking given that the European Central Bank, not Germany or other members of the eurozone, exercises direct control over the euro. WTO regulations also would greatly complicate U.S. efforts to single out German exports.

But Merkel's deeper concern may be one based more on ideology. At the end of the day, a U.S. argument that Germany benefits from favorable trade conditions and a weakened currency through its use of the euro amounts to an attack on the eurozone. As Merkel recently told a group of German industrial leaders, she is prepared to wage a generational fight for the ideals of free trade and competition against protectionists like Trump and others emerging in Europe. Trump has made no secret that he sees the European Union as a failed project and has applauded the United Kingdom for being "so smart" for getting out early and returning to its special relationship with the United States. In contrast, Trump has branded the European Union as a vehicle for Germany, providing valuable fodder for Euroskeptics with similar views. As Berlin struggles to get in the Trump team's good graces, it will demonstrate ways in which Germany can assume stronger leadership in defense and security matters on the Continent to share more of that burden with the United States. But for all of Merkel's idealism, Germany is also where realpolitik was born. Even as Berlin is quietly preparing for its own worst-case scenario — a demise of the eurozone and the breakup of the European Union — it must hold it together for as long as it possibly can to avoid a bigger economic eruption.

When Merkel eventually gets her time with Trump, the most powerful message she will carry, along with Enrique Pena Nieto, Xi Jinping and other leaders on Trump's radar, will be that accelerating the dissolution of the European Union all while trying to decompose deeply integrated supply chains from North America to the Asia-Pacific is a recipe for mutually assured destruction in today's highly globalized world.

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