The NAFTA deal shows that Trump is willing to make concessions under one condition — his negotiating partners must concede to him a success that he can market to his constituents. But China is still afraid.
The United States will continue the course set by Donald Trump to settle current trade disputes. At the last minute, the United States and Canada agreed on a successor to the North American Free Trade Agreement. Previously, Mexico had agreed to the deal. The replacement of NAFTA was a core concern of President Trump, having repeatedly discredited the free trade agreement as the worst deal ever signed.
Before the NAFTA agreement, the Americans pushed through a new version of the free trade agreement with South Korea, and celebrated its finalization on the sidelines of the recent United Nations General Assembly. Progress is also being made with trading partner Japan. Last week, Trump and Japan’s Prime Minister Shinzo Abe agreed to bilateral negotiations mainly on vehicle trade and production. Trump pledged not to impose import tariffs on Japanese cars during the negotiation phase. Previously, Trump had come to a handshake agreement with the president of the European Commission, Jean-Claude Juncker, on further negotiations and informal pledges for the purchase of soy beans and liquid gas.
Trump indicates a willingness to concede to old allies on one condition — they must allow him success that he can market to his constituents. Therefore, the successor to NAFTA must change its name. In the agreement, the Americans at least superficially enforced strengthening their domestic car production by forcing Mexico to increase the cost of its car production. That way, Trump can insist that he is promoting industrial jobs in the United States, as he promised in the election campaign. His loyal agricultural voters, heavily shaken by Chinese tariffs, are pleased with the slightly improved market opportunities with Canada.
Threating To Aggravate the Conflict with China
The agreement with South Korea theoretically also helps the American auto industry. After all, Trump has wrestled with the Japanese enough that they are engaging in bilateral negotiations. Previously, Tokyo had always rejected such requests by pointing out that America should join the Trans-Pacific Partnership. And now even the European Union is ready to negotiate.
The agreements that the Americans have produced so far are not of substantive importance, except for the new version of NAFTA. But even here, the practical effects are initially low. The new free trade agreement with South Korea is, in its language, nearly identical to its predecessor. It brings some relief to the American auto industry without professionals having to bet on a boost in exports to South Korea. The Trump-Juncker handshake remains highly informal as commitments to buy more soy beans and liquid gas follow market trends. There is also no evidence that Trump is closer to his big goal of reducing his country’s foreign trade deficit.
The only country that has yet to benefit from Trump’s new readiness to concede is China. Without saying it, Washington has apparently understood the criticism that one cannot forget his old friends when battling a big opponent. The conflict with China is likely to be further aggravated, but Trump could also have that in mind.