As U.S. Flexes Its Muscles On Trade, Other Countries Are Beginning To Push Back | KUER 90.1

As U.S. Flexes Its Muscles On Trade, Other Countries Are Beginning To Push Back

Jun 8, 2018
Originally published on June 8, 2018 9:05 pm

As the world's largest economy, the United States can use its considerable economic muscle to force other countries into making concessions in trade disputes.

But as President Trump is finding out, even the biggest guy on the block can face resistance by pushing too hard.

As leaders of the Group of Seven industrialized countries meet in Quebec, Trump is facing serious opposition from some of America's closest allies, with some Western leaders warning that they are willing to part company with the U.S. over trade.

"The American president may not mind being isolated, but neither do we mind signing a six-country agreement if need be," French President Emmanuel Macron said in a tweet Thursday.

Trump came to office proclaiming that the U.S. has been taken advantage of by its trading partners. He has sought to renegotiate trade agreements and threatened to impose tariffs on countries that resisted.

His efforts have generated opposition all over the world, from both rivals such as China and allies like Canada and Germany.

"We have to believe that at some point, common sense will prevail. But we see no sign of that in this action today by the U.S. administration," Canadian Prime Minister Justin Trudeau noted tartly last week, after the White House decided to impose tariffs on steel and aluminum imported from its northern neighbor.

Meanwhile, Beijing has threatened to retaliate by cutting off imports of products such as pork and soybeans, if Trump goes ahead with a plan to slap tariffs on Chinese goods.

"[Trump] is getting a lot of pushback from just about every country that he's taking a tough stance against," says Douglas Irwin, professor of economics at Dartmouth College. "There's a lot of global resistance, I think, to the way the Trump administration is trying to push U.S. trade policy."

Trump has argued that the U.S. can negotiate with its trading partners from a position of strength because other countries want access to the vast American market and will have no choice but to give in to U.S. demands.

Hardball tactics have worked in the past. During the 1980s, the Reagan administration was able to persuade Japan to open up its markets somewhat, amid rising anger over the growing U.S. trade deficit with Japan.

But Japan was a major Cold War ally that needed American protection. Today, the major U.S. trading partner is China, which is simply not as vulnerable to U.S. pressure, Irwin notes.

Moreover, the U.S. is not as dominant a player in the global economy as it was in the 1980s, he says.

"The weight of the world economy has really shifted toward Asia. That's where some really big, rapidly growing markets are, and the U.S. is just not quite as important as it was before," he says.

Many countries also remain suspicious of the way the U.S. seems to have done an about-face on trade policy, appearing to abandon its long-standing support for free and open markets, says Simon Johnson, professor of entrepreneurship at the Sloan School of Management at the Massachusetts Institute of Technology.

The U.S. has long spread the gospel of markets all over the word, arguing that free trade benefits all countries. Trump, by contrast, often seems to view trade as a kind of war game in which one country's gain necessarily means another country's loss.

"I think a lot of countries are taking the position that they have cooperated for a long time in what has always been an American-initiated and an American-overseen system, so now Mr. Trump wants to change the rules. To what end? What exactly is he going to get from that?" Johnson says.

Irwin says U.S. trading partners are "drawing a line in the sand early on, saying, 'Look, this is an inappropriate way of approaching things. You can't treat us this way. And we're going to resist.' Because if they just cave in, then the Trump administration might double the ask."

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MARY LOUISE KELLY, HOST:

Now, as we just heard, the G-7 summit comes as President Trump has been pressuring other countries to make big trade concessions. As NPR's Jim Zarroli reports, the resistance he's encountering underscores how isolated the U.S. has become on trade.

JIM ZARROLI, BYLINE: Canadian Prime Minister Justin Trudeau doesn't vent publicly much. But after Trump's recent tariffs on steel and aluminum, he reacted angrily.

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PRIME MINISTER JUSTIN TRUDEAU: We have to believe that at some point, common sense will prevail. But we see no sign of that in this action today by the U.S. administration.

ZARROLI: And Canada isn't the only country that's unhappy. Trump's trade policies have been condemned throughout Asia, Europe and Latin America. Doug Irwin is a professor of economics at Dartmouth College.

DOUG IRWIN: Well, he's getting a lot of pushback from just about every country that he's taken a tough stance against. There's a lot of global resistance I think to the way the Trump administration's trying to push U.S. trade policy.

ZARROLI: In recent months, Trump has flexed his muscles on trade. He's insisted on renegotiating trade agreements and threatened tariffs against uncooperative countries. The tough stance represents a calculation that U.S. trading partners will cave in to Washington's demands because they need access to the vast American market. That kind of pressure has worked before. The U.S. once exerted a lot of pressure on Japan to open its markets. In 1987, President Reagan even spoke to the country's parliament.

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RONALD REAGAN: Americans believe your markets are less open than ours. We need your support to lower further the barriers that still make it difficult for some American products to enter your markets easily.

ZARROLI: But Doug Irwin says times were different then. Japan was a key U.S. ally in the Cold War. The two countries needed each other. What's more, Irwin says the U.S. dominated the global economy more than it does today.

IRWIN: The weight of the world economy has really shifted towards Asia. That's where some really big, rapidly growing markets are. And the U.S. is just not quite as important as it was before.

ZARROLI: Irwin says today the United States' biggest trading partner is China, and it simply isn't as vulnerable to U.S. pressure as Japan was. Economist Simon Johnson of MIT says many countries are also confused by Trump's harsh rhetoric on trade which they see as a big departure from longstanding U.S. policy of promoting open markets.

SIMON JOHNSON: I think a lot of countries are taking the position that they have cooperated for a long time in what has always been an American-initiated and an American-overseen system. So now Mr. Trump wants to change the rules. You know, to what end? (Laughter) What exactly is he going to get from that?

ZARROLI: In the past, the U.S. has argued that fair and open trade benefits all countries. But in his speeches and tweets, Trump sometimes seems to view trade like a war game aimed at winning more favorable terms from your trading partners. And Doug Irwin says a lot of countries are worried that if they give in, Washington will keep demanding ever-bigger concessions.

IRWIN: And I think what they're doing is drawing a line in the sand early on, saying, look; this is an inappropriate way of approaching things; you can't treat us this way, and we're going to resist 'cause if they just cave in, then the Trump administration might double the ask.

ZARROLI: And U.S. trading partners are already making clear they're willing to go their own way. As the G-7 summit was approaching, French President Emmanuel Macron said maybe the American president doesn't mind being isolated, but we don't mind being 6 if necessary. Jim Zarroli, NPR News. Transcript provided by NPR, Copyright NPR.