There will be a lot of ink shed on what a Trump presidency means for US trade policy, for TPP, and, in Europe, for TTIP.
The fact is: we do not know.
In the short term all these projects will not likely move ahead. More fundamentally, trade policy might be the lesser problem in the overalll scheme of things, as the Trump election is about deeper matters in the global order affecting our very security.
Trump has promised to pull out of flagship FTAs such as NAFTA, to drastically increase trade barriers against China, and even hinted he might pull his country out of the WTO.
Should Europeans panic?
There is a benign view that says his own party would not go along with his proposed policies, that Congress would block him, and that courts including the WTO would stop him. There is also the view that Trump would not follow through on all this but act more pragmatically. Rob Howse, Professor at NYU law school said: “During the Trump campaign I noticed a shift of emphaisis from pulling out of agreements to renegotiating them.”
But there is also a less benign view that says Trump could do a lot of damage to the US and his partners – at least in the short term if he really wants to. Gary Clyde Hufbauer from the Peterson Institute is from the latter view. Abstracts from his piece in a recent paper entitled Assessing Trade Agendas in the US Presidential Campaign.
Why could Trump wreak havoc?
“Because of the president’s constitutional power over foreign affairs and because multiple statutes enacted by Congress over the past century authorize the president to impose tariffs or quotas on imports and regulate foreign commerce in other ways as well”, Hufbauer writes.
“Any effort to block Trump’s actions through the courts, or amend the authorizing statutes in Congress, would be difficult and would certainly take time. There is practically no chance that Congress can enact appropriate amendments before the next president is inaugurated, and even less chance that congressional action could surmount a presidential veto if Trump is elected”, Hufbauer adds.
Gary Hufbauer cites the following pieces of US legislation which would give tremendous power to a Trump running amok on trade:
- NAFTA: the president has powers to proclaim the return to MFN tariffs on imports from Canada and Mexico, and to proclaim additional duties following consultations with Congress;
- The 1962 Trade Expansion Act: allows the president to impose tariffs or quotas as needed to offset a negative impact on trade;
- The Trade Act of 1974’s ‘Section 122’: allows the president to order imposing tariffs up to 15 percent, or quantitative restrictions, or both for up to 150 days against one or more countries with large balance of payments surpluses (Germany beware!);
- The same trade act’s famous ‘Section 301’ : allows the president to order retaliatory actions, at presidential discretion, including tariffs and quotas;
- Trading With the Enemy Act, 1917: All forms of international commerce, plus the power to freeze and seize foreign-owned assets of all kinds;
- 1977 International Emergency Economic – Powers Act: which allows the President to curtail all forms of international commerce, and grants him the power to freeze foreign-owned assets of any sort.
So: wait and see! Hope for the best, be prepared for the worst.
