America is embroiled in a new international trade war.
It seems nothing will remain sacred, under the new Trump administration, after the Obama administration worked diligently to foster a great relationship, between the United States and other countries.
But no one should be surprised.
Promises on International Trade from 2016
President Trump declared from the days when he was on the campaign trail that he would put an end, to existing international trade deals.
And certainly, that seems to be his goal.
Back then, economists were concerned about his intentions.
However, now, they are terrified about the ramifications of declaring a trade war with countries such as China.
Remember, during the 2016 Elections when he used terms such as “rape of our country” in referencing existing trade deals. And remember he did associate Hillary Clinton as being a part of “a leadership class that worships globalism.”
So people should not be surprised that he is going after existing agreements like North American Free Trade Agreement.
If anything, Trump will probably go down in history as the most hated President of the United States and one who kept his promises.
Donald Trump campaigned on the rhetoric that globalization benefitted mostly “the financial elite,” and that “millions of workers had nothing but poverty and heartache.”
He said countries did not benefit directly by importing goods.
This was what drew many blue-collar workers and those in the steel mining industries to support his campaign, because most of their jobs went overseas.
The Weaponizing of International Trade Deals
The Commander and Chief of the United States has declared war.
He professes that trade deals put America at a disadvantage. Right now, he has heavy tariffs on essential items including steel and aluminum. This he intends will drive US businesses in investing in the country and putting the steel mines back to work.
On the flip side, Mexico and Canada are safe from this first onslaught. At least until there are new stipulations for NAFTA.
The President issued a statement, saying, “I have determined that the necessary and appropriate means to address the threat to the national security posed by imports of steel articles from Canada and Mexico is to continue ongoing discussions with these countries and to exempt steel articles imports from these countries from the tariff, at least at this time.”
Therefore, it is certainly in the best interest of Canada and Mexico to come to some agreement with Trump, because they will probably face stiff penalties or tariffs.
So countries looking to approach the bargaining table with the US President, must also consider the present realities.
They will have to compromise heavily if they want in on the USA market.
Is Trump Operating From a Legal Premise?
Well, it seems so.
In this, President Trump is standing firmly on Section 232 of the Trade Expansion Act 196. It offers some protection for his decisions, which bypass any input from Congress.
The Trade Expansion Act
The Trade Expansion Act gives Commerce Secretary Wilbur Ross the power to decide whether a particular international trade deal has any ramifications for US security.
Depending on what Ross brings to the table, the President can amend tariffs with no input from Congress.
Trump reported that “The Secretary found that the present quantities of steel articles imports and the circumstances of global excess capacity for producing steel are weakening our internal economy, resulting in the persistent threat of further closures of domestic steel production facilities and the shrinking [of our] ability to meet national security production requirements in a national emergency.”
And when there is a threat, the government is expected to double down and protect its own.
As a world power, the United States ought to be capable of producing the majority of steel that it needs in an emergency. If factories are closing, then that limits the countries capacity to execute such a requirement.
Therefore, in short order, local steel factories should feel some reprieve from the latest tariffs included in international trade deal.
The WTO Article XXI of the General Agreement on Tariffs and Trade (GATT)
Another piece of legislation that protects the President’s decision is the GATT.
It stipulates, “Nothing in this Agreement shall be construed to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests.”
Even though this seems to be a blanket exemption for those who wish to alter their trade dealings, there will be trade disputes filed with the organization.
Already member states are declaring that the argument of national security is not valid.
They will have a difficult time getting any recourse because Donald Trump steeped his arguments on Section 232 of the Trade Expansion Act 196.
And America, since 9/11, takes any possible threat seriously.
So, if America wishes, from here on out, it can dispense whatever tariffs it deems fit because it has a solid argument founded on the National Security Strategy.