Analysts say Trump’s announcement the U.S. will withdraw from the TPP (Trans Pacific Partnership) will hurt America’s ability to negotiate trade deals in the future, might impact US companies across different sectors.
WASHINGTON D.C., UNITED STATES (RESTRICTED POOL) – An ambitious Asia-Pacific trade pact linking the United States and 11 countries lay in tatters on Tuesday (November 22) after U.S. President-elect Donald Trump said he would kill the deal on his first day in office on Jan. 20.
Trump’s statement appeared to open the way for China to assume the United States’ leadership mantle on trade and diplomacy in Asia. The Republican termed the Trans Pacific Partnership (TPP) “a potential disaster for our country.”
Trump has pledged to redraw trade deals to win back American jobs, and has threatened Mexico and China with punitive tariffs in a move that some economists have warned could spark a trade war that threatens to roll back decades of liberalization.
Ending the TPP was a key election pledge of Trump’s and was also the policy of his Democratic opponent, Hillary Clinton. The deal died in Congress after Trump’s Nov. 8 election victory.
“He can basically make this decision, as the president, to withdraw from the negotiations. It hasn’t been ratified through the Congress yet,” said Nicholas Consonery, Senior Director of Asia of FTI Consulting in New York about the timing of the announcement.
He cautioned that withdrawing from the deal will have ramifications in the future.
“There’s absolutely a little bit of a loss of legitimacy of the US, given that this was a US-led agreement, negotiating with other 11 member countries for a number of years now,” he said adding that the withdraw would impact some key sectors within the US.
“You look at US technology firms, you look at US agriculture firms, US manufacturing, those are sectors that were perceived to be big beneficiaries of the agreement.”
The Trans Pacific Partnership, a signature diplomatic initiative of Democratic President Barack Obama, was intended to lower tariff barriers in countries that accounted for 40 percent of the world economy, as well as providing a bulwark against China.
Consonery said that many countries in the region still want to see a strong U.S. presence both strategically and economically.
“To the extent to which, you know, President-elect Trump is genuine in his commitment to striking better trade deals, I still think, the window is going to be open for the U.S to come back to the table. It’s just going to take some time to find a new equilibrium,” he said.
A major trade deal between the United States and Europe is also now close to collapse after Britain’s plans to withdraw from the European Union prompted Washington to demand better terms and opposition in France and Germany has also all but scuppered it.
China, Japan and South Korea are already in the initial stages of discussing a trilateral trade deal, and Beijing has been pushing its own limited Asian regional trade pact that excludes Washington for the past five years.
Japan and Australia, Washington’s closest allies in Asia, pledged after Trump’s announcement to push ahead without the United States, although removing the largest market for goods and services would shrink it dramatically.