Needling Foreign Nations May Torpedo Trump's Trade Agenda

Chad P. Bown (PIIE)

October 31, 2017
Photo Credit: 
REUTERS/Kevin Lamarque

Recent listeners to the popular weekly British radio show, "Any Questions," were jolted into an unlikely discussion about how American President Donald Trump's trade protectionism was now threatening British jobs.

Broadcasting from a high school in Penwortham, England, three politicians and a journalist had been expecting to field audience questions on Brexit or some other lively domestic political fare.

However, the BBC radio kickoff from audience member Jonathan Riley was about the news coming out of America. His pressing concern was the Trump administration announcing it would impose a massive new import tariff on airplanes the United States imported from Canada.

The British audience was outraged because Trump's supposed tariff was threatening 4,000 jobs in a Bombardier plant across the Irish Sea in Belfast that manufactures wings for the Canadian jet maker.

President Trump has done the impossible, managing to enrage small communities around the world who personally hold him responsible for lost jobs. This may make him happy, but it only impedes his stated goal of concluding trade deals in which America "wins."

By infuriating constituents of foreign leaders, Trump makes it harder for those same politicians to make concessions he claims to want.

This controversy involved a relatively mundane US Commerce Department investigation into whether to levy a "countervailing duty" on imports from Canada. Here, government career staff conduct a technical and formulaic analysis into whether the jet maker received illegal subsidies from Quebec.

Traditionally, there is no presidential involvement in the process. Trade analysts view these as garden-variety tariffs; they have been imposed frequently but without much fanfare under both Republican and Democratic administrations.

By infuriating constituents of foreign leaders, Trump makes it harder for those same politicians to make concessions he claims to want.

Imposing this kind of tariff could have been one of the least provocative trade policy actions the Trump administration has taken. The problem, of course, is that this administration doesn't simply impose tariffs. President Trump likes to add a personal victory lap.

Indeed, the Bombardier flap can be traced back to events in April and the reputation earned after President Trump's provocative behavior in two unrelated trade cases.

On April 25, Trump boasted that he was imposing similar duties on Canadian softwood lumber, saying, "We will be putting a very big tariff on lumber—timber—coming into this country. People don't realize Canada has been very rough on the United States."

When Trump personally threatened the livelihood of Canadian timber workers, Prime Minister Justin Trudeau had little choice but to respond politically. He threatened to cut off American coal shipments to a port in British Columbia.

This came on the heels of President Trump's April 20 announcement of potential US trade protection alleging imports of steel threatened American national security.

Allied trading partners in that instance were also outraged. Resorting to the national security excuse is viewed as a protectionist cop-out. Furthermore, instead of waiting for American steel companies to request assistance, Trump intensified the issue by triggering the government investigation himself.

That act is so rare that other American companies, including Boeing, which brought the controversial case against Bombardier, interpreted it as a clear sign of his protectionist intent.

Foreign concern quickly mounted. Trump was seemingly indifferent that new American tariffs would hit European steel exports, rather than trade from China, the alleged source of his ire.

Like Trudeau and timber, European leaders found themselves forced to preemptively warn of the American exports that they would retaliate against—Kentucky bourbon, Wisconsin dairy, Florida citrus, etc.—if Trump acted on steel.

So, when the Bombardier case quickly escalated this fall, British Prime Minister Theresa May joined Trudeau in a similar tactical attempt to defend British jobs. Each threatened to retaliate by canceling Boeing's military contracts.

But even that may not be adequate to appease public sentiment. British MP Richard Burgon stated on the radio program that May had not gone far enough:

"Theresa May should have put the argument far more persuasively to Donald Trump a while ago. I think the British government as well should use our trade leverage with the United States…as strongly as possible."

Regardless of how Trump proceeds in the Bombardier case, the serious damage may have already been done. Trump's personalization and escalation of even routine trade policy matters have had profound consequences.

April's actions established his foreign reputation as a president who now owns every US trade policy action, even the ones made by bureaucrats that are technically outside of his legal ambit.

In June, after Trump announced his intent to withdraw the United States from the multilateral climate accord, he famously quipped that he was elected to represent the citizens of Pittsburgh, not Paris. Trump may similarly claim indifference in the Bombardier case, as he was also not elected by the people of Penwortham, Belfast, or Quebec.

This approach makes little sense. For if President Trump is serious about a new North American Free Trade Agreement (NAFTA) or even a future UK-US trade agreement, he will need the backing of foreign citizens' elected leaders.

By intentionally incensing those audiences, his own actions make it impossible for those overseas to permit their leaders to cooperate with him.

The reaction of the Penwortham audience to the British politicians' anti-Trump remarks drove this home. Jonathan Riley, the man who asked the Bombardier question, put it best: "We should expect a better response from America. My worry is whether we'll get it or not."

Chad P. Bown is a senior fellow at the Peterson Institute for International Economics in Washington. With Soumaya Keynes, he cohosts Trade Talks, a weekly podcast on the economics of trade policy. Follow him on Twitter @ChadBown.