Donald Trump sparks a race for trade deals to counter US tariffs

The United States’ economic partners are racing to shore up trade volumes in an era of Donald Trump, striking new bilateral deals and redirecting supply chains to cope with increased US protectionism.

Policymakers and trade experts say the countries are turning to a tactic implemented during the US president’s first term, when they signed more trade deals with each other, as the world’s largest economy consumption of the world has erected barriers.

Since Trump’s election in November, the EU has concluded a long-awaited trade deal with the Mercosur bloc of South American countries, updated a free trade agreement with Mexico, and reopened negotiations with Malaysia that were moribund for more than a decade.

Trump Meanwhile, in his first days in office, he threatened tariffs of up to 100 percent on China, 25 percent on China. Canada and Mexicoand said he was considering a general levy on all American imports. He also ordered US government agencies to investigate trade issues including currency manipulation and counterfeit goods.

Tengku Zafrul Aziz, Malaysia’s trade minister, told the Financial Times that Trump’s return “could really prompt countries to further diversify their trade portfolios.”

Aziz cited the example of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which went ahead with 11 members in 2018 after Trump pulled the United States out of the talks. The agreement “demonstrated the resilience of countries willing to cooperate even in the absence of traditional economic leaders like the United States,” he said.

EU trade commissioner Maroš Šefčovič told the World Economic Forum in Davos that his schedule was full of meetings with ministers from the Gulf countries and elsewhere. “There is great interest” in making deals with the EU, he said.

The entire team of commissioners will visit India to make progress on trade negotiations and technology partnerships in the coming months.

“The countries that are actively making deals do so regardless of the US situation,” said one European official, adding that there was a “huge gap” between the rhetoric of what Washington would like to do and what is actually happening on the ground. .

In Trump’s first term, the EU signed agreements with Japan – a staunch ally of the United States that feared economic damage from its policies – Singapore and Vietnam and started talks with New Zealand and Chile, finally fulfilling the agreements. One EU official joked that the president was “the best EU trade commissioner ever”.

“There was a lot of business,” said Cecilia Malmström, the EU’s trade commissioner when Trump was last in power who was instrumental in the previous Mercosur negotiations. “We thought, it’s a tough world. We don’t believe in trade wars. We have an unpredictable president who’s throwing tariffs all over the place. Let’s see what we can do together.”

Malmström, now with law firm Covington & Burling, expects a deal with Mexico and talks with Australia, Indonesia and possibly the Philippines and Thailand to be concluded during Trump’s four-year term.

Bernd Lange, who chairs the European parliament’s trade committee, said the EU’s response to Trump would pair retaliatory tariffs with deeper trade relations elsewhere. “In addition to defending ourselves, we must also strengthen our collaboration with third countries such as the United Kingdom, Mexico, Japan or Canada, which could also be in the crossfire.

“This means the ratification of trade agreements such as the EU-Mercosur, and the conclusion of negotiations with partners such as Australia and Indonesia.”

In 2020, ASEAN countries plus China, Japan, Korea, Australia and New Zealand will form the Regional Comprehensive Economic Partnership. RCEP mainly reduced non-tariff barriers to trade such as veterinary controls and customs procedures. RCEP covers 2.3 billion people and 30 percent of global GDP, compared to 25 percent from the United States.

The African Continental Free Trade Area, which will eliminate 90 percent of tariffs over time, began in 2021.

Trade in goods and services has continued to grow in recent years despite the Covid-19 pandemic and growing protectionism.

Scott Lincicome at the Cato Institute, a Washington-based think-tank, said: “Regardless of what Donald Trump will do in the next few years, everyone else seems unwilling to embrace costly economic isolationism and instead will go it alone without us. There are about 370 trade agreements in force in mid-2024 with no sign of a future reversal.”

China, meanwhile, has recently concluded agreements with Serbia, Cambodia, Nicaragua and Ecuador. Beijing, which Trump sees as the United States’ biggest rival, accounts for about 30 percent of global manufacturing.

A senior trade official, who declined to be named, said they were “more skeptical this time” of a flurry of deals because the deals left to complete were more difficult to negotiate.

“The return of Trump could promote new bilaterals, maybe in Africa. But Asia is quite sewn up. I’m confused.”

Additional reporting by Aime Williams in Washington

Data visualization by Janina Conboye in London