US out of TPP: Is that good for China?

Signaling that he is indeed serious about trade, one of Donald Trump’s first acts in office was to put a halt to US participation in the Transpacific Trade Partnership or TPP.  Since China has been working on its own pacific focused trade agreement, some would say this means the US has just ceded economic competitive position in the pacific to China.  Is that true?

 

China doesn’t gain an advantage if US leaves TPP

 

I wouldn’t go that far.  The agreement the Chinese are working on is far less ambitious than the TPP, that is doesn’t go as far in lowering barriers as the TPP.  If the Chinese were to succeed in getting other countries to sign on to their trade pact and America actually likes that trade pact, it won’t be difficult for the US to negotiate the same terms with any member of that agreement.  On the other hand, if America doesn’t like those terms, it simply doesn’t have to pursue an agreement.  To say that pulling out of the TPP will leave the US at a disadvantage in pacific trade is an overstatement for sure. 

 

Trump signals he favors less protectionism overseas, not more at home

 

Take a broader view, pulling out of the TPP is just the first step for an administration that has placed trade at the top of its agenda as no other has in recent times.  The $64,000 question is whether the Trump goal is ultimately to make America more protectionist or other countries less protectionist?  Does he want no free trade deals or, as he says, just better trade deals.  Perhaps our best indication to date is Mr. Trump’s first meeting as president with business leaders on the first Monday of his administration.  He emphasized making the US more competitive—lower taxes, less regulations.  He said of course America trades. America is for trade, he said.  But if we are open for other countries, they have to be open for us.  That was Donald Trump’s emphasis.  That sounds a lot like someone who wants to lower barriers overseas, not raise them at home.  Only time will tell, but it looks more like Trump is not pushing for less free trade but instead for more fair trade.