Trump’s trade war with China

This is the biggest question hanging over the global economy. And the biggest risk.

After China hawk Steve Bannon’s exit there was a temptation to proclaim the death of the Trump White House’s economic nationalism. But that ignored the presence of Donald Trump, who is instinctually a protectionist. He wants “tariffs” rather than deals when it comes to China, as we’ve learned in recent days. He also sees cracking down on China as key to keeping his “America First” promise to his base.

The only things in the way are his staff, Republicans in Congress and the limits of his power. And those are important. Campaign promises of 45 per cent tariffs on Chinese goods have turned into investigations into Beijing’s intellectual property regime.

My bet is those forces — and America’s CEOs — will continue to temper the president’s trade tantrums in the short term. But there are lots of people baying for Chinese trade blood in Washington these days.

The Brexit trade uncertainty

The most striking thing about the UK’s looming exit from the EU is how few details we still know about what Brexit will bring. And that it has been more than a year since the referendum.

Theresa May is still facing resistance from within her own party. Vince Cable, the Liberal Democrats’ sage and leader, still thinks Brexit may not really happen.

It seems safe to predict lots more noise and very little progress for the rest of 2017. And that will continue to be a damaging combination for business and the UK economy.

China’s bid to close its own Asia-Pac deal

Beijing is pushing hard to conclude the Regional Comprehensive Economic Partnership by the end of the year. The deal has long been called China’s answer to the Trans-Pacific Partnership and its bid for regional trade hegemony.

Technically it is a project of the 10-member Association of Southeast Asian Nations to bring all of its trade deals in the region under one umbrella. It also lacks the ambition on many fronts of the TPP.

But closing the deal on RCEP less than a year after Donald Trump pulled the US out of the TPP would be a big win for Beijing.

Likewise, if the 11 countries led by Japan left in the TPP manage to salvage a deal following the US exit that could provide some balance in the region.

The drama in Nafta

With the second round of (re)negotiations closing on Tuesday we have truly entered the technocratic phase of these trade talks.

Still, the clock is ticking and President Trump is doing his best to add dramatic tension by threatening a withdrawal.

I expect the real drama to come early in 2018. But this is Donald Trump’s trade world. We just live in it.

Don’t cry for the WTO

We began the year worried that the US was poised to withdraw from the World Trade Organisation. That hasn’t happened. And it’s now unlikely to any time soon.

But we are going to get a taste of the new world order when the WTO’s members gather for its biennial ministerial in Buenos Aires in December. It’s unclear, as always, if the WTO will be able to deliver anything of substance. But the real test lies in not having the US leading the way in discussions for the first time in the WTO’s life. Will China step in? The EU? And will India be as minded to block any deal as it has been in the past?

The EU’s Americas gambits

The EU is making clear it wants to use the void in US leadership on trade to nail down new trade agreements. The negotiations with the Mercosur trade bloc in Latin America have been going on in fits and starts for more than a decade. But the EU and key Mercosur members like Argentina are now pushing to conclude a deal by the end of this year. That would be a big statement planted right in the US’s backyard.

So too would be concluding the EU’s own (re)negotiation of its existing trade agreement with Mexico. And there is a good chance Brussels could beat Donald Trump to the finish line on a deal with Mexico.