President Trump’s deal-making record, explained

President Trump’s deal-making record, explained
Source: Jonathan Ernst, Reuters
President Trump has hailed his record in office as a break from past “deals” that he claims have hurt American industries and workers.

During the 2016 presidential campaign, Republican presidential candidate Donald Trump was looked on by many of his supporters as a successful, if unorthodox, businessman who would run America like one of his own companies.

Trump’s vision contrasted with that of Hillary Clinton, the 2016 Democratic nominee, who in the eyes of Trump and his supporters represented all that was wrong with the so-called Washington political establishment.

Throughout his 2016 campaign, Trump vowed to adopt an “America First” stance on trade and deals with other nations and stated that a vote for him was a vote against “a leadership class that worships globalism” embodied, he argued, in Hillary Clinton.

On trade with China and the United States’ North American neighbors, Trump pledged a new course, one that would break from past agreements that he and his supporters believed had killed the American manufacturing industry and outsourced US jobs overseas.

President Trump has hailed his record in office as a break from past “deals” that he claims have hurt American industries and workers.

Others, such as The Associated Press, have argued that Trump’s “deals” have “made scarcely a ripple in a $20 trillion economy,” adding little other than uncertainty. With no new stimulus deal agreed upon to help aid the US’ economic recovery, President Trump’s “deal making” record may matter little.

Nearly four years on, TMS looks at the “deals” President Trump has made and whether these will impact his reelection chances in any meaningful way.

The China deal

China featured prominently in President Trump’s 2016 campaign messaging and has in large part dominated much of the president’s foreign relations and international “deal making” throughout his administration.

The president blamed China and bad “deals” with China made by past administrations for the decline in the American manufacturing industry. He also stated that he viewed the American trade deficit with China as a weakness.

Trump inaugurated a costly trade war with China in 2018, in which both sides began to adopt high tariffs on imports from the opposing country. Some American industries, such as agriculture, received tens of billions of dollars worth of government subsidies to make up for lost trade with China.

In January 2020, however, President Trump announced a new trade deal with China, which he said would be the first step to a more general resumption of trading relations between the two countries.

The president argued the deal was a “momentous step, one that has never been taken before with China toward a future of fair and reciprocal trade with China.”

In some ways, this was true. As part of the deal, China committed to buying an additional US$200 billion worth of American goods and services by 2021 and was expected to ease at least some of the tariffs placed on American products. This would go some way to addressing the trade deficit with China that President Trump had pinpointed for attack.

However, in other ways, the deal failed to justify the years of uncertainty and the rocky economic climate created by Trump’s trade war. The president had previously declared that “trade wars are good and easy to win.”

The overall trade deficit with China has barely been impacted as a result of the trade war and Trump’s presidency saw the trade deficit with China rise to US$418 billion in 2018, higher than any figures recorded during the Obama administration.

As of August 2020, the monthly deficit stands at some US$29.8 billion, which can hardly be said to have changed significantly since January 2017’s figure, when Trump took office, of US$31 billion.

Trump’s new China deal also changes little in terms of trading relations with China. The vast majority of tariffs will remain in place on hundreds of billions of dollars worth of imports on both sides.

American companies with production in China also appear largely unmoved. A US-China Business Council survey taken in May and June 2020 showed that 87% of respondents had no plans to shift their production out of China.

President Trump’s trade war and “deal making” with China may have impacted the trade deficit little and brought few jobs back to the US.

Yet, according to Eswar Prasad, a Cornell University economist who formerly led the IMF China division, Trump’s trade war with China has ultimately caused the disruption of “the multilateral trading system” and the creation of “uncertainty.”

North American trade

Trade deals with China have not been alone under the spotlight during Trump’s presidency.

Candidate Trump described the 1994 North American Free Trade Agreement (NAFTA) that opened the US, Canada and Mexico to freer trade, as the “worst” and an American jobs killer.

Coming into effect in 1994, NAFTA slashed tariffs between the three North American countries, with eased trade barriers allowing for a flow of goods and services across the continent. At the same time, however, US manufacturers capitalized on the eased restrictions by moving factories to Mexico to take advantage of cheaper labor there.

In January 2020, President Trump announced a new deal among the three North American countries to replace NAFTA – the US-Mexico-Canada Agreement, or USMCA.

Proponents hailed the USMCA as a welcome revision to NAFTA, with new stipulations on advances in the digital economy and certain criteria updated to ensure that jobs would remain in the US. For instance, the USMCA stipulated that 75% of a car and its parts must come from within North America, preventing jobs and labor from being outsourced elsewhere.

Ultimately, however, like Trump’s China deal, the USMCA will barely make a ripple in the huge American economy, its greater impact being the restoration of certainty to trading relations across the continent, certainty that had been upended by President Trump.

Figures from the independent International Trade Commission have projected that the USMCA would add US$68 billion and 176,000 jobs over six years to the US economy, which, while welcome, is only a small addition to a US$22 trillion economy with 152 million nonfarm jobs.

These economic benefits may not make up for the disruption caused by the “axes and saws” that the Trump administration has taken to long-standing trade policies, according to former economic adviser under President George W. Bush, Phil Levy.

Stimulus deal

Though President Trump’s “deals” with Chinese and North American trading partners have restored some certainty to the US’ trade relations with these countries, the differences in these new deals with past agreements is not hugely significant.

If these deals secured by President Trump have made only a small ripple in the US economy, the efforts to secure a “deal” on a new stimulus package for the US economy and its workers during the coronavirus crisis will have a huge impact.

A new stimulus package is perhaps the deal of greatest consequence, both to Trump’s own reelection chances and the future of the US’ economic recovery, but it’s a deal that has, crucially, yet to come to fruition.

President Trump himself has done little of note to secure a new stimulus deal. In early October, the president abruptly ended stimulus negotiations with Democrats and, in a night of confused tweeting, appeared to both suggest that the deal was off and was then back on, at one point calling for an even greater stimulus package than put forward by Democrats themselves.

The continued stalemate over a new stimulus package has been damaging for the US economy. Markets, which thrive off of certainty, have for months experienced some of their worst days as economic uncertainty is rife without a new stimulus package for the country.

All the while, different timelines continue to be put forward by those involved in negotiations. Republican Senate Majority Leader Mitch McConnell has said that relief will be handled “right at the beginning of the year,” whereas Democratic Speaker of the House Nancy Pelosi has argued Democrats “don’t want to have to wait that long, because people have needs.”

Surveys of voters continually show that the coronavirus pandemic continues to be one of the biggest concerns of American voters, as the US continues to set records for daily cases.

Behind in the polls in crucial swing states, securing a stimulus deal could’ve been the biggest “deal” of Donald Trump’s presidency. With Trump now telling reporters that a “tremendous stimulus package” will be made “immediately after the election,” the president appears to have rejected this opportunity.

As it stands, the uncertain future over a new stimulus deal could seal President Trump’s reelection fate and, more ominously, the fate of America’s economic recovery from the coronavirus crisis.

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