Trump withdraws USA from TPP and multilateral treaty negotiations

Just the three days after he has taken on the role of President of the United States, Donald Trump has started to dismantle the advances of the Obama Administration towards a borderless world for commerce.

Today he has announced the withdrawal from the TPP (Trans Pacific Partnership) and his intention to negotiate on a one-on-one bilateral basis all future trade agreements.

“It is the policy of my Administration to represent the American people and their financial well-being in all negotations, particularly the American worker, and to create fair and economically beneficial trade deals that serve their interests. Additionally, in order to ensure these outcomes, it is the intention of my Administration to deal directly with individual countries on a one-on-one (or bilateral) basis in negotiating future trade deals. Trade with other nations is, and always will be, of paramount importance to my Administration and to me, as President of the United States.”

The memorandum, directed to the United States Trade Representative, and was published today on the press office section of The White House website.

President Trump orders the Trade Representative of the USA to “provide written notification to the Parties and to the Depository of the TPP, as appropriate, that the United States withdraws as a signatory of the TPP and withdraws from the TPP negotiating process.”.

The USA has been a founding member and an eager promoter of the APEC (Asia-Pacific Economic Cooperation), as well as of the TPP under Obama’s tenure at The White House. The withdrawal ordered by President Trump stops the opening process towards a free trade zone in the region and poses downside risks both to worldwide and US growth.
Trump’s decision also increases the risk of bursting a commercial war between China and the USA.

China, does not want a commercial war , but prepared

Trump’s decision decission does not contribute precisely to alleviate tensions between the USA and China. The Asian giant could well start off a commercial war against the many US economical interests inside and outside the Great Wall.

Li Keqiang (Premier of the PRC). ©
Li Keqiang (Premier of the PRC). ©

PRC’s Prime Minister, Li Kequiang, said during the Lima summit of the APEC that all country members of the APEC and TPP negotiations would not be the same if the USA if leave the organisation and the negotiations of the free trade agreement.

Xi Jinping (President of the PRC). Photo by Angélica Rivera de Peña.Uploaded by ASDFGH, CC BY-SA 2.0,
Xi Jinping (President of the PRC). Photo by Angélica Rivera de Peña.Uploaded by ASDFGH, CC BY-SA 2.0. To  watch the original photo, click here

President of the PRC Xi Jinping said last week at Davos in a speech against protectionisme not naming Trump, but clearly directed to him, that “Pursuing protectionism is like locking yourself in a dark room, which would seem to escape the wind and rain, but also block out the sunshine and air,”…“Waging a trade war will only cause injury and loss to both sides.”

Trade disruptions, a downside risk for IMF’s WEO

The IMF has also prevented from the many negative effects that a return to protectionist policies would bring to the economy worldwide and for the US itself.

Measures like the one adopted today by Trump are seen by the IMF as one of the factors that could downgrade the worldwide and US growth outlook update released by the International Monetary Fund this same January.

“Our central projection is that global growth will rise to a rate of 3.4 percent in 2017 and 3.6% in 2018, from a 2016 rate of 3.1%. Much of the better growth performance we expect this year and next stems from improvements in some large emerging market and low income economies that in 2016 were exceptionally stressed. That being said, compared to our view in October, we now think that more of the lift will come from better prospects in the United States, China, Europe, and Japan,” said Maury Obstfeld (IMF Economic Counselor and the Director of the Research Department) at a press briefing on the WEO last 16th January.

Maury Obstfeld (IMF Economic Counselor and the Director of the Research Department). © IMF
Maury Obstfeld (IMF Economic Counselor and the Director of the Research Department). © IMF

Obstfield also underscored: “We think the prospects of a more expansionary fiscal stance coupled with tax reform justifies some upgrade of the U.S. forecast, mostly for 2018. Now this is the short-term and longer-term we would have to worry about other fiscal repercussions, for example, if world deficits rise.

The possibility of trade disruptions is a downside risk to this forecast; it’s an important downside risk. It is not in our baseline scenario largely because we think that at the end of the day countries will recognize that these actions are not in their own self-interest, especially when there’s a threat of retaliation by other countries.
On the other hand, this could happen, it would derail our baseline forecast, possibly considerably, because the outbreak of a trade war could be quite disruptive.”

Image over the headline.- Donald Trump at the inauguration ceremony of his presidency of the USA. Source of the image, official Facebook page of Donald Trump.

Related external links:

The White House: Presidential Memorandum Regarding Withdrawal of the United States from the Trans-Pacific Partnership Negotiations and Agreement

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