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   Vol. 16 No. 28
Wednesday March 22, 2017

Trump Across The Pacific

Trump Across The Pacific

Abe & The Donald supped at Mar-A-Lago. President Donald Trump, second from right, sat down to dinner with Japanese Prime Minister Shinzo Abe, second from left, in Palm Beach, Florida, last month.
The same type of meet & greet is planned with Chinese President Xi Jinping next month in the same place as the U.S. moves to lower the temperature in Asia trade and politics.
In the meantime, the rest of Asia waits.

     The Trump Presidency and, more specifically, what it means for trade and logistics, is befuddling analysts and industry insiders. Investors in U.S. stock markets seem certain that a pro-business government determined to boost exports, employment, and manufacturing and increase spending on infrastructure will benefit transport demand across the modes.

Viewing TPP Exit

      But for many, pulling out of the Trans-Pacific Partnership (TPP) was an open invitation from the U.S. for China to take its mantle as the leader of global trade policy. And policies (and tweets) that create uncertainty about the U.S.-EU relationship and the future of NAFTA, and raise the possibility of a trade war with China, are treated with incomprehension.
      “There are a lot of mixed messages,” said one regional trade association president who requested anonymity. “But when people aren’t laughing at this Presidency and its almost daily crises, they are very concerned.
      “It’s hard to factor in the risk of U.S. policy and how it will apply to global trade practices when it seems that policy is being made on the hoof. A lot of our members also have concerns about security and how this might impact trade flows and the political environment.
      “And no one really understands how the U.S. could benefit from taking on China in a trade war. It would just increase prices of consumer goods in the U.S.”


Peeking Through Fingers

      A leading forwarder based in Europe said he was watching the Trump Presidency “through his fingers.”
      “It’s painful to see. We manage a lot of Europe-U.S. business by air and sea, and our customers really don’t know what to make of it, or how to plan ahead and incorporate political risk into their supply chains. It’s a case of looking at all the many twists and turns that could be taken by this administration and then hoping for the best but preparing for the worst.”


Trying To Focus

      Ocean shipping analyst Drewry said it was hard to analyze the new administration’s trade intentions at this early stage, but predicted Trump would continue to make protectionist anti-FTA noises (digitally and verbally), and that the U.S. would backtrack from entering into any broad agreements like the Transatlantic Trade and Investment Partnership (TTIP).


No Shots Through The Foot

      However, Drewry said it was unlikely the Trump administration would introduce any legislation that might harm U.S. trade competiveness and risk job losses and higher prices at home.
      “Assuming we are correct and all that happens is a bit more symbolic relocating back to America, to satisfy Trump voters, there shouldn’t be too much change to the status quo, meaning little adjustment to our container forecasts will be necessary,” said Drewry.
      “If we are wrong, the likely losers will be the US.
      “Reports that China could replace the U.S. in the TPP agreement points to a future when the rest of the world moves on and simply trades more with each other.
      “If Trump does impose trade barriers and high tariffs, other countries will definitely retaliate and then U.S. exports will suffer.”


Cannot Win Trade War

Nigel Driffield      Nigel Driffield, (left) a Professor of International Business at Warwick Business School and a consultant and researcher for the World Bank, the European Commission, and several UK Government Departments, told FlyingTypers that a trade war with China was a conflict that President Trump could not win.
      “I don’t pretend to be an expert on what is shipped by air as opposed to sea, but what he is seeking to do is bring jobs back to the U.S.,” he said.
      “Well, let’s say that Apple stop using Foxconn. There is nothing to suggest that the factories of Ohio or Pennsylvania can deliver that capacity—at least in the short run. All that will happen is that Apple’s prices will go up, and maybe more people will buy Samsung phones.
      “If China retaliates, then certain U.S. exports will be hit, and I can see those declining as China can essentially switch to European or Japanese producers and dump U.S. government debt.
      “Basically this is a trade war Trump can’t win. Protectionism is akin to holding back the tide—one can do this for a while, but in the long-term it is not sustainable.
      “The current thinking by President Trump seems to be framed by the belief that trade barriers are a solution to job losses, particularly in the so-called rust-belt, which was one of his key constituencies. At the margin, there is no doubt that tariffs can influence both trade and investment decisions, but there is no evidence that in the long-term this is effective in protecting employment,” Nigel Driffield said.


Air Cargo Weathered Eye

 Adams Nager     Certainly, many in the air freight industry will hope Trump does not take the advice of Adams Nager, (right) Economic Policy Analyst at Washington-based think tank Information Technology and Innovation Foundation. He argued earlier this month that any trade war instigated by the Trump administration should focus on China—which generates major volumes of air freight—rather than neighboring Mexico, which does not.
      Nager claimed ‘losing a job’ to China was much more damaging for the United States than losing a job to Mexico because a) Mexico’s manufacturing sector is integrated with U.S. supply chains and success is shared; and b) Mexico generally abides by global rules and guidelines governing fair international trade practices, while China “aggressively” does not.
       “I don't think an ideal policy response to Chinese bad practices would invoke a true 'trade war’ or, because that term is amorphous, a sharp decline in the volume of trade between the U.S. and China,” he told FlyingTypers.
      “To me, increasing the amount of goods flowing from the U.S. to China would benefit shipping because now they can haul goods in both directions. U.S. goods to China represent just a fraction of Chinese goods going to the U.S. And U.S. goods may be less bulky as they tend to contain more knowledge-components.”
      But he concluded that if the federal government was to spend its political capital fighting Mexico, it would be much less able to mount an effective challenge to ‘Chinese innovation mercantilism.’
      “In short, the Trump administration needs to choose its battles carefully,” said Nager.
Sky King
To Read Part 1 of This Series, Click Here
To Read Part 2 of This Series, Click Here
To Read Part 3 of This Series, Click Here
To Read Trump Effect—India Walks Softly Carries Big Stick, Click Here
To Read Trump Effect—Implications Of A Trump Trade War, Click Here

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