Financial Times

Trump puts protectionism at heart of US economic policy

by Demetri Sevastopulo, Shawn Donnan & Courtney Weaver, Financial Times

January 24, 2017 | 10:12 am
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Order signed to pull out of Pacific trade deal

Executives warned over offshoring jobs

President Donald Trump signalled he would put protectionism at the heart of economic policy, withdrawing the US from a historic Pacific trade pact and threatening to punish companies for moving production overseas on his first working day in office.

Mr Trump said pulling out of the 12-nation Trans-Pacific Partnership, a signature initiative of predecessor Barack Obama’s “pivot” to Asia, was a “great thing for the American worker”.

His signing of the TPP executive order came shortly after he warned a White House gathering of US business executives that he would place a “very major” border tax on companies that moved production overseas and exported products back into the country.

While Mr Trump made clear during the campaign that he would withdraw from the TPP, the move was a potent signal that he will use his first days in the Oval Office to plough ahead with the populist, antitrade agenda that catapulted him to the White House.

Mr Trump is also expected to formally tell Canada and Mexico that he wants to renegotiate the North American Free Trade Agreement, which was signed by then-president Bill ­Clinton in 1993.

Republican senator John McCain criticised the TPP move as a “serious mistake”, highlighting how Mr Trump’s agenda is at odds with decades of Republican trade policy. “It will create an opening for China to rewrite the economic rules at the expense of American workers,” Mr McCain said. “And it will send a troubling signal of American ­disengagement in the Asia-Pacific region at a time we can least afford it.”

Japan and several other TPP signatories – which include some of the closest US allies along the Pacific Rim – have vowed to press ahead with the pact.

Shinzo Abe, Japan’s prime minister, told parliament yesterday that he would press the US leader to rejoin the pact. “President Trump understands the importance of free and fair trade, so I’d like to pursue his understanding on the strategic and economic importance of the TPP,” Mr Abe said.

Steven Ciobo, the Australian trade minister, said going forward with the remaining 10 nations still made economic sense for his country.

In his inaugural speech on Friday, Mr Trump said the US had “made other countries rich while the wealth, strength and confidence of our country has disappeared over the horizon”.

In his first White House meeting since the inauguration, Mr Trump put companies on notice that he intended to match his rhetoric with action, telling chief executives that he would look harshly on companies that moved production out of the US. He also said those that wanted to open US plants would face fewer regulations and lower tax.

During the session, which included Elon Musk of Tesla and Marilyn Hewson of Lockheed Martin, Mr Trump said he would impose a “substantial border tax” on goods made overseas by US companies, but would offer “advantages” to those who manufactured domestically.

“A company that wants to fire all of its people in the United States and build some factory someplace else and then thinks that that product is gonna just flow across the border . . . that’s not gonna happen,” he said.

Additional reporting by Jamie Smyth in Sydney

 

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by Demetri Sevastopulo, Shawn Donnan & Courtney Weaver, Financial Times

January 24, 2017 | 10:12 am
  |     |     |   Start Conversation

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