Global Economics Monthly: Troubling Start for Trump's Economic Statecraft

With Donald Trump now installed in the White House, the speculation about what he might do as president can give way to assessment of his actual policies and performance. Trade and other international economic issues have featured prominently in President Trump’s words and actions since Inauguration Day. The early signs are troubling: the new president has set out on a unilateralist, protectionist path, while creating a trade policy apparatus that seems destined for dysfunction.

President Trump’s inaugural speech made clear that he has little time for the existing liberal international order of free trade, multilateral institutions, and enforceable rules. Building, expanding, and defending this order has been the central focus of U.S. economic statecraft since World War II. But the new president apparently thinks the current system is harmful to America’s economic health. He summed up both his diagnosis and prescription when he said in his speech, “We must protect our borders from the ravages of other countries making our products, stealing our companies and destroying our jobs.” He promised that from now on, “it’s going to be only America first.”

On his first day in office, the new president signed an executive order withdrawing the United States from the Trans-Pacific Partnership (TPP), the 12-country trade agreement that the Obama administration had spent over five years negotiating. The following day, he notified Canada and Mexico of his intention to renegotiate the North American Free Trade Agreement (NAFTA). Both moves sent a clear signal that the new president was serious about following through on his tough campaign rhetoric on trade.