Former USTR Says More Tariffs Likely if Trump Re-Elected
Trade professionals should expect more tariffs if President Donald Trump is re-elected, warned a former U.S. trade representative, Bob Zoellick, who was speaking to an audience at the Washington International Trade Association on Feb. 4. In a second Trump term, “expect a China sequel.” He said that the European Union is clearly in his target sights now. “If you're in Brussels or if you’re in the European Commission embassy here,” he said, or if you're a company that does production in Europe, there's “a flashing yellow light and it’s turning orange. One thing we know about Trump, he’s not subtle.You're next.”
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He said he doesn't expect tariffs on cars in 2020, because the market would react badly, and it's an election year. “But I think you better well expect it the following year,” Zoellick said.
“He’ll never be able to solve the trade topic, he needs to keep it boiling,” said Zoellick, who served under President George W. Bush. Tariffs “go to his core authenticity as a politician. The only real check on this is the market reaction.” Zoellick said that the administration correctly identified the problems with China's policies that put other economies at a disadvantage. “Tariffs are probably not the right wrench for trying to deal with the bolts on these” issues, he said.
His advice to businesses is to diversify out of China, especially if they make technology products. He said there will be a decoupling in technology, and there will be greater global fragmentation generally. “Make supply chains more flexible and resilient,” he said -- and said the coronavirus outbreak is going to be more disruptive than people have recognized.
He said companies may want to evaluate if they want to be in the U.S., because sanctions compliance and litigation are more burdensome here than in other countries.
But for those that are in the U.S., he said lobbying for the benefits of trade and against the harm of tariffs is important. He said he's not naive, and he knows that CEOs who come out publicly risk a backlash from Trump, but added, “if you're afraid of Trump’s wrath, work through members of Congress. I haven’t been excited by some of my Republican friends in the Senate in terms of courage and fortitude,” he said, but they argue they've been effective behind the scenes in preventing tariffs on autos.
He said that even if Trump is not re-elected, trade is going to be thorny. “The Europeans are quite serious about these carbon border taxes,” he said, referring to the idea that Europe could impose tariffs on goods coming from countries that are contributing to greenhouse gases more than European countries. But he said that Democrats might be interested in wedding trade and environmental issues.
In a brief interview with International Trade Today after his talk, he said that carbon taxes aren't imminent on EU imports, but the issue is not going away.