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Panjiva: 2017 Trade Outcomes Hinge on Trump

Without mincing words, Panjiva opened its Global Trade Outlook 2017 report with a clear statement: “2016 was a bad year for trade.”

According to the intelligence platform for global trade professionals, the pressing concern now is: “What if 2017 is worse?”

“A protectionist U.S. president could kick off trade wars that hurt industries from autos to apparel and electronics to weapons; Europe could dither over trade deals; China could leverage its strength strictly to serve its own interests; and global trade volumes could decline further,” Panjiva CEO Josh Green said in the report.

The concerns are real, and not in some time has the mood among trade leaders in Washington been so dispirited.

Playing devil’s advocate, Green also said there’s a possibility that 2017 could be global trade’s best year yet.

“Corporates could learn to live with Trump and find new opportunities to trade elsewhere in the world. Brexit negotiations could help Europe find a new path forward for sustainable trade. China could drive a new period of trade liberalization across the Pacific Rim and beyond, bringing improved standards of living to emerging markets,” Green said.

Either way, the one clear certainty is that things are uncertain.

This year, there are key trade deals to track, according to Panjiva.

Trump’s TRADE – Target Rich, Arguably Difficult Environment

Donald Trump said in his press conference Wednesday, “I will be the greatest jobs creator God ever created,” so whatever he can do with trade early on to fulfill that claim, he may likely do.

From the Republicans’ proposed border adjustability tax to Trump’s talk of a 10 percent tariff on all imports—and 45 percent if those imports are coming from China—apparel manufacturers could be facing steep increases in tariffs.

Trump’s target countries will likely be those where the U.S. trade deficit is largest, like China ($348 billion deficit in the last 12 months), the European Union ($138 billion), Japan ($68.3 billion), Mexico ($61.5 billion), Vietnam ($31.8 billion) and South Korea ($29.6 billion).

“The challenge is that all but seven of its top 25 deficit partners are either already in, or negotiating to join, free trade areas which may limit the potential for bilateral deals,” according to Panjiva.

Nafta 2.0 = TPP 1.0?

Trump has promised to renegotiate NAFTA, lumping the deal with all the other “bad deals” America has made for trade.

The president-elect will be able to get the renegotiating process started, but Congress would need to approve a revised deal.

“Such a deal could end up resembling the Trans-Pacific Partnership which is broader in scope than NAFTA in that it includes labor and environmental standards,” the report noted, adding however, that “negotiations would be far from simple.”

According to Panjiva, in the 12 months to Oct. 31, the U.S. was running a $62 billion goods deficit with Mexico and $9.6 billion with Canada. In industries like autos where the U.S. runs a surplus, it may lose out and manufacturers could end up moving their supply chains out of the U.S. and face the import tariffs.

RCEP 0.5 – Really China’s Expansion Plan

China has been working on its Regional Comprehensive Economic Partnership (RCEP) for some time—a deal that seemed to rival the TPP—and now that TPP is looking more and more like a  no-go, China will want to get at least a draft agreement settled by the end of this year.

The RCEP would include the 10 Association of Southeast Asian Nations (ASEAN): Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, plus the six countries ASEAN already has free trade agreements with: Australia, China, India, Japan, South Korea and New Zealand.

“Reaching a deal would also make it more complex for President-elect Trump to negotiate updated bilateral deals, for example with South Korea if it includes ‘most favored nation’-type clauses,” Panjiva said.

Environmental Goods Agreement

Negotiations are ongoing for an Environmental Goods Agreement that would eliminate tariffs on a number of key environment-related products, as part of President Obama’s Climate Action Plan.

The deal has not been formalized and China opted out of taking part in final negotiations.

“While President-elect Trump may not be willing to get involved in such a broad, multilateral deal it could resurface as part of China’s broader trade strategy,” Panjiva said.

Brexit busy, going nowhere

The U.K.’s decision to leave the European Union dominated headlines in 2016. The process to start leaving is expected to begin in March and could take up to two years from there.

Britain will now have to work out a separate trade deal with the EU, and that deal will have to be approved by 38 regional and national assemblies, and the likelihood of that process being an easy one is low.

Last year, Canada was getting closer to finalizing its trade deal with the European Union, The Comprehensive Economic and Trade Agreement (CETA), but things stalled when Belgium said it wouldn’t support the trade deal because its French-speaking Wallonia region still had reservations. The deal (which has been under negotiation for seven years) has since been signed and is working its way to being finalized—though it is evidence that all the moving parts in the European Union won’t allow for a U.K.-EU trade deal to happen overnight.

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