Convoluted trade and governance initiatives from Washington

Since assumption of office of the President in January 2017, US President Donald Trump's administration has witnessed the departure -- at times forced -- of a number of high-ranking officials. There have also been several initiatives with regard to trade and tariff barriers that have caused worry among states including China and several members of the European Union. These measures have been initiated to reinforce the President's 'America First' policy.

In the recent past, in less than two weeks, at least three Trump administration officials have either announced their resignation or left the White House. This followed the firing of Secretary of State Rex Tillerson on March 13. Tillerson's firing came just weeks after White House Communications Director Hope Hicks and Staff Secretary Rob Porter resigned. One needs to add in this procession the resignation of National Security Adviser Lt General HR McMaster who also announced his retirement from the US Army. He was replaced by former US Ambassador to the UN John Bolton. This evolving scenario has also seen the firing in March of Andrew McCabe Deputy FBI Director (who corroborated former FBI Director James Comey's claims that Trump tried to pressure him into ending the Russia probe) and the earlier resignation of Steve Bannon (who was functioning as the Chief Strategist of Trump).

It may also be recalled that in 2017 we had seen multiple resignations and firings. Some important ones were that of - (a) Michael Fynn, a former army general who joined Trump early on the campaign trail and assumed the role of National Security Adviser in January 2017 - only to resign less than a month later amid an ongoing investigation into alleged Russian meddling in the 2016 US Presidential elections; (b) Former FBI director James Comey who was fired by Trump in May 2017; (c) resignation of Reince Priebus, White House Chief of Staff on June 28, 2017 ( who was replaced by former homeland security secretary, retired general John Kelly and (d) the firing of Sally Yates, the then Acting Attorney General on January 30, 2017 (for instructing the justice department lawyers not to defend the President's ban on people from seven Muslim-majority countries).

There has also been the termination of the service of White House Communications Director Anthony Scaramucci, a declared opponent of former chief of staff Reince Priebus and the resignations of White House Press Secretary Sean Spicer and Gary Cohen Chief Economic Adviser to Trump and chief of the National Economic Council. Others who have resigned from the Trump Administration include -- White House Staff Secretary Rob Porter, White House Communications Director Hope Hicks, and the then US Secretary of Health and Human Services Tom Price (known as a frugal Congressman who railed against abuse of power and misuse of state funds, Price was caught in a media firestorm when it was discovered that he cost taxpayers an estimated $1million for his use of private planes during short trips).

This dynamics appears to have created a degree of uncertainty in the process of governance, more so, because the President is acting like a CEO of a business empire rather than a politician.

The month of March has also seen another dynamics that has created not only an uproar from China but also several countries in Europe and also North America.

On March 1 this year, President Donald Trump announced plans to impose tariffs on imports of steel and aluminium. United States allies, including the EU and Canada, vowed to retaliate (Canada and Mexico were later exempted from possible tariffs on March 8). On March 2, Germany, Australia, South Korea and the UK expressed concern over the tariffs, while China urged the United States to abide by the existing multilateral trade rules. The EU also pointed out that it would consider responding to the US proposal of tariffs by introducing tariffs on its side on US-made bourbon, motorcycles and jeans. On March 3, President Trump responded to the EU by threatening to further tax cars imported by the USA from Europe. This was responded to by the European Union on March 16 when they published a long list of hundreds of American products -- including cigarettes, ovens, sailboats and lipsticks - that it would target if Trump moved forward with tariffs on imports of steel and aluminium. This led to the US granting exemption on steel and aluminium to the EU, South Korea, Australia, Brazil and Argentina.

The month of March has also seen two other developments arising out of Trump's decisions. The first resulted from a simple two-line note from the White House which had been sandwiched between three congressional bills renaming post offices, Trump had signed into law the Taiwan Travel Act, which encourages "visits between officials of the United States and Taiwan at all levels." Basically, this will allow the President of Taiwan and other top government officials, who for four decades have been barred from visiting the United States, to come for official visits and will also allow senior Americans to go there as well. Analysts have pointed out that the Taiwan Travel Act went little noticed in Washington. Quite expectedly, it loomed large in Beijing, where leaders were furious with this decision. This also resulted in a stern response from Chinese President Xi who pointed out that consistent with the established one-China policy "any actions or tricks to separate the country are bound to fail. They will receive the condemnation of the people and the punishment of history."

The next salvo launched by President Trump related to his widening war on Chinese trade practices. This time he aimed alleged Chinese unfair seizure of US intellectual property. On March 22, Trump directed the US Trade Representative Robert Lighthizer to level tariffs on about US Dollar 50 billion worth of Chinese imports following a seven-month investigation into alleged intellectual property theft, which has been a longstanding point of contention in US-China trade relations. Peter Navarro, Trump's hawkish top trade adviser said the US was "simply strategically defending itself against this particular form of economic aggression". Trump also signed a memorandum announcing other trade actions, invoking Section 301 of the 1974 Trade Act, which has formed the basis for the US administration's investigation pertaining to US' multi-hundred billion dollar trade deficit with China. He also warned that the US would take action against China at the World Trade Organization. The very next day, China retaliated by outlining plans to hit back with tariffs on more than 120 US goods, including pork and steel pipes. It has also warned that China would challenge the United States for ignoring the rules of the WTO.

It is understood that in addition to the tariffs, the US also plans not only to impose new investment restrictions but also take further actions against China through its Treasury Department. Trump has signalled that the tariffs would affect "about $60 billion" of Chinese imports, but US Administration officials have said that the figure would be close to $50 billion. It may be mentioned here that latest statistics indicate that in 2017, total exports of US to China amounted to about US Dollars 130 billion. The total figure for imports from China was about US Dollars 506 billion. All these steps are heightening concerns of a global trade war that could destabilise the global economy -- fears that Trump Administration has repeatedly brushed off.

Economists have observed that the incoming tariffs are the most significant to date from a President who has campaigned on a promise to correct the US' global trade imbalance, particularly with China, and to revitalise US manufacturing. The move is just the latest sign that Trump is intent on putting his protectionist rhetoric into action despite concerns from economists and financial analysts, including many within his own administration.

The Chinese response from their Commerce Ministry has been cautious. However China's Premier Li Keqiang has warned: "A trade war does no good to anyone. There is no winner." They have also urged the US to avoid placing bilateral trade ties in danger but have also indicated that they were not afraid of a trade war. They have also announced plans to impose tariffs on US $ 3 billion of US imports including pork and steel pipes.

Economists, market strategists and trade analysts have also been speculating as to what else China might do. They have observed that China could initially also take the following steps: (a) file complaints with the WTO; (b) limit US beef imports by raising health and safety standards; (c) tell Chinese customers not to buy American cars -- thus affecting the fifth largest US car export market; (d) tell Chinese tourists (who spend about US$ 260 billion every year) to stop visiting the US and (e) sell some of the US $ 1 trillion of the US debt Bonds that China owns.

All these possible measures and prospect of retaliation from China and Europe have already started to impact investor confidence in the USA and elsewhere. There is a growing anxiety that these evolving scuffles could spill over into different markets. After Trump's announcement, Wall Street started to tumble from March 23. Dow knocked off more than 1000 points in two days. The S&P 500 came very close to its 200-day moving average which is treated as a key technical level. The benchmark index also nudged closer to its February low, which touched a correction, ending 9.9 per cent lower than the January 26 record. The Nasdaq Composite also dropped 174.01 points.

All these developments underline that the risk of trade war is being monitored very carefully in economic and trade screens all over the world. It is still unclear as to how or in what way the changing economic scenario might affect Bangladesh. However, Bangladesh needs to analyse the developments and take pre-emptive steps to avert any potential threats that might emerge for its export-oriented economy.

The writer, a former Ambassador, is an analyst specialised in foreign affairs, right to information

and good governance.

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