Donald Trump at a welcome celebration at the Lincoln Memorial in Washington, DC, on January 19, 2017.BRENDAN SMIALOWSKI/AFP / Getty Images
For 70 years, the United States has been the architect of a system of rules for global commerce. On Friday, with Donald Trump's inauguration, it becomes the Middle Kingdom of trade: a country that sees itself as the most important market in the world, able to demand that others bow and give ground to do business there.
It's an irony that Mr. Trump will make the U.S. approach to trade more reminiscent of China. Mr. Trump bitterly complained that China circumvents trade rules to ensure it benefits, but his view is that the United States can rewrite the rules, and keep rewriting them, to ensure they work for the U.S.
Historically, the term the Chinese used for their state, the Middle Kingdom, reflected their perspective that their emperor sat at the centre of the world, and others were vassals or lesser nations on the fringes. In Mr. Trump's world, the United States is the centre of global trade, the big market where everyone wants to sell. Others must make concessions to enter
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It would be a mistake for Canadians to think of this approach to trade as the impulse of a deal maker, like a 3 a.m. tweet. It's a considered strategy that runs through the writings and comments of the troika at the centre of Trump trade policy: billionaire Wilbur Ross, his nominee for commerce secretary, trade lawyer Robert Lighthizer, his new U.S. trade representative, and economist Peter Navarro, who will head the new National Trade Council.
Mr. Trump's threats and tweets even fit the strategy. Mr. Ross said in his confirmation hearing this week that Mexico's peso and Canada's dollar had dropped in value because the president-elect preconditioned them for concessions.
It's fair game, in Mr. Trump's world, to use U.S. market power and threats of arbitrary trade barriers as leverage. There was always some of that, of course, but now it's naked.
The U.S. used to send a different message. The Americans were the architects of the postwar trade regime, starting with the 1947 General Agreement on Tariffs and Trade, the forerunner of the World Trade Organization. That was a keystone of U.S. soft power: The superpower backed, and largely wrote, relatively predictable trade rules and invited the world to sign on.
Mr. Trump's trade troika see things differently. They see trade deficits – importing more than the U.S. exports – as a key drag on economic growth. Mr. Navarro expounded that idea in Seeds of Destruction, a 2010 book he co-wrote with former George W. Bush adviser R. Glenn Hubbard, arguing that, between 2000 and 2010, the U.S. trade deficit had substantially slowed the country's economic growth.
Another of Mr. Navarro's books, Death By China, attributed much of the blame to Chinese trade "cheating," such as currency manipulation, illegal subsidies and non-tariff barriers. It was overwrought, but bore some truth: China does use a host of non-tariff barriers to reduce access to its market.
But it's not just China. Mr. Trump's team feels it has a right to "fix" trade deficits with all countries, even if cheating is not the cause. He complained last week that Germans don't buy U.S. cars, sparking German vice-chancellor Sigmar Gabriel to argue that Americans should "build better cars." But Mr. Trump's team feels it has a right to rebalance trade to its interest: Mr. Lighthizer and Mr. Ross have essentially expressed the view that trade agreements aren't free trade – they're agreements, and can be changed for U.S. interests.
For Canada and Mexico, which entered NAFTA with trepidation for a guarantee of predictable access to the U.S. market, that's a shocking new world. Mr. Trump's team doesn't just want to renegotiate NAFTA to reduce its trade deficit with Mexico, it wants the right to reopen it again in the future whenever the U.S. has a deficit with either Canada or Mexico. Canada used to work for trade rules, now it will fight for favour and access.
That doesn't mean Mr. Trump will necessarily hit China or Mexico – or Canada – with the big tariffs he has threatened. In a CNBC interview last November, Mr. Ross said that threat is "part of the negotiation." The new White House wants leverage. They don't like regional trade deals, such as the Trans-Pacific Partnership, Mr. Ross said, because they want to negotiate one on one, using their weight.
"We are the big market. We are the world's biggest importer," Mr. Ross said in that CNBC interview. "We need to treat other countries as good suppliers, not as determining the whole show."