U.S. Allies Strike Back Trump’s Tariffs with Trade Deal

The United States have been working with its allies on a trade pact to counter China’s rapid growth in economy. This pact, however, in response to Trump’s new tariffs on steel and aluminum, might shift towards countering Trump’s measure of protectionism instead, taking on a new agenda.

On Thursday, Japan, Canada, Australia and eight other nation have come together to sign a trade deal against Trump’s protective trade measures. This pact will push forward a new trade vision that challenges the United States instead of China, which was its previous target. This push back was anticipated by Trump’s economic advisers as Trump stated that there would be exemption of the tariffs on any country, even US allies.

A year ago, under President Trump’s order, the United States have withdrawn from the Trans-Pacific Partnership, and this agreement, with the absence of American leadership, seemed to find its new direction promptly.

The TPP was originally set on acting as a counterweight of China’s economic growth and sprawl as it was planning to lower trade barriers and urge Beijing to change its state-driven economic model and policies to have access to the same economic benefits. However, Trump’s imposition of steel and aluminum tariffs to protect domestic companies have turned its role from “being a leader to actually being the No.1 antagonist and No. 1 source of fear”, according to Jeffrey Wilson, who is the head of research at Perth U.S.-Asia Center at the University of Western Australia. This sentiment was echoed by the Prime minister of Japan, Taro Kono, who stated on Thursday: “Only free trade will contribute to inclusive growth of the world economy” and that “Protectionism isn’t a solution”.

This new deal, now named as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, is planning to establish new trade rules in markets that occupy up to one sevenths of the world’’s economy. It will also offer other benefits to around the region by dropping tariffs and opening up new free trade markets in agricultural products and digital services. This means that countries that sign this agreement will enjoy benefits of free trade while United States, no longer an economic ally, will face 38.5 percent of tariffs in Japan. Countries that will benefit from this agreement include Mexico, Vietnam, New Zealand, Chile, Malaysia, Peru, Singapore and Brunei.

According to results generated by the Peterson Institute for International Economics, this trade deal is anticipated to bring in $147 billion of global income, while also putting forward the global message that it will push and advocate for free trade, open markets and economic integration between countries for the global good.

On the other hand, China, which was recently off the hook, has put forward the consideration of forming its own trade pact. In fact, China sent delegation to Chile last year after United States’ withdrawal from the trade pact. Experts say that even though United States have become the primary target of this agreement, China will still feel its repercussions and impact, especially in trade of high-tech products and other manufactured goods.

China’s foreign minister, Wang Yi, has responded on Thursday that Chinese government too hope that this agreement will help pushback against protectionism, expressing its appreciation of open trade and markets.

The picture of global trade has been shifted and disturbed because of Trump’s tariffs, triggering the response of the TPP as well as putting other countries in high alert regarding its trade and economy. At the moment, TTP is still hoping for the return of the United States to the pact to restore global trade stability.

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