In a pointed challenge to President Trump’s “America first” agenda, leaders of the world’s biggest economies this week are touting an approach that breaks with the past 20 years of global trade — sidestep the United States entirely.
In the days leading up to this week’s Group of 20 summit in Hamburg, leaders from Germany, Japan and elsewhere are discussing new free-trade agreements that exclude U.S. automakers and manufacturers. Their leaders are vigorously pushing back against Trump’s threat of new U.S. tariffs or regulations on imported steel. And many are making public comments that affirm their commitments to fashioning pacts with or without the United States.
German Chancellor Angela Merkel, who faces elections in September in a country where Trump is deeply unpopular, has been among the most outspoken and is expected to push Trump this weekend over his trade threats and his recent decision to withdraw from the Paris climate agreement that aimed to curb greenhouse gas emissions.
“Those who think that the problems of this world can be solved with isolationism or protectionism are terribly wrong,” Merkel told the German parliament last week.
The divergent approaches have set up the G-20 as a potential crossroads for the world’s new economic order. Trump is attempting to leverage the United States’ economic power to negotiate deals in the country’s favor, but foreign leaders appear increasingly ready to bypass Trump in favor of a global trade network that is not U.S.-centered.
“It is important for us to wave the flag of free trade in response to global moves toward protectionism by quickly concluding the free-trade agreement with Europe,” Japanese Prime Minister Shinzo Abe said Tuesday as he touted a new potential Japan-E.U. trade pact that would lower tariffs for automobiles between Europe and Japan. If signed, the free-trade agreement would rival the size of the one created in 1994 when the North American Free Trade Agreement lowered barriers between the United States and its neighbors.
“There was a question mark there, as to whether or not the E.U. would be able to continue signing free trade agreements in the future,” said André Sapir, an international trade expert and a former economic adviser to the European Union’s director general for economic and financial affairs. “Going into the G-20, [the proposed trade pact is] demonstrating that indeed the E.U. and Japan want to continue to have a liberal trade agenda and show that there are other countries able to pursue this agenda without the United States.”
While other countries explore new economic ties, Trump is threatening to pull the United States further back.
“The United States made some of the worst Trade Deals in world history. Why should we continue these deals with countries that do not help us?” he wrote in a Wednesday morning Twitter post.
As well as threatening to rip up existing agreements, the White House is also considering placing new taxes or restrictions on imported steel. Some Trump advisers say the restrictions are needed to protect the domestic steel industry from what they allege are trade practices by China, but international allies, including Germany and Canada, have opposed the new restrictions, arguing it will punish their nations’ industries and raise the global price of steel.
At the G-20 summit, Trump’s team plans to push countries to agree to crack down on Chinese steel exports, people briefed on the planning said.
“The United States stands firm against all unfair trading practices, including massive distortions in the global steel market and other nonmarket practices that harm U.S. workers,” National Economic Council Director Gary Cohn said. “We ask the G-20 economies to join us in this effort and to take concrete actions to solve these problems.”
In advance of the G-20 summit, Merkel and Trump discussed “global steel overcapacity” during a phone call Monday.
Germany is a large exporter of steel, and officials there worry they could be caught in a U.S. crackdown.
China makes more than half of the world’s steel, and U.S. officials have accused it of “dumping” excess steel on global markets in a way that drives down prices. The United States imports very little steel from China, but Trump administration officials say the way China produces and exports steel still hurts the U.S. steel industry, as it sells the metal to other countries at low prices, driving global prices below a point where many U.S. firms can compete.
U.S. companies say that the Chinese steel boom is also due to unfair government subsidies and state ownership, which protects steel mills from market forces and causes them to produce much more steel than the world needs. In 2015, China produced 10 times as much crude steel as the United States.
Trump’s administration is divided over whether to impose new steel trade barriers. The Commerce Department was close to recommending new restrictions, but other top Trump advisers warned it could lead to major economic fallout — including for U.S. industries.
Trump took a combative posture with China ahead of the meeting, ripping the country for its ties to North Korea at a time when dictator Kim Jong Un is developing long-range missiles and threatening U.S. allies. “Trade between China and North Korea grew almost 40% in the first quarter. So much for China working with us — but we had to give it a try!” Trump wrote in another Wednesday morning Twitter missive.
Trump had taken a more conciliatory approach with China in recent months, backing away from a threat to label Beijing a currency manipulator and saying he thought both countries could work closely together. But relations appear to have soured in recent weeks, and his Wednesday accusation that China has enabled North Korea’s missile programs marks a low point between his administration and Chinese President Xi Jinping.
If Trump is able to use the summit to negotiate a united front against Chinese steel, he could boost the U.S. industry without straining ties with foreign allies. But the strategy could backfire if other nations reject Trump’s entreaties and further isolate the United States.
Trade experts said it remains unclear whether Trump is simply threatening tariffs as a way to lure other countries to offer him concessions, or if he will follow through on new restrictions. He has taken steps to renegotiate NAFTA, and he has also said he wants a new trade deal with South Korea. But so far, those efforts are only in initial stages. Global leaders have seen an opening in persuading Trump to change course, as he made a last-minute decision to renegotiate, rather than withdraw from, NAFTA after intense pressure from Canada and Mexico.
“There’s a big difference between being unpredictable with your adversaries and being erratic with your friends and allies,” said Daniel Price, former international economic affairs adviser to President George W. Bush, who helped organize the first G-20 summit in 2008.
The E.U.-Japanese deal, which has only been negotiated in broad terms thus far, would lower barriers to exports of cars flowing in both directions, as well as reduce Japanese barriers to imports of trains and agricultural products, including cheese and chocolate.
Japan was a party to the now-aborted Trans-Pacific Partnership, a broad trade arrangement negotiated under President Barack Obama that would have lowered trade barriers between the United States and many Asian countries, with the notable exception of China. But the deal faced opposition in
Congress, and Trump formally ended its chances when he withdrew the United States from the deal upon taking office.
Now, the E.U.-Japan pact underscores the economic risks for the United States if the country is bypassed in global economic pacts.
“Any trade agreement that’s lowering barriers between other countries ultimately hurts U.S. exporters, because they still face those tariff barriers others don’t,” said Chad Bown, a senior fellow at the Peterson Institute for International Economics.
Trump left for the G-20 meeting on Wednesday, with a pre-meeting stop scheduled in Poland.
G-20 meetings, which are held once a year in a rotation of countries, typically end with a joint statement from every nation about a range of issues that can include economic policy, international assistance and security. Officials are likely to face strains as they try to cobble together the joint statement — known as the “communique” — for this meeting, because Trump could easily block any language he feels tries to box him in.
