Talk about hitting the ground running.
As my colleague Larry Edelson reported yesterday, on President Trump’s first day in office, he kept his campaign promise to tear up trade agreements unfavorable to the U.S. by withdrawing from Trans-Pacific Partnership talks, and promising to renegotiate NAFTA too.
With that, all signs are pointing to a global trade war and to perhaps a new cold war with China, one of Trump’s favorite targets, aside from Mexico.
So who stands to win and who could lose the most from trashing TPP?
Winner: China exports to the rest of Asia.
Loser: U.S. political influence in East Asia.
The truth is, officials in Beijing were celebrating just as much as those in the Oval Office yesterday after the TPP decision.
Remember, China was excluded from TPP negotiations. If the deal had been done, it could have given the U.S. “significant influence in dictating trade policy across East Asia,” according to Bloomberg.
Ironically, America stands to lose more trade business to China as a result.
At present, the U.S. does almost $10 billion more in trade annually with the remaining members of TPP than does China. Expect that gap to close quickly now that Uncle Sam has dropped out.
With the U.S. now absent from TPP, China will be more than happy to fill the void and expand its influence in the region with its own version, already in the works.
|If this is indeed the opening salvo in a new trade war, it looks like the first shot from the U.S. backfired.|
The Regional Comprehensive Economic Partnership, which coincidentally excludes the U.S., is likely to move ahead with more enthusiastic participation from other Asian nations, and with China at the helm.
At the same time, China is expanding the Asian Investment Infrastructure Bank (AIIB), a key cog in the nation’s plans to buildout the new Silk Road – westbound trade routes, overland and by sea, from China through the Middle East and into Europe.
Twenty-five countries have already signed on to the AIIB this year, but the U.S. is also excluded.
Trump is right about one aspect of TPP, it wouldn’t have amounted to much to the U.S. economy anyway. However, geopolitically speaking, the U.S. loses significant influence over affairs in fast-growing East Asia, giving China the green light to write its own terms of trade in the region, in the absence of Uncle Sam’s influence.
If this is indeed the opening salvo in a new trade war, it looks like the first shot from the U.S. backfired.
Director of Research