TPP Decision

What Does Trump’s TPP Decision Mean for International Business?

As promised, Donald Trump has already started to go ahead with more radical changes for the US, particularly for trade policy.

Trump has previously called the Trans-Pacific Partnership (TPP) “a potential disaster” and has decided that America will not join it. He has instead pledged to move forward and renegotiate the TPP DecisionNorth American Free Trade Agreement (Nafta) something he once described as “one of the worst deals ever”. Both of these decisions have led companies to rethink their own operations and investments.

Trump’s decisions have become a cause for concern for companies like Ford and Nike, whose operations extend to outside the US, because of the new President’s desire to boost US manufacturing and create jobs.

 

Import Tariffs

The President said that he would try to prevent US jobs from being outsourced and could impose harsh tariffs on imports.

Abandoning TPP could have a great impact on companies that manufacture in Asia. Companies like Nike were counting on TPP to create savings on import tariffs.

Fielding Chen, Bloomberg Intelligence economist said that multinationals with investments in Asia will now have to rethink their business strategies, with many already moving away from China to take advantage of cheaper labour costs. “Now manufacturers will slow down the decisions and may also consider other Asian destinations.”

The decision to abandon TPP has been heavily criticised by many because of the potential rising costs of products for American citizens. Donald Grimes, an economist at the University of Michigan said: “it won’t make people that happy if the price of tennis shoes goes up, if the price of clothing goes up and if the price of motor vehicles goes up. That contradicts the idea of making people better off.”

 

Not Unwelcome News for All

Some were pleased with the new that Trump would follow through on his plans to move away from TPP. Labour groups in particular welcomed the news. President of United Auto Workers, Dennis Williams said that TPP was “deeply flawed” and “corporate-drive”. Similarly, the president of the AFL-CIO federation of trade unions said that Trump’s decisions were “an important first step”.

Car manufacturers are holding off on new investments until they know the full details about the new trade relationship between the US and Mexico. With $80bn worth of vehicles and $68bn of car parts coming into the US from Canada and Mexico, any changes to Nafta could have some drastic consequences.

Some manufacturers have already changed their plans. General Motors were threatened by Trump with a “big border tax” on Mexico-made cars and as a result announced that they would be investing in the US. Similarly, Ford’s plan to create a new plant abroad were cancelled in favour of a new US-based one said to create 700 new jobs.

 

What will This Mean for the UK?

While Theresa May is confident at working on new trade deals with the US, Trump is insisting on a  preference for American manufacturing in a hope to keep jobs and wealth in the US.

This leaves the UK in another uncertain predicament, particularly after the Brexit vote which will potentially make it harder for the UK to come to profitable trade deals with the EU. If this were to result in higher exporting costs for the UK, we could perhaps see a financial blow to many companies who rely on these trade routes.

 

What are your thoughts on TPP? What do you think the implications will be for UK-based businesses hoping to do trade with the US? Share your thoughts in the comments below.