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Trade tensions

Trump suggests return to TPP as farmers fear trade war with China

Trade pact would offer alternative markets in Japan and Asia-Pacific

U.S. President Donald Trump faces pressure from farmers as China imposes retaliatory tariffs targeting American pork, soybeans, corn and beef.   © Reuters

NEW YORK -- U.S. President Donald Trump told a gathering of lawmakers from agricultural states on Thursday that he had directed his advisers to weigh the possibility of rejoining the Trans-Pacific Partnership, or TPP, in a major reversal of policy.

Thursday's announcement comes as the White House is looking to dampen the impact of a possible trade war between Washington and Beijing on U.S. agriculture.

Senator Ben Sasse, who attended the meeting, told reporters that the president directed Larry Kudlow, the new director of the National Economic Council, and U.S. Trade Representative Robert Lighthizer to "to negotiate U.S. entry into TPP."

In a statement, Sasse said "The best thing the United States can do to push back against Chinese cheating now is to lead the other eleven Pacific nations that believe in free trade and the rule of law."

White House Deputy Press Secretary Lindsay Walters told the Nikkei Asian Review: "The President has consistently said he would be open to a substantially better deal, including in his speech in Davos earlier this year. To that end, he has asked Amb. Lighthizer and Director Kudlow to take another look at whether or not a better deal could be negotiated." 

Withdrawal from the trade pact -- agreed between the U.S. and 11 Asia Pacific countries -- was one of Trump's central campaign promises, despite being a core element of former President Barack Obama's strategy to counter China's influence in the region.

U.S. farmers, an important support base for Trump, have become increasingly worried about the negative effects of trade tensions with China. In response to the president's decision to impose tariffs on imports from China, the Asian nation retaliated with tariffs targeting American pork, soybeans, corn and beef.

A study by researchers at Purdue University said that Chinese soybean imports from the U.S. could drop by as much as 71% if China were to impose trade restrictions on U.S. soybeans.

Farmers of soybeans and other crops are concerned about being locked out of global overseas markets as U.S. President Donald Trump pursues his nationalistic trade policy.   © Reuters

The study, issued in late March, suggested that the impact of the trade war could be bigger than widely expected.

China is the world's largest soybean importer, buying 93 million metric tons of soybeans in 2016. Nearly two-thirds of all U.S. soybean exports go to China.

"This is a very important signal that the U.S. is keen to keep markets open," said Eric Farnsworth, vice president of the Council of the Americas, a business group promoting free trade in the region. "If American farmers were to lose some access to China, we would need to increase access to somewhere else. Through the TPP, Japan and the countries in the Asia-Pacific region would offer new markets."

Farnsworth said that the Summit of the Americas, to take place on Friday and Saturday in Lima, Peru, would be an ideal place for the Trump administration to announce its intention to consider rejoining the TPP, since four TPP members -- Canada, Mexico, Peru and Chile -- will attend. The U.S. will be represented by Vice President Mike Pence.

Despite the surprise turn of events, this is not the first time Trump has hinted at a change of heart on the agreement. "I would do TPP if we were able to make a substantially better deal," he said in an interview with CNBC in January.

Japan expressed a cautious welcome on Friday to Trump's renewed interest in the pact.

"If the news is true, we would welcome it," said Taro Aso, finance minister and deputy prime minister, who has led bilateral economic talks with the Trump administration over the past year.

Foreign Minister Taro Kono was more enthusiastic. "The U.S. returning to TPP would be great news," he said, adding that "the shift indicates America's desire to work with Japan to lead global rule-making for the 21st century."

Kono said the priority for now was to bring into force the revised version of the original TPP, signed in Chile in March, as soon as possible.

Japan's foreign minister reaffirmed Tokyo's stance of insisting that the U.S. must accept the pact as a whole and should not be allowed to retain only the elements it desires.

Prime Minister Shinzo Abe has decided to take TPP minister Toshimitsu Motegi with him for planned summit talks with Trump in the U.S. on April 17-18. Motegi will be tasked with explaining where the agreement stands at present to the U.S. president.

The announcement was met with mixed reactions in Australia. The country's farmers welcomed Washington's embrace of free trade in place of escalating tensions, said Tony Mahar, chief executive of the National Farmers' Federation, according to Australia's ABC news.

But he also noted that U.S. participation in the TPP could erode the competitive advantage Australian beef exporters currently enjoy in key Asian markets like Japan.

Mitsuru Obe in Tokyo contributed to this story.

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