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Trump's Asian trading partners will try to ride out the storm

Amid global tensions, Japan-EU pact shows value of long-term policy planning

America's trading partners might as well stay low till U.S. President Donald Trump's disruptive trade policy subsides.

"Disrupter" may be the best word to describe U.S. President Donald Trump. The Cambridge Dictionary provides the following definition: "a person or thing that prevents something, especially a system, process, or event, from continuing as usual or as expected."

In contrast to most Asian cultures and countries -- which tend to value continuity, stability, predictability, precedents and incumbency -- Trump relishes disruption, instability, unpredictability, anti-orthodoxy and taking actions that others have never taken (such as meeting with the leader of North Korea).

Nowhere is this more evident than in the arena of world trade, where Trump has already flouted precedent by withdrawing from the Trans-Pacific Partnership, renegotiating the U.S.-Korea Free Trade Agreement , renegotiating the North American Free Trade Agreement, rejecting multilateralism, casting doubts on the value of the World Trade Organization, labeling the EU as a "foe" in trade, and imposing unilateral tariffs on a wide range of products. His insistence on a "free, fair, and reciprocal" relationship (emphasizing "reciprocal") with trading partners is also new, as is his obsession with reducing bilateral trade imbalances.

Having been in office for more than a year, Trump is gaining confidence that he now fully understands government and Washington and can rely on his own instincts rather than on the expertise of Washington insiders who, in his view, have created the mess in which we now find ourselves. Thus, although in his first year in office he was long on rhetoric and short on action when it came to trade, in his second year he has started to take action based on his long-held conviction that "other countries, including our allies, are taking unfair advantage of the United States."

The animosity he felt toward Japan on trade in the 1980s has shifted to China, as shown by his imposition this year of tariffs on Chinese solar panels, steel, aluminum, and a wide range of products that could reach as much as $450 billion worth of Chinese goods, nearly equivalent to the total value of goods imported into the U.S. from China last year. With the midterm elections coming up in November, Trump can appeal especially to the Rust Belt states such as Michigan, Wisconsin, Ohio, and Pennsylvania -- which tipped the 2016 election in his favor -- by showing that his rhetoric is now being matched by his action.

Predicting how this will play out is not easy. First, Trump is following his own advice on page 45 of "The Art of the Deal": "My style of deal-making is quite simple and straightforward. I aim very high, and then I just keep pushing and pushing to get what I'm after. Sometimes I settle for less than I sought, but in most cases I still end up with what I want." Tactical and transactional, it is hard to discern a strategy.

Second, the endgame is unclear, and this is compounded by the fact that his economic team is divided between those who support free trade (such as Treasury Secretary Steven Mnuchin and National Economic Council Director Larry Kudlow) and those who support protection (such as National Trade Council Director Peter Navarro, Commerce Secretary Wilbur Ross, and U.S. Trade Representative Robert Lighthizer).

Third, the reaction so far by China and most other trading partners has been to engage in a tit-for-tat retaliation against the U.S., but there is little desire by these countries to wage a full-scale trade war with the U.S.

Fourth, on July 11 the U.S. Senate, by an 88-11 vote, approved a motion backing a role for Congress in requiring tariffs based on national security, such as those Trump imposed on steel and aluminum imports and is considering on automobiles. The nonbinding motion does not curtail the president's authority to impose tariffs but does indicate a growing concern, even among Republicans, that Trump is abusing Section 232 of the Trade Expansion Act of 1962 by invoking national security as a justification to impose the tariffs. Many trade experts believe that China does engage in trade practices detrimental to the U.S. and the world trade system but that the imposition of tariffs is a blunt instrument that can create unanticipated consequences given the interconnectedness of global supply chains.

Fifth, the possibility of tariffs being imposed on automobiles has led companies such as General Motors to warn that the move could backfire, leading to "less investment, fewer jobs and lower wages" for its employees. And agricultural interests fear that retaliatory tariffs by America's trading partners, especially by China, could dramatically reduce U.S. agricultural exports abroad.

Finally, Trump's tendency to conflate national security (e.g., recruiting China to persuade North Korea to abandon its missiles and nuclear weapons), trade (e.g., imposing tariffs on Chinese products to reduce the bilateral trade imbalance), and his family's business interests (e.g., in China, the U.S., and third countries) is another factor that leads many to despair that we are in "uncharted waters."

How will the global trading system cope with Trump the disrupter? Given that the U.S. operates on a two-year election cycle, whereas many of America's trading partners, including especially China and Japan, operate on a 5-, 10-, or even 20-year strategic framework, one approach that these countries are likely to take is the "rope-a-dope" tactic in boxing, where the boxer pretends to be trapped against the ropes, goading an opponent to throw punches that are absorbed by the elasticity of the ropes, wearing out the opponent over time so that the boxer can land effective counterpunches and eventually prevail. In other words, America's trading partners may simply try to ride out the storm and bide their time over the long term.

The impatient boxer wanting to land a quick and dramatic knockout punch in the early rounds is unlikely to succeed in the complex arena of global trade, which increasingly requires strategy, multilateral coalition-building, and endurance. No better example of this can be found than in the just-signed economic partnership agreement between Japan and the European Union, which creates the world's largest free trade zone, accounting for 37% of the world's trade by value and which required strategic intent, multilateral cooperation, and years of "pre-negotiations" and over five years of actual negotiations.

Glen S. Fukushima is a senior fellow at the Center for American Progress in Washington, D.C., and served as deputy assistant United States Trade Representative for Japan and China and as president of the American Chamber of Commerce in Japan.

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