Turn it up to 11: Trump's trade carnage went beyond tariff wars

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Here is a look back at 11 of Trump’s and Lighthizer’s most disruptive trade actions and some of the consequences that they leave behind, both for the President-elect Joe Biden and for the world:

1. An open field for China to dominate in the Asia-Pacific

Trump brokea commitment of the United States on his third day in office by pulling out of the Trans-Pacific Partnership, a trade deal with 11 other countries that President Barack Obama’s administration negotiated with support from Republican leaders in Congress. His executive order to withdraw from the agreement said the United States would negotiate bilateral deals to replace it, a promise he has only partially kept.

The remaining TPP members, which include Japan, Vietnam and Malaysia, entered into a revised agreement without the U.S. that was renamed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and is sometimes called TPP-11. Many of the same countries also are part of a new pact that China signed with 14 other countries in November. Some farm groups are already urging Biden to rejoin the TPP to ensure the United States remains competitive in the fast-growing world region.

2. A tariff war with China that continues

Trump broke World Trade Organization rules by unilaterally imposing tariffs on $50 billion worth of Chinese goods and escalating each time Beijing retaliated to reach $370 billion. That action followed a formal U.S. investigation that charged Beijing with failing to protect U.S. intellectual property and forcing companies to transfer their technology to Chinese-owned entities to operate in the Chinese market. WTO rules, however, bar countries from unilaterally raising tariffs on another member.

China also broke the rules by unilaterally retaliating against Trump’s tariffs and ratcheting up the fight each time Trump escalated. But it has also challenged Trump’s tariffs through the WTO’s dispute settlement system. This summer, a WTO panel issued its verdict: Trump’s tariffs on Chinese goods were an illegal action.

3. Steel and aluminum tariffs based on questionable national security claims

Trump unilaterally imposed tariffs on steel and aluminum imports, citing national security grounds. The issue here is trickier because WTO rules allow countries to raise tariffs to deal with a national security threat. But trading partners such as the European Union and China challenged Trump’s move at the WTO, saying that action was thinly disguised protectionism.

Lighthizer pushed back, saying the WTO rules allow each country to decide whether an action meets the national security test. The U.S. also asserted other countries have no right to even challenge the decision. However, a WTO dispute settlement panel disagreed with that view in a separate case between Ukraine and Russia that was decided in 2019.

In addition, the United States was not in a military conflict with China, the EU or any of the other countries that Trump hit with duties in 2018. Steel and aluminum are also not fissionable material, ammunition or implements of war, which are explicit examples of goods where countries can invoke the national security exemption.

4. A threat to impose auto tariffs on allies

Trump threatened to impose a 25 percent duty on hundreds of billions of dollars of auto imports from the EU, Japan and other places that are important suppliers to the U.S. Lighthizer used the threat of tariffs to strike a modest trade deal with the European Union and a more meaningful one with Japan.

But the Japan pact borrowed heavily from the Trans-Pacific Partnership deal that Trump abandoned, while also being far less comprehensive. The Commerce Department launched an investigation to justify auto tariffs on national security grounds, but Trump never acted on it.

5. An anxiety-inducing threat to bust up NAFTA

Trump and Lighthizer used the threat of withdrawal to force Canada and Mexico to renegotiate the North American Free Trade Agreement. The 1990s-era pact allowed any member to withdraw with six months’ notice. Many lawmakers argued only they would need to approve such a move because the U.S. Constitution gives Congress jurisdiction over trade.

Trump ignored those complaints to avoid a vote he likely would have lost. He continued to threaten withdrawal even after Canada and Mexico agreed to talks, keeping companies and trade groups in a state of unease. After 18 months of negotiations, Lighthizer came back with a deal that maintained most of the provisions of NAFTA, with some updates from the TPP agreement.

6. A reworked South Korea deal with little to show in increased auto exports

Trump threatened to withdraw from a free trade agreement with South Korea during his first year in office. The deal was originally negotiated by the administration of George W. Bush and renegotiated by the Obama administration to win congressional approval in 2011.

Lighthizer made slight changes to the automotive and pharmaceutical provisions and used the threat of tariffs to force South Korea to accept a quota on its steel exports to the United States. Otherwise the rest of the deal was the same as Trump condemned.

7. A brazen use of emergency trade powers to stop immigration

Trump invoked emergency presidential powers to pressure Mexico into doing more to stop the flow of migrants from Central America. His threat to impose tariffs on Mexico was especially brazen since it came six months after he signed the new U.S.-Mexico-Canada Agreement that guaranteed continued duty-free trade within North America.

Trump dropped the idea, which was strongly opposed in Congress and threatened approval of the USMCA, after reaching a deal with Mexico on the migration concerns.

8. A preemptive strike to fend off digital taxes

Lighthizer launched an investigation that is expected to result in the United States on Jan. 6 unilaterally imposing tariffs on $1.3 billion worth of French goods.

His target is France’s digital services tax, which the United States believes is unfairly aimed at U.S. tech giants like Google, Facebook, Amazon and Apple. But other countries are also eager to collect money from such firms, so the fight has broader implications.

Lighthizer also is investigating digital services taxes that have been adopted or are under consideration at 10 other WTO members: Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey and the United Kingdom. He could announce preliminary plans to impose tariffs on goods from at least some of trading partners before leaving office on Jan. 20.

9. A simmering trade war with Vietnam over currency

Lighthizer is actively investigating whether to impose tariffs on Vietnam for two separate offenses: having an undervalued currency and using illegally logged lumber in wood products exports to the United States.

Previous administrations have declined to use trade remedy tools to target another country’s currency out of concern that a similar action could be brought against the United States. But in recent months, the Commerce Department has imposed preliminary duties on plastic bag twist ties from China and tires from Vietnam, saying those nations undervalued their currencies.

Lighthizer’s investigation is broader in scope and could potentially lead to an across-the-board tariff on Vietnamese goods before he leaves office.

Biden also promised to get tough on currency manipulation during his presidential campaign, so the Vietnam case is an early test of how his administration will address the issue.

10. A crushing body blow to the world system for resolving trade disputes

Trump never made good on his threat to pull the U.S. out of the WTO, but he and Lighthizer are leaving it in a much weakened state.

The most obvious victim is the WTO Appellate Body, which Lighthizer crippled by blocking the appointment of new judges. He charges that the Appellate Body has overstepped its bounds by imposing new trade obligations on the United States.

But dismantling the Appellate Body encourages members to take unilateral actions to resolve trade disputes, further weakening the rules-based multilateral trading system. It also allows countries to avoid implementing adverse rulings, as the United States has done in the case that it lost to China over the tariffs that Trump imposed.

11. A last-minute objection that left the World Trade Organization leaderless

In a parting blow to the WTO, Lighthizer allowed a five-month process to select a new director-general to proceed almost to the end before objecting to the consensus choice of other members: former Nigerian Finance Minister Ngozi Okonjo-Iweala.

USTR asserted that South Korean Trade Minister Yoo Myung-hee was better qualified, even though many other members believe it is time for an African to lead the organization.

The U.S. move caught WTO officials by surprise because the selection process provided opportunities for members to voice a strong objection to any particular individual before the list is down to two candidates.

The action places a U.S. ally, South Korea, in the uncomfortable position of remaining in a race it appears doomed to lose once Biden takes office. It also could deny a prized international position to an African woman who holds dual U.S. citizenship.

The United States’ ambitious agenda for the WTO is also much harder to accomplish without a director-general in place. That adds even more uncertainty to talks about the future of the Appellate Body and how to adapt the rules of the organization to better deal with a giant non-market economy like China.