Trump at Davos
Perhaps sensing
the sense of dread that permeated delegates at the World Economic Form in
Davos, Switzerland, US President Donald Trump surprised his critics by reaching
out with a sales pitch for the US economy. He clarified that his slogan ‘America
first’ did not imply ‘America alone’. He offered the US’s friendship and partnership
and invited investors to take advantage of a booming economy once again.
Although his remarks were undermined by the latest reports that the US economy
slowed in the fourth quarter, Trump’s well known aversion for multilateral
trade pacts was softened by the statement that he could revisit the pan-Pacific
trade agreement he rejected soon after taking office. Bilateral trade pacts though
received Trump’s approval. He reiterated that the US supports free trade but it
has to be fair and reciprocal. He condemned predatory behaviours such as theft
of intellectual property, industrial subsidies and state-led economic planning.
This remark may have been aimed at China, which has benefited hugely from the
US market after embracing an export-led capitalist model three decades ago but
which is accused of the first two practices in trade and the third is its
system of economic management under communist rule. The week before he travelled
to Davos to deliver his maiden speech at the Forum, the Trump administration targeted
China and South Korea with new tariffs, including 30 percent tariffs on
imported solar panels. These are seen as the first unilateral trade
restrictions as part of a broader protectionist agenda. Trump underlined the
resolve of his administration that the US would no longer turn a blind eye to
unfair trade practices.
President Trump
was unabashedly promoting US interests in Davos, arguing that every state is
entitled to do the same. However, the world is still holding its breath
regarding the protectionist, if not isolationist rhetoric that has been coming
from Trump since his election campaign and after he assumed office. While the world’s
biggest economy has no doubt acted as a magnet for the world’s exports,
investment too has followed in the footsteps of this phenomenon, creating jobs
and enriching the US economy. In fact this has been the experience of most
developed and developing economies in the last three decades. Conceded that
where cheaper imports have hurt US businesses, there may be a case for tariff
adjustments, but this should be restricted as far as possible to such clearly
established vulnerable sectors and not become the battering ram of raising
tariff walls that effectively cut off the US from the world’s free trade
regime. Having said that, it is noteworthy that Trump’s address was met with
more than a modicum of relief by the Forum delegates. For one, fears of a similar
tongue-lashing to the one Trump delivered at the UN General Assembly last
September appeared to be misplaced. There was also relief all round that Trump
did not declare a trade war or any other wars. The speech has been described as
more consensual than expected, middle-of-the-road, unexciting and rational.
That description could be considered a first for Donald Trump! Despite the
relief that nothing untoward was to be found in the speech, Trump was listened
to in almost complete silence, except when he was roundly booed for once more
tilting against his favourite target, the media. On balance, perhaps the
alarmist prognoses of what Trump may bring to the Davos table were just that:
alarmist. As to what he actually said, it remains to be seen whether his
reassuring words on trade convinced the audience. Perhaps it will take more
than pretty words for Trump to overcome the grave suspicion and reservations
with which his economic policies are viewed.
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