Trump orders review of U.S. trade deficits with all nations, including Japan

Kyodo, AP

President Donald Trump directed trade officials Friday to conduct what will be the first country-by-country, product-by-product review of the causes of U.S. trade deficits, apparently targeting major trading partners such as China and Japan.

The action, put in motion by one of a pair of executive orders signed by the president, is part of his administration’s efforts to reduce America’s deficits and address what it says are unfair trading practices.

China, Japan and other countries with which the United States incurs hefty deficits will be subject to the review, ordered just ahead of the first summit between Trump and Chinese President Xi Jinping this week and the first round of a high-level economic dialogue between the United States and Japan later this month.

The second order directs officials to step up collection of anti-dumping and countervailing duties levied against illegally subsidized foreign products.

Speaking to reporters before signing the orders, Trump said the actions will “set the stage for a great revival of American manufacturing.”

Trump, who has pledged to promote “fair” trade under his “America First” mantra, said he will defend American industry and create a level playing field for American workers.

The Commerce Department and the Office of the U.S. Trade Representative (USTR) will undertake the study on U.S. trade deficits and report its findings to Trump in 90 days. The findings may see Trump pressure China, Japan and other U.S. trading partners to further open their markets to U.S. goods and services.

In its 2017 National Trade Estimate Report on Foreign Trade Barriers, released earlier Friday, the USTR criticized the two countries over trade practices and market access barriers.

Japan was rebuked over “the existence of substantial market access barriers” against U.S. agricultural products and “a variety of nontariff barriers” against American automobiles.

As examples, the report pointed to Japan’s “highly regulated and nontransparent” importation and distribution system for imported rice, saying it “limits the ability of U.S. exporters to meaningfully access Japan’s consumers.”

It also quoted industry research as saying that Japanese consumers would buy high-quality U.S. rice if it were more readily available.

Although Japan is the fourth-largest market for U.S. agricultural products, the United States is unhappy with market access to the country, the report said, citing “high tariffs” on grains, sugar, citrus, wine, dairy and a variety of processed foods.

Aside from farm products, the report said Washington has expressed “strong concerns” about the lack of access to Tokyo’s automobile market.

“A variety of nontariff barriers impede access to Japan’s automotive market,” it said, citing issues relating to certification, “unique” standards and testing protocols, as well as “hindrances” to the development of distribution and service networks.

The USTR meanwhile criticized China for its “massive excess capacity” in the steel and aluminum sectors, a situation it said was driven by state industrial polices and financial support.

The resulting overproduction and increase in exports distorts global markets and hurts U.S. producers and workers in both the U.S. and third country markets where U.S. exports compete with Chinese exports, it said.

Referring to the review of U.S. deficits, Commerce Secretary Wilbur Ross said Thursday that officials will study to what extent they have been caused by “cheating” trade practices and currency misalignment by other countries, as well as asymmetrical treatment of tax systems by the World Trade Organization.

The officials will also review the effects on the deficits of free trade agreements that have failed to produce the benefits that were forecast, Ross said in a briefing previewing the order.

As of last year, China incurred a $347 billion trade surplus with the United States, followed by Japan with $69 billion, Germany with $65 billion and Mexico with $63 billion. Other Asian economies also generated surpluses with the United States, with Vietnam logging $32 billion and South Korea $28 billion.

Several economists said it is unlikely the report will address the broader economic forces behind the trade imbalance, since it will track trade deficits country by country and product by product. And the order on trade duties appears to duplicate the standards of a trade enforcement act signed into law by then-President Barack Obama in 2016, according to congressional staffers.

“It seems like there is less here than meets the eye,” said Robert Scott, director of trade and manufacturing policy research at the left-leaning Economic Policy Institute.

In remarks at the Oval Office, Trump said he had seen the situation first-hand as he traveled the country and found how bad trade deals had hurt American workers.

“The jobs and wealth have been stripped from our country,” he said, vowing to bring that to an end. “We’re bringing manufacturing and jobs back to our country.” The president had been expected to sign the orders after giving his remarks, but left before he had. A White House official said he signed the orders later.