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Within hours of his inauguration as the 47th US president, Donald Trump issued more than 200 executive orders. They rescind many of his predecessor’s policies and launch his own initiatives for domestic transformation, terminating US membership of the World Health Organisation and Paris climate accord and suspending donor funding. They have so far also covered immigration, energy, pardons and America’s international trade.

When Trump campaigned for re-election he repeatedly promised to increase tariffs on imports into the US, identifying China, Canada, Mexico and the EU as targets for tariff increases. These were not idle words; he has done it before. In 2018 the US imposed tariffs on steel and aluminium imports and invoked the national security clause in the General Agreement on Tariffs & Trade (Gatt) as justification. A World Trade Organisation (WTO) panel subsequently rejected this argument.

A tariff is a tax on imports, paid by the importing country. Tariffs generally serve two purposes: to protect domestic industries and to increase revenue for the fiscus. But economists warn that if implemented as threatened the Trump import tariffs will be inflationary and will not result in extra jobs in US factories. Higher tariffs mean American consumers pay more for imports. 

It is standard practice for US presidents to issue executive orders. These are executive instruments in the form of written instructions to the federal government, which do not require congressional approval. The constitutional basis for executive orders is the president’s broad powers to issue “executive directives”. Article II of the US constitution says the president “shall take care that the laws be faithfully executed”. Federal legislation can grant the president additional powers.

Trump wants his own framework for international trade with the US, in the form of his America First trade policy. Several senior officials — the secretaries of state, treasury, defence, commerce and homeland security, the director of the Office of Management & Budget, the US trade representative and others — must now investigate specific trade-related issues and submit a report to him by April 1.

A pro-Trump hat at the New York Stock Exchange in New York City, the US. Picture: ANDREW KELLY/REUTERS
A pro-Trump hat at the New York Stock Exchange in New York City, the US. Picture: ANDREW KELLY/REUTERS

The America First trade policy aims for a package of measures Trump considers necessary for the US. They must “promote investment and productivity, enhance our nation’s industrial and technological advantages, defend our economic and national security, and benefit Americans”. He has reminded Americans that during his first term as president “my administration treated trade policy as a critical component to national security and reduced our nation’s dependence on other countries”.

According to Trump, “unfair and unbalanced trade” continues to undermine the American economy and its security, and this must be addressed through new policies and measures. The process begins by investigating “the causes of our country’s large and persistent annual trade deficits in goods, as well as the economic and national security implications and risks ... and recommend appropriate measures, such as a global supplemental tariff or other policies, to remedy such deficits.”

There will also be an investigation into “the feasibility of establishing ... an external revenue service to collect tariffs, duties and other foreign trade-related revenues”. At present, Customs & Border Protection  collects import duties and enforces customs procedures.

All unfair trade practices are to be reviewed, and remedial action taken. The legal basis for “appropriate actions” will be US domestic laws, not the applicable WTO disciplines. The president’s instructions do not refer to compliance with WTO rules.

The US trade representative must also review existing US trade agreements and recommend revisions where necessary to achieve “reciprocal and mutually advantageous concessions”. This will be another unilateral exercise. The review and amendment of existing trade agreements are normally governed by their own provisions. The same applies to the modification of tariff schedules. 

The African Growth & Opportunity Act (Agoa) is not mentioned, since it is not a trade agreement. Agoa is governed by US legislation. Its original purpose was to assist the economies of  Sub-Saharan Africa and improve economic relations with the US. Agoa has been extended to September, when it will expire unless renewed. Trump has not yet revealed his preferences regarding the future of Agoa. Perhaps there will be an indication in the America First report. 

In addition, the US trade representative must identify countries with which the US can negotiate agreements on a bilateral or sector-specific basis to obtain export market access for American businesses. This raises the possibility of bilateral free trade area (FTA) agreements with African countries.

During Trump’s first term a trade and investment agreement with Kenya was mooted. Both parties supported the idea, but the Biden administration did not pursue the initiative. Morocco is the only African state with an FTA with the US, dating back to 2006. It was inspired by shared strategic and economic interests. 

Other issues on the to-do list for the America First trade policy investigation are:

  • The loss of tariff revenue and risks associated with importing counterfeit products and contraband drugs such as fentanyl. 
  • Whether any country subjects US citizens or corporations to discriminatory or extraterritorial taxes.
  • The affect of trade agreements (including the WTO Agreement on Government Procurement) on US federal procurement.
  • An investigation of discriminatory Chinese policies and practices.
  • The future of China’s “permanent normal trade relations” status. This is a US designation for nondiscriminatory trade with a foreign state. It was granted to China in 2000 in exchange for Beijing agreeing to open its markets and liberalise its trade practices ahead of joining the WTO.
  • Reciprocal and balanced treatment of US intellectual property rights by China. 

The America First memorandum contains a list of additional economic security matters that must be investigated, in addition to those categorised as unfair and unbalanced trade. The aim is to “conduct a full economic and security review of the US’s industrial and manufacturing base to assess whether it is necessary to initiate investigations to adjust imports that threaten the national security of the US”.

Once the America First report has been submitted and studied, Trump will presumably inform the world how trade with the US will henceforth be conducted, and how existing trade agreements will be implemented or ignored. Some commentators predicted that he would use the threat of increased tariffs as a bargaining chip for striking “deals” on border controls and commercial transactions, which has come to pass with Mexico and Canada in recent days. 

The WTO will not be the guiding star for the America First trade policy, despite it being a binding agreement and building block of the multilateral trade order. Since the end of World War 2, when Gatt was adopted through negotiations in which the US played a pivotal role, the principles for liberalising international trade in goods have focused on eliminating tariffs and non-tariff barriers. Once tariffs are bound, they cannot be increased willy-nilly. The exceptions provided for in Gatt are conditional and justiciable.

Trump envisages an alternative international trade order. One newspaper called it the Pax Trumpiana — it must promote the national security of the most powerful country in the world. Once the America First trade policy has been formulated and announced we will know what this means and how the rest of the world will respond.   

• Prof Erasmus is an associate of the Trade Law Centre.

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