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World trade: What will Donald Trump do?

From BBC - January 10, 2018

Of all the questions hanging over world trade this year, none loom bigger than President Trump.

For decades, the US was the biggest driving force behind moves to stimulate more international trade.

Now it's the most important sceptic.

So for 2018, the big question has to be: what can we expect from him, and other forces around the world that share his doubts about trade?

Confrontational again?

Perhaps the biggest single issue looking ahead is President Trump's hints that he might revert to his previous more confrontational approach to trade relations with China.

During the election campaign Mr Trump spoke aggressively on trade, about US agreements and about some of the country's trading partners.

He made an early start on his agenda after taking office. One of his first acts was to withdraw the US from a trade agreement that had not come into force, the Trans-Pacific Partnership.

He has started the renegotiation of another, the North American Free Trade Agreement (Nafta) with Canada and Mexico that took effect in 1994, although he has so far stopped short of earlier threats to pull out of it altogether.

Another proposed agreement that was under negotiation between the US and the European Union has gone into the deep freeze, perhaps permanently.

He also has serious doubts about the World Trade Organization. The United States' lack of enthusiasm was a central factor behind a lacklustre outcome at the WTO's conference in December.

It ended without new deals or even the usual agreed declaration of commitment to the system that the WTO manages.

Historic contrast

It is a striking contrast with the previous 70 years.

Since the late 1940s the trend has been one of reducing or removing barriers to cross-border commerce.The global effort took place first withthe General Agreement on Tariffs and Trade (Gatt) and then the WTO, which started work in 1995.

There has also been a proliferation of agreements between smaller groups of countries that provide deeper trade integration than the WTO.

The underlying idea was to avoid a repeat of the trade barriers that were erected in the 1930s, barriers that probably aggravated the Great Depression (though they were not the original cause of it).

There was also the idea, with strong roots in economic theory, that stimulating trade by reducing barriers to it would make all countries better off.

That said there is also plenty of economic analysis that suggests that some people within countries lose out. It's just that the gains are reckoned to exceed the losses.

Mr Trump represents a striking contrast to this approach.

He appears to believe that if you have a trade deficit - if you import more than you export - you are losing out.He looks at both the overall trade balance with the rest of the world and the bilateral balance with particular countries.

Economic theory

Global Trade

Brexit's impact

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