MNI POLICY: Trump May Deal on China Like He Did With Nafta

--John Sutcliffe Presenting At Dallas Fed Conference Friday

--Says Both Nations Have Reasons For Deal

By Greg Quinn

     OTTAWA (MNI) - U.S. President Donald Trump may leave aside his history of

aggressive utterances and sign a deal with China's Xi Jinping, following the

pattern he took when replacing NAFTA, a trade expert presenting his views at a

Dallas Fed conference Friday told MNI.

     Both leaders are in a tough position because they are sensitive to

criticism about compromising on trade, says John Sutcliffe, head of the

political science department at Canada's University of Windsor who studies the

impact of Trump's policies on the Canada-U.S. border. Potential damage from a

tariff war still gives Trump and Xi incentives to negotiate a solution, he said,

and Trump in the end may prefer a showy signing ceremony over a long fight.

     "It could happen very quickly and then Trump declaring great success, and

forgetting the things he's said before," said Sutcliffe, whose school is near a

bridge to Detroit that carries $100 billion of goods a year between Canada and

the U.S. "Then he will claim a great victory whatever happens, even if it's not

a particularly radical change from what was before, it's claimed as a victory."

     Trump was elected after attacking Mexico for cheating on trade and sending

migrants across the southern border, and once in power he threatened to destroy

Canada's auto industry with 25% tariffs. U.S. officials have changed their tune

since Trump signed the USMCA agreement to replace NAFTA, urging Congress to

ratify a pact they say will boost American exports. Tariffs on Canadian and

aluminum shipments, employed as a pressure tactic to get a deal, were also

removed.

     Trump went from saying he should tear up NAFTA with no replacement to

signing USMCA, which held made only few changes which were detrimental to the

other parties, Sutcliffe said. "It wasn't the bad conclusion, measured against

what might have been," he said. "It could have been a lot worse for Canada."

     While Trump has tapped into longstanding voter anger in U.S. swing states

over foreign competition, tariffs will be painful to consumers, Sutcliffe said.

Trump has said at rallies over the past year that trade wars are fast and easy

to win.

     "This misreading that tariffs are great and bring money into the United

States, we know they don't, they create costs that consumers must pay,"

Sutcliffe said. "There is that underlying rationale for a deal that allows trade

to continue more or less as before."

     China's government has said it won't accept punishing U.S. tariffs and has

retaliated several times as Trump imposed new restrictions. It has also rejected

U.S. accusations that China weakens its currency to gain an unfair advantage and

may use new 5G technologies for spying or to threaten U.S. national security.

Whatever deal emerges must also factor in the idea that "the Chinese government

itself is very sensitive to criticism," he said.

     While Trump's diplomacy via Twitter makes any outcome uncertain, the U.S.

will continue to be wary of free trade, Sutcliffe said, citing Democrats in

Congress who don't like USMCA and past presidents from both parties who have

have sought restrictions.

     "If you come from a town where the air conditioner factory is closing down"

because of foreign competition "those are dramatic and intensely felt costs," he

said. "Those costs are very real and very visible and likely to drive votes in

the parts of the United States that carry electoral weight."

     "Some of the things he's saying and doing and taking action on are ideas

that have driven U.S. policy from Reagan, the two Bush presidencies, Clinton,

even Obama to some extent, that in some ways there needs to be some management

that goes on with free trade," he said. "That's not something that Trump

invented."

     Sutcliffe speaks Sept. 27 at the Dallas Fed on a panel about "Migration,

Workforce and the Integration of Labor Markets."

--MNI Ottawa Bureau; +1 613-314-9647; email: greg.quinn@marketnews.com

[TOPICS: M$C$$$,MC$$$$,MI$$$$,MT$$$$]