Dec 31, 2018

Steel, soybeans and NAFTA 2.0: A year of Trump's trade wars

Illustration: Lazaro Gamio/Axios

President Trump thoroughly upended the global trading system in 2018, slapping tariffs on billions of dollars' worth of imports as he pledged to "put America first" and renegotiate more favorable trade deals for the U.S. around the world.

The big picture: At their peak, Trump's trade wars were fought on three main fronts: Europe, North America and China. Since then, the president has agreed to a handshake ceasefire with the EU and successfully renegotiated NAFTA with Canada and Mexico, pending congressional approval. That leaves the spat with China — temporarily on hold until March 1 — as Trump's most expensive and high-stakes trade challenge heading into 2019.

Driving this year's news:

  • Trump took his first steps to target Chinese manufacturing in January 2018 by imposing a 30% tariff on solar panels and a 20% tariff on washing machines. He followed it up with three more rounds of tariffs on a range of Chinese products, amounting to $34 billion worth of goods in July, $16 billion in August and $200 billion in September.
  • China retaliated for each round of Trump's tariffs, enacting a total of $110 billion in tariffs applied exclusively to the U.S. Its 25% tariff on soybeans had a particularly harmful effect on American farmers, many of whom are concentrated in Trump's rural voter base and have received $12 billion in federal aid as compensation. Trump and Chinese President Xi Jinping agreed to a 90-day trade war ceasefire at the G20 summit on Dec. 1.
  • In March, Trump announced his intention to impose a 25% tariff on steel and a 10% tariff on aluminum, which hit Canada, America's top source of both steel and aluminum imports, especially hard. Canada, Mexico and the EU were temporarily exempt, but became subject to the tariffs on May 31.
  • European Commission President Jean-Claude Juncker met with Trump in July and agreed to hold off on future tariffs as the two sides continue to negotiate a new deal.
  • Trump had long promised to renegotiate or withdraw from NAFTA, calling it "the worst trade deal ever signed" because of its impact on American manufacturing and the U.S. trade deficit. He successfully did so in October, with the rebranded United States–Mexico–Canada Agreement including updates to issues like intellectual property and the digital economy.

What's next:

  • NAFTA: Trump said in December that he intends to formally withdraw from NAFTA, a move that would give Congress six months to approve the renegotiated deal or revert to pre-NAFTA trade terms. The USMCA must also be approved by the Canadian and Mexican legislatures.
  • Europe: Trade talks seem to have been placed on the back burner for now. Trump has privately considered the threat of auto tariffs as leverage in negotiations, but European officials have warned that such a move would result in retaliation by the EU and effectively kill any chance for a deal.
  • China: The trade war between the world's two largest economies is on hold until March 1, at which point it may come roaring back. Negotiators have reportedly agreed to meet for face-to-face discussions in January.

Go deeper:

Correction: A previous version of this article said that Trump has formally notified Congress of his withdrawal from NAFTA. He has said he intends to do so, but has not officially.

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