Caribbean Trade Law and Development

Tag: trump

  • Re-invigorating CARICOM–Canada Trade in a Shifting Global Order

    Re-invigorating CARICOM–Canada Trade in a Shifting Global Order

    Alicia Nicholls

    On May 5, 2025 I had the opportunity and pleasure of being a panelist on the Canada Caribbean Institute (CCI)’s webinar entitled “Canada-CARICOM Relations in the Trump Era”.  In this blog post, I share and expand on some of the reflections I made at this session around the theme of reinvigorating CARICOM-Canada trade in this current global dispensation.

    While the US remains an important partner for Caribbean Community (CARICOM) countries, it is well understood in international trade and development circles that overreliance on any single market or partner increases exposure to geopolitical, economic and other shocks emanating in that partner. For the small island developing states (SIDS) of CARICOM whose economies are already highly open and vulnerable, diversifying trade and economic relationships is not a luxury, but a necessity. Diversification entails not only expanding south-south ties with Africa, China, and Latin America, as CARICOM countries have increasingly been doing, but also strengthening partnerships with long-standing allies like Canada. In this storm of uncertainty, Canada stands out as a stable and values-aligned safe harbour—a reality reinforced by the presence of a sizable Caribbean diaspora in Canada and a not insignificant Canadian diaspora presence here in the Caribbean, serving as bridges between us.

    The foundations of the Canada-CARICOM trading relationship stretch back to the colonial era when trade between the British West Indies and British North America (now Canada) involved an exchange of sugar, molasses, and rum for Canadian fish, lumber, and flour. That historical trade has evolved in structure and content, but the essence of mutual respect and cooperation remains. Today, our trade is anchored by the Canada Caribbean Trade Agreement (CARIBCAN)—a non-reciprocal preferential trade arrangement established in 1986 under which Canada grants unilateral duty-free access to eligible goods from Commonwealth Caribbean countries and territories. This covers most CARICOM countries’ exports to Canada, excluding goods in Harmonised System (HS) chapters 50-65 (mainly textile products) and goods subject to most favoured nation (MFN) tariffs of over 35%.

    CARIBCAN beneficiary countries or territories are Anguilla, Antigua & Barbuda, Bahamas, Barbados, Belize, Bermuda, The BVI, the Cayman Islands, Dominica, Grenada, Guyana, Jamaica, Montserrat, St. Kitts & Nevis, St Lucia, St. Vincent & the Grenadines, Trinidad & Tobago and the Turks and Caicos Islands. Notably, CARICOM member States Suriname and Haiti are not CARIBCAN beneficiaries.

    The arrangement is unilateral which means that beneficiary countries and territories are not required to reciprocate by lowering duties on Canadian imports, reflecting the agreement’s original development-oriented rationale: to enhance the region’s export capacity, promote economic development, and stimulate regional integration. The arrangement is subject to a World Trade Organisation (WTO) waiver, which was most recently extended in 2023 for another ten year period (until 2033).

    Despite this favourable arrangement, CARICOM’s trade performance with Canada has seen signs of stagnation. According to data gleaned from ITC’s Market Access Map, bilateral trade between CARICOM and Canada was valued at just US $1.2 billion in 2024. This is relatively modest when compared to CARICOM’s trade volumes with other partners. Notably, CARICOM enjoyed a trade surplus with Canada until 2019, but that dynamic has since reversed and Canada now enjoys a surplus with the region. CARICOM countries’ margin of preference in the Canadian market has declined as Canada has concluded agreements with other partners and its tariffs have lowered. Moreover, utilization rates of CARIBCAN preferences vary significantly across countries, with some utilising the preferences for significant shares of their exports and others failing to capitalize on the access afforded. CARICOM’s share of Canadian imports has declined, from 0.17% in 2014 to just 0.09% in 2024. Conversely, Canada’s share of CARICOM’s imports also dropped from 2.5% in 2014 to 1.5% in 2024.

    Digging deeper into the data reveals more about what is being traded and where opportunities lie. CARICOM’s leading exports to Canada include gold, aluminum, methanol, rum and spirits, root crops and seafood. On the flip side, Canada exports oil, wheat, iron ores, medicines, and meats to the Caribbean. According to ITC’s Export Potential Map, there remains significant unrealized export potential—estimated at around $1.4 billion. Gold alone, in its unwrought, non-monetary form, represents a good portion of this untapped potential. There may also be scope to expand exports of products like Caribbean rum, especially as Canadian consumers seek alternatives to U.S. products, including spirits and other alcoholic beverages.

    On the services side, tourism, commercial services and transportation services form the bedrock of the Canada–CARICOM relationship. Canadian banks have a long history in the region and for Barbados, Canadian firms are the major players in its global business sector. Travel remains one of the most vital service links, with Canada emerging as the region’s second-largest source market in 2024, sending 3.3 million visitors—a 4% increase from 2023, although still below pre-pandemic figures. With Canadians traveling less frequently to the US due to geopolitical tensions between these two countries, there is real potential for the Caribbean to capture more of this outbound market through targeted marketing, improved airlift, and creative offerings such as multi-destination packages. The education link is also noteworthy. Many CARICOM nationals study at Canadian institutions, bolstering ties through Mode 2 (consumption abroad) services trade.

    In addition to bilateral trade and services, Canada and CARICOM share values that manifest in their joint positions on the multilateral stage on issues like climate action, support for the Sustainable Development Goals (SDGs), and championing on-going and badly needed reform of the rules-based multilateral trading system. As global multilateralism comes under increasing strain, these alignments become even more critical.

    Some concrete recommendations

    The 2023 Canada–CARICOM Strategic Partnership, launched at the Ottawa Summit, marked an important milestone. This framework creates a permanent mechanism for structured dialogue and coordination—a platform we must now leverage more ambitiously. There are several immediate and medium-term actions worth considering.

    First, we need to better understand and address the reasons behind the low utilization of CARIBCAN by firms in beneficiary countries and territories and ensure evidence-based interventions to remedy this. This might involve empirical research in partnership with institutions like the University of the West Indies. Technical assistance to help exporters meet rules of origin, the simplification of customs procedures, and the creation of digital trade platforms or business missions could strengthen small and medium-sized enterprise (SME) readiness. As most CARICOM countries’ exports (except those exempted from the baseline tariff) now face additional 10% tariffs in the US market where they might have entered either duty-free or reduced rates of duty under the Caribbean Basin Initative (CBI) programmes, some CARICOM exporters will be seeking alternative markets for their products and Canada’s market of 40 million people and where most CARICOM goods can enter duty-free under CARIBCAN, beckons.

    Second, the question of whether CARIBCAN should be modernized or replaced with a reciprocal but development-sensitive agreement must be considered seriously before it is up for renewal of the waiver in 2033. While negotiations for a reciprocal trade agreement began in 2007, they eventually stalled due to divergent priorities. Today’s changed global landscape may offer a window to revisit the idea, possibly with a WTO-compatible trade and development agreement better tailored to CARICOM and Canada’s current needs.

    Third, Canada and CARICOM could benefit from updating their bilateral investment treaties (BITs) to reflect contemporary standards. Most are older generation BITs which prioritise investor protection over promoting and facilitating investment for sustainable development. In the absence of the negotiation of an FTA with a comprehensive investment chapter, Canada and CARICOM countries with which it has BITs should consider renegotiating their BITs and integrating development-friendly provisions, environmental safeguards, and mechanisms that encourage responsible investment.

    Fourth, greater attention should be paid to emerging sectors like digital trade, creative industries, fintech, scientific research and development, and digital health. These are areas where Canadian and Caribbean firms can collaborate meaningfully, and where mutual capacity-building could lead to innovation and job creation. I am always reminded of and inspired by the story of Barbadian-born scientist, Dr. Juliet Daniel, who is doing significant cancer research in Canada. This shows that the possibilities do indeed exist, especially given the strong ties between many Canadian universities and The UWI here in the Caribbean.

    Fifth, Canadian tourism is on a growth trend towards its pre-pandemic levels but could be boosted not just through more aggressive marketing in Canada, but through product innovation and better coordination across the region. Multi-destination tourism packages, for instance, could offer Canadians a richer Caribbean experience while distributing tourism benefits more evenly within CARICOM.

    Finally, the new Canada–CARICOM Strategic Partnership should also be used as a platform for closer multilateral coordination, including on WTO reform to strengthen the rules-based multilateral trading system. Although the Liberal Party in Canada won the elections in the just concluded election, there is a new Prime Minister and it remains to be seen to what extent he will continue some of the work of his predecessor.

    In all of this, the Caribbean diaspora in Canada and the Canadian community in the Caribbean serve as vital bridges that can drive trade, investment, cultural exchange, and policy dialogue, and are important players and allies as we seek to strengthen this relationship.

    In a world increasingly shaped by geopolitical unpredictability and economic volatility, deepening our economic relationship with Canada is not simply a reactive response. It is a logical and strategic one. Canada is already a valued partner with shared values, historical ties and a demonstrated commitment to inclusive and sustainable development. But the current level of trade and investment does not yet reflect the true potential of this relationship. There is considerable scope for deeper growth.

    Let me thank the Canada Caribbean Institute for the great work it is doing on fomenting this relationship, including its advancement of thinking on forging deeper Canada-Caribbean ties in the backdrop of Trump 2.0, as well as some of the concrete policy recommendations it has highlighted in a recent blog post. In these headwinds of global uncertainty, we should view Canada as not just a buffer in times of crisis, but as a cornerstone in our efforts to build a more resilient, prosperous, and sustainable CARICOM. Strengthening this partnership is more than a policy option—it is a strategic imperative.

    Alicia Nicholls, B.Sc., M.Sc., LL.B. is an international trade and development specialist with over 15 years experience and is the founder of the Caribbean Trade Law and Development Blog.

  • US ‘Liberation Day’ Tariffs: What impact for the Caribbean?

    US ‘Liberation Day’ Tariffs: What impact for the Caribbean?

    Alicia Nicholls

    On April 2, 2025, United States (US) President, Donald J. Trump, announced additional ad valorem tariffs of 10% on goods imports from all countries, including Caribbean Community (CARICOM) countries, under his new ‘Reciprocal Tariff Policy’. In addition, some countries like Guyana, which have a merchandise trade surplus with the US, will face even steeper additional tariffs. This article discusses these ‘Liberation Day’ developments and what they might mean for CARICOM countries.

    The Reciprocal Tariff Policy

    Earlier this year, on January 20, 2025, President Trump signed a presidential memorandum outlining the broad contours of his America First Trade Policy 2.0, initiating an investigation into the root causes of the country’s “large and persistent” merchandise trade deficit. This was followed by a second executive order, the Presidential Memorandum on Reciprocal Trade and Tariffs issued on February 13, 2025, which ordered a review of non-reciprocal trade practices and their contribution to the U.S. trade imbalance. On April 1, 2025, the President received the results of these investigations.

    The executive order of April 2, 2025 entitled “Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that contribute to large and persistent annual US goods trade deficits” introduces the so-called Reciprocal Tariff Policy as a response to the national emergency supposedly caused by foreign trade and economic practices.

    Using presidential authority pursuant to the International Emergency Economic Powers Act of 1977 (IEEPA), this policy applies an additional ad valorem duty starting at 10% on imports from all of the US’ trading partners, effective April 5, 2025 at 12:01 am (EDT). For countries in Annex I, these tariffs will increase to the country-specific rates outlined in that annex effective April 9, 2025 (EDT). For Guyana, the only Caribbean Community (CARICOM) country on Annex I, its goods exports to the US will be hit with additional ad valorem tariffs of 38%.

    These tariffs are to remain in place indefinitely, until the President determines that the conditions warranting them have been “satisfied, resolved, or mitigated”. Additionally, the President has the authority to increase the tariffs if the countries retaliate. A narrow range of goods listed in Annex II of the Memorandum is exempt from the ad valorem tariffs.

    These new ‘reciprocal’ tariffs aim to address what the Trump Administration perceives as chronic non-reciprocity in the US’ trade relationships, hampering U.S. manufacturers’ ability to compete in foreign markets and thereby threatening American jobs, manufacturing capacity, and competitiveness. However, the methodology used to determine these tariffs has faced criticism. If it is to be a so-called ‘reciprocal’ tariff, the initial thinking by many of us in the trade policy community was that the US would match the tariffs charged by these countries on US imports. Rather, according to financial journalist James Surowiecki in a post on X and later confirmed by economists and the administration, the formula for calculating the additional tariffs appears to involve simply dividing a country’s trade balance with the U.S. by the value of its exports to the US multiplied by ½ to arrive at the tariff rate. This has led to some of the poorest countries in the world being hit with disproportionately high tariffs based on this dubious formula. Moreover, tariffs have even been imposed on small uninhabited territories like the Heard and McDonald Islands, reiterating doubts about the logic behind the policy and on the more humorous side, giving rise to a raft of penguin memes on social media.

    Possible implications for Caribbean economies and firms

    However, this is no laughing matter as all goods exported from CARICOM countries to the U.S. will now face the additional 10% tariff, except for Guyana which faces a country-specific 38% tariff. This makes the costs of Caribbean products more expensive in the US, although there is the argument that they will also be competing with goods from other countries which might be subjected to even higher country-specific rates.

    The US has a large trade surplus with the region on a whole, and with most Caribbean countries, with the exceptions of the commodity-exporting countries of Guyana and Trinidad & Tobago. Indeed, the US remains a key market for several important Caribbean exports, including energy products like oil, ammonia and methanol, as well as rum, textiles and other manufactured and agricultural products. Since the 1980s most CARICOM countries’ goods exports to the US are eligible to enter duty-free due to the Caribbean Basin Initiative and its constituent Acts. This is not a negotiated trade agreement, but a unilateral preferences programme which has enjoyed bipartisan US support because it benefits US manufacturing as the biennial US International Trade Commission (USITC) reports on the operation of the CBERA have consistently shown.

    In her latest article, noted Caribbean economist Dr. Kari Grenade outlined a variety of ways in which these developments could impact Caribbean economies, including inflation as since the Caribbean imports a significant volume of US goods, including essential foodstuffs, this could lead to rising prices on our supermarket shelves. Analysis by Tax Foundation shows that the Trump tariffs amount to an average tax increase of more than $2,100 US per US household in 2025. What does this mean for the Caribbean diaspora in the US? What does this mean for Americans’ travel to the region if US consumers will be paying more for everyday goods and will have less disposable income ? What does this mean for those countries in the Caribbean which depend on the US as a major tourism source market?

    What next? Firm and regional responses

    The tariffs have not yet come into effect, and it is likely that they could be halted at the last minute given the backlash and stock market volatility the announcement has caused. Nonetheless, it is imperative for firms and Caribbean countries to plan for them. For Caribbean exporters which rely on the CBI concessions, this may necessitate rethinking export strategies, possibly by shifting to non-trade market entry strategies to maintain access to the U.S. market, or by diversifying into new export destinations. For those Caribbean companies which rely on inputs imported from the US, they could face higher costs as US manufacturers pass on their increased costs to intermediate and end consumers. This means they will have to continue to diversify their sourcing. Some firms are already doing this.

    Retaliation is not a feasible option for CARICOM countries as we import much of what we consume from the US and already have high tariffs on imported goods. Where feasible, Caribbean countries could lower their applied rates on imported goods to help offset some of the pain consumers would feel.  Our other main options are diplomatic, preferably as a grouping. Caribbean governments have been engaging in diplomatic outreach to urge the US to reconsider the policy or at least provide carve-outs for small countries. In a recent article, Antigua & Barbuda’s highly respected Ambassador to the US, Sir Ronald Sanders, has called on the US to revisit these tariffs as they are against the spirit of the CBI and US-Caribbean relations, have human and economic costs and also imperil US strategic interests. Indeed, this policy will make the price of US goods more expensive and further incentivise importers in the region to source more regionally or internationally. Moreover, many Caribbean nationals have customarily gone to the US, especially cities like Miami and New York, to vacation and shop, contributing to the economies of those cities. Caribbean nationals will increasingly go to cheaper destinations like Panama.

    The ‘America First Trade Policy 2.0’ reinforces the need for us in CARICOM to accelerate efforts to expand our intra-regional trade and continue our trade diversification efforts. This is nothing novel and it is something we have long recognised. I listened to the speech of EU Commission President, Ursula von der Leyen earlier this week and found it noteworthy that the EU, a market of some 450 million people and with the economic heft to implement meaningful retaliatory measures also saw the salience of deeper integration and economic diversification to helping build its resilience and navigate this period of uncertainty. If deeper integration and diversification are important for the EU, they are doubly vital for us in CARICOM. After all, it is not just these tariffs we must contend with, but also the mooted fees to be placed on vessels which are Chinese made or are part of fleets which have a large number of Chinese-made vessels, which could impact many Caribbean countries.

    A broader concern is the pall this beggar thy neighbour trade policy by US as the world’s largest economy casts over the rules-based multilateral trading system and the World Trade Organisation (WTO) which it was critical in establishing. While the multilateral trading rules are far from perfect, they have provided a predictable and rules-based framework where, inter alia, countries agreed to bind their tariffs for tariff lines at specific levels, which ensures some predictability for exporters. However, what the Trump administration is doing is contrary to the spirit of the multilateral trading system and will set off a global trade war as major economic powers react with their own retaliatory measures. As history shows, this will possibly have deleterious implications for the global economy, and just a mere five years after the world was hit by the worst pandemic in 100 years.  This latest move heralds a more unpredictable, uncertain, unstable and unilateral era in global trade relations, one in which strategic diplomacy, regional cooperation and diversification will be key for CARICOM countries to navigate.

    Alicia Nicholls, B.Sc., M.Sc., LL.B. is an international trade specialist and the founder of the Caribbean Trade Law and Development Blog: www.caribbeantradelaw.com.

  • US Tariff Wars: What possible impact for the Caribbean?

    US Tariff Wars: What possible impact for the Caribbean?

    Alicia Nicholls

    What a time to be an international trade analyst! That was my first thought after reading the latest memorandum dated February 1, 2025, announcing sweeping tariffs on America’s three biggest trading partners—Canada, Mexico, and China. Well-known for using tariffs as a tool for geopolitical ends, President Donald J. Trump is justifying these latest measures as part of a national emergency he declared against illegal immigration and drug trafficking under the International Emergency Economic Powers Act (IEEPA). This Act, signed in 1977, allows the President broad powers to regulate commerce after declaring a national emergency.

    These aggressive trade moves, the latest in Trump’s America First Trade Policy 2.0, are in fulfillment of promises he made on the campaign trail and expand on his first-term tariffs on China (which President Biden largely maintained). In his first term he had also announced 25% tariffs on steel imports and 10% on aluminum imports from the European Union (EU), Canada and Mexico. Canada and Mexico are not just the US’ largest trading partners, but are its treaty partners under the U.S.-Mexico-Canada Agreement (USMCA), the agreement that replaced the North America Free Trade Agreement (NAFTA) during Trump’s first term and which is due for review in July 2026 under its review clause.

    What do these new tariffs involve?

    Yesterday, President Trump announced a 25% additional tariff on imports from Canada and Mexico and a 10% additional tariff on imports from China, and has also vowed to increase these tariffs should these countries retaliate.

    This move will of course hurt those countries, affecting manufacturers and also jobs. But Trade 101 is that tariffs also mainly hurt consumers in the country imposing them – the US in this case! Billions of dollars in trade occurs among USMCA countries each year, with tightly interwoven supply chains, especially in the automobile, agriculture, textiles and other industries. Indeed, U.S. goods and services trade with USMCA totaled an estimated $1.8 trillion in 2022, according to the Office of the US Trade Representative (USTR). This means that many of the goods on American shelves come from these countries or were made with inputs sourced from these countries. Therefore, American manufacturers will pay higher costs for raw materials and intermediate goods sourced from these countries and higher business costs which they will likely pass on to consumers. The end result is that American shoppers and businesses will pay higher prices for everyday goods, an ironic state of affairs given that reducing these costs was said to be one of the reasons the American public voted for President Trump.

    For their part, both Canada and Mexico have announced retaliatory measures of their own yesterday. Outgoing Canadian Prime Minister, Justin Trudeau, announced in a press conference last evening a 25% tariff on 155 billion (Canadian dollars) of US goods, while Mexican President Claudia Sheinbaum indicated that Mexico will be implementing retaliatory measures as well.

    Trump has also again threatened to hit the EU with tariffs, and Colombia following a row over Colombia’s insistence that its deportees be returned with dignity. Trade wars among the world’s major powers threaten global economic stability, as the International Monetary Fund (IMF) warned in October last year, even before Donald Trump was re-elected but in the amidst of tariff threats he made on the campaign trail.

    They’ll Hit Caribbean Consumers too

    Caribbean manufacturers, which depend on US inputs, will likely face higher prices and business costs, while we end consumers might spend more for American-made food, cars, electronics and the like. However, there are ways in which we could seek to combat this to the best that we can. Caribbean manufacturers should, to the extent possible, continue to explore alternative suppliers to mitigate against these possible price hikes. This state of affairs also makes the case for more intra-Caribbean sourcing. After all, instead of sourcing so much of our fresh fruit from Florida, we could be sourcing these from within the region more.

    Final Thoughts

    Trump’s tariffs may be aimed at Canada, Mexico, and China, but the ripple effects will be felt far beyond in the possible form of higher prices and business costs, supply chain disruptions and economic uncertainty. Our jobs as trade analysts have never been more important as we help the Caribbean businesses and governments we advise to stay informed, and ready to adapt in an increasingly unpredictable global trade landscape.

    Alicia Nicholls, B.Sc., M.Sc., LL.B. is an international trade specialist and the founder of the Caribbean Trade Law Blog. Learn more about her work at http://www.caribbeantradelaw.com.

  • Trade Takeaways from Trump’s Second State of the Union Address

    Trade Takeaways from Trump’s Second State of the Union Address

    Photo source: Pixabay

    Alicia Nicholls

    Last night (February 5, 2019), United States (US) President, Donald J. Trump, delivered his second State of the Union (SOTU) address before a joint session of the US Congress. The President highlighted his administration’s progress on his campaign promises, including on immigration, trade, tax policy, infrastructure and national security. This article takes a brief look at the trade takeaways from the SOTU.

    The Context

    President Trump came to office with the promise, inter alia, of effecting a seismic shift in US trade policy. America, Trump argued, was being taken advantage of by other countries, while “unfair” trade deals were leading to the outsourcing of American jobs to the detriment of American workers and the American economy.

    An underlying theme of President Trump’s SOTU address last night was that of “promises made, promises kept”. The President reminded viewers of his campaign promise “to defend American jobs and demand fair trade for American workers”, while highlighting the achievements made thus far.

    Much of President Trump’s trade policy actions have been done through executive actions utilising legislation like the Trade Act which empower the President to take certain trade-related action, such as raising tariffs. Indeed, in just two years, the Trump presidency has heralded a decidedly mercantilist turn in US trade policy, marked by increased unilateral action (even against traditional US allies, such as Canada and the EU), the US’ withdrawal from the Trans-Pacific Partnership Agreement, the renegotiation of the tripartite North American Free Trade Agreement (NAFTA), more aggressive action against China, coupled with threats of withdrawal from the WTO and blockage of appointments/re-appointments of WTO Appellate Body members.

    Main Trade Takeaways from SOTU

    However, in his address, President Trump focused exclusively on trade policy achievements regarding increased enforcement of US trade laws and the renegotiation of NAFTA. Below are the takeaways:

    US-China Trading Relations

    China has been the principal target of President Trump’s trade policy actions, leading to an escalation in trade tensions between Washington and Beijing which, according to the major multilateral institutions, are already negatively impacting global trade flows and dampening the outlook for the global economy.

    In 2018, the Trump administration imposed tariffs on $250 billion worth of Chinese goods, to which Beijing retaliated with tariffs on $110 billion worth of US goods. Although those parties threatened to impose further tariffs, they made a truce on the sidelines of the G20 Summit in December 2018 not to impose any further tariffs for a 90-day period while trade talks resumed between them. Since the start of the truce, two sets of face-to-face trade talks have been held between the two economic behemoths.

    While President Trump proudly boasted that America is “now making it clear to China that after years of targeting our industries, and stealing our intellectual property, the theft of American jobs and wealth has come to an end”, he further noted that he and Chinese President Xi were working on a new trade deal. The President, however, reiterated that any US-China trade deal “must include real, structural change to end unfair trade practices, reduce our chronic trade deficit, and protect American jobs”.

    From NAFTA to USMCA

    In his SOTU address, President Trump noted that “to build on our incredible economic success, one priority is paramount – reversing decades of calamitous trade policies”. To this effect, one of the President’s major trade policy campaign promises was the renegotiation of NAFTA, an agreement which he derided as a “historic blunder” in his SOTU address.

    This renegotiation was accomplished last year with the signing of a replacement agreement called the US-Mexico-Canada (USMCA) Agreement. Some of the major changes include the requirement that 75 percent (up from 62.5 percent under NAFTA) of an automobile’s contents needs to be made in North America for it to qualify for duty-free treatment, greater access to the Canadian dairy market for US farmers, an extension of the terms of copyright protection, stronger labour provisions, a sunset clause and provision for review of the Agreement every six years.

    The USMCA was signed in November 2018, but is awaiting ratification by the three parties. However, some Democrats have raised issues with the Agreement. President Trump encouraged Congress to ratify the USMCA, in order to “bring back our manufacturing jobs in even greater numbers, expand American agriculture, protect intellectual property, and ensure that more cars are proudly stamped with our four beautiful words: “Made in the USA.”

    United States Reciprocal Trade Bill

    President Trump also made a strong appeal to Congress to pass the United States Reciprocal Trade Bill (HR 764), “so that if another country places an unfair tariff on an American product, we can charge them the exact same tariff on the same product that they sell to us”.

    The US Reciprocal Trade Bill, was introduced in the House on January 24, 2019, by Republican representative from Wisconsin’s 7th District, Sean Duffy (R-WI), who is currently the ranking Member of the Financial Services Subcommittee on Housing & Insurance.

    Inter alia, the Bill provides that if the President determines that the rate of duty or non-tariff barriers imposed by a foreign country on a particular US good is “significantly higher ” than the rate of duty or non-tariff barriers imposed by the US on that same good imported from that country, the President is empowered to take several actions, including imposing a rate of duty on imports of that good that is equal to that imposed by that country.

    The Bill currently has 19 co-sponsors. According to Representative Duffy’s press release, the proposed legislation would give the President “more flexibility in responding to foreign tariffs on U.S. products” and “the tools necessary to pressure other nations to lower their tariffs and stop taking advantage of America”.

    If passed, the Bill will, however, likely be challenged by affected countries through the WTO’s dispute settlement system. However, it should be noted that its successful passage by Congress is not guaranteed. Firstly, the Democrats are the majority in the House of Representatives since January 2019, some of whom have openly criticised Trump’s protectionist trade policies. Secondly, and more importantly, some members of Congress, including some Republicans, are already proposing bi-partisan legislation to limit the President’s authority to unilaterally impose trade restrictions for national security purposes.

    In the House, for example, Representative Mike Gallagher (R-Wi-8) introduced H.R.940 to amend the Trade Expansion Act of 1962 to impose limitations on the authority of the President to adjust imports that are determined to threaten to impair national security, and for other purposes. Meanwhile, in the Senate, for example, Senator Mike Lee (R-UT)  introduced the Global Trade Accountability Act (S 177), which would amend the Trade Act of 1974 to require congressional approval of unilateral trade action. The House version (HR 723) was introduced by Representative Warren Davidson (R-OH-8).

    However, the passage of any of these proposed bills limiting the President’s trade policy powers are not a sure bet either. Even if passed by both Congressional chambers, the bill would almost certainly be vetoed by the President, and would require a two-thirds majority in each house to override a presidential veto, which is not an easy feat.

    The big takeaway

    The big takeaway is that President Trump is convinced that his mercantilist trade policy is delivering for the American people, a fact he evidences by the increase in jobs and economic growth. Indeed, a fact sheet  was released by the White House on the same day highlighting the President’s trade policy achievements.

    However, his trade policies have come at the cost of increased trade tensions, alienating traditional US allies and creating an impending crisis in the WTO’s Appellate Body whose membership is now down to three – the minimum number of members required to hear an appeal.

    Several WTO members have already initiated complaints against certain of President Trump’s trade measures, and/or have raised issues during the US’ most recent Trade Policy Review (TPR).

    However, barring some Congressional limit on Presidential trade policy powers, the current trade policy approach is likely to continue for the remainder of the Trump Presidency.

    The full transcript of the President’s SOTU Address may be viewed here.

    Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.