President Trump signed a memo this morning to leave the Trans-Pacific Partnership or the TPP. This act was one of the expected moves from the new president and the move left Japan and South Korea bracing for change. The lack of a deal will mean new negotiations over trade and defense costs. This is the first in a series of acts that Trump has designed to protect US investments and workers.
“We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs. Protection will lead to great prosperity and strength,” Trump said in his inaugural address.
In addition, the White House also issues a statement saying they would be renegotiating the North American Free Trade Agreement (NAFTA) that dates back to 1994. Japan was spinning this morning and has tried to schedule meetings with Trump to stress the important of the TPP. “A protectionist approach, such as quitting the Trans-Pacific Partnership (TPP) and renegotiating the North American Free Trade Agreement (NAFTA), will have a significant negative impact on the world economy,” said Akio Mimura, chairman of the Japan Chamber of Commerce and Industry, in a written statement on Saturday.
After the news, the dollar has weakened after the inauguration address and as the TPP news sweeps across media outlets. Many analysts are seeing the dollar tangled in trade wars and uncertainty. While Trump has vowed to cut taxes and legislation, many are looking to China today as Chinese President Xi Jinping vowed to be the anti-populist leader and promote free trade. The loss of TPP could give China leverage in the area – the countries involved represent 40% of GDP – and has already been pushing its own deal the Regional Comprehensive Economic Partnership (RCEP) with many countries in the deal. Many countries see no benefit in a trade war and are already aligning themselves to China. China is obviously ecstatic about the news. “Beijing is understandably relieved that the exclusive, economically inefficient, politically antagonizing TPP is looking ever less likely to materialize by the day,” said an editorial late last year in state-run English-language newspaper China Daily.