U.S. Trade Partners Reach Own Deals    02/03 06:22

   

   WASHINGTON (AP) -- Bullied and buffeted by President Donald Trump's tariffs 
for the past year, America's longstanding allies are desperately seeking ways 
to shield themselves from the president's impulsive wrath.

   U.S. trade partners are cutting deals among themselves --- sometimes 
discarding old differences to do so -- in a push to diversify their economies 
away from a newly protectionist United States. Central banks and global 
investors are dumping dollars and buying gold. Together, their actions could 
diminish U.S. influence and mean higher interest rates and prices for Americans 
already angry about the high cost of living.

   Last summer and fall, Trump used the threat of punishing taxes on imports to 
strong-arm the European Union, Japan, South Korea and other trading partners 
into accepting lopsided trade deals and promising to make massive investments 
in the United States.

   But a deal with Trump, they've discovered, is no deal at all.

   The mercurial president repeatedly finds reasons to conjure new tariffs to 
impose on trading partners that thought they had already made enough 
concessions to satisfy him.

   Just months after reaching his agreement with the EU, Trump threatened new 
tariffs on eight European countries for opposing his attempts to seize control 
of Greenland from Denmark -- though he quickly backed down. And last month, he 
said he'd slap 100% tariffs on Canada for breaking with the United States by 
agreeing to reduce Canadian tariffs on Chinese electric vehicles.

   "Our trading partners are discovering that the largely one-sided deals they 
concluded with the U.S. provide little protection,'' said former U.S. trade 
negotiator Wendy Cutler, senior vice president at the Asia Society Policy 
Institute. "As a result, trade diversification efforts by our partners are on 
turbo charge, looking to reduce dependence on the U.S.''

   Trump supporters such as Paul Winfree, who was deputy director of the White 
House Domestic Policy Council during Trump's first term, are wary of the 
relative decline in U.S. Treasury note holdings by foreign central banks and 
view the national debt as a vulnerability rivals would like to exploit.

   Winfree, CEO of the Economic Policy Innovation Institute, a think tank, said 
that some of Trump's advisers do not feel America has fully benefited from the 
dollar's status as the world's dominant currency.

   "But the fact remains that every other country is jealous of our status, and 
many of our adversaries would love to challenge the U.S. dollar and 
Treasuries," he said.

   White House spokesman Kush Desai insists America's standing on the global 
stage has not been diminished.

   "President Trump remains committed to the strength and power of the U.S. 
Dollar as the world's reserve currency," he said.

   India and the EU clinch a long-awaited deal

   The most eye-opening deal so far has been the pact announced last week 
between the 27-country EU and India, the world's fastest growing major economy. 
Negotiators had been at it for nearly two decades before they closed the 
agreement.

   Likewise, an EU trade deal announced two weeks ago with the Mercosur nations 
of South America took a quarter century of negotiation. It will create a 
free-trade market of more than 700 million people.

   "Some of these deals have been in the works for quite some time,'' said 
Maurice Obstfeld, a senior fellow at the Peterson Institute for International 
Economics and former chief economist at the International Monetary Fund. "The 
pressure from Trump made them more eager to accelerate the process and reach 
agreement.''

   EU exporters were jubilant over the India deal. VDMA, a group of European 
machinery and plant engineering companies, welcomed lower Indian tariffs on 
machinery.

   "The free trade agreement between India and the EU brings much needed oxygen 
to a world increasingly dominated by trade conflicts," VDMA's executive 
director, Thilo Brodtmann, said in a statement. "With this agreement, Europe is 
sending a clear signal in favor of rules-based trade and against the law of the 
jungle."

   'We have all the cards'

   On Monday, Trump went on social media to announce his own deal with India. 
The U.S., he posted, would reduce tariffs on Indian imports after India agreed 
to stop buying oil from Russia, which has used the sales to fund its four year 
war in Ukraine.

   The president said that India would reduce its tariffs on American products 
to zero and buy $500 billion worth of American products. Trade lawyer Ryan 
Majerus, a partner at the King & Spalding and a trade official in the Biden 
administration and during Trump's first term, said that businesses and legal 
analysts were awaiting official White House documents spelling out details of 
the deal.

   Trump is banking on there being limits to other countries' ability to pull 
away from the United States. America has the world's biggest economy and 
consumer market. "We have all the cards,'' Trump told Fox Business this month.

   Countries like South Korea, dependent on America's market and military 
protection, can't afford to ignore Trump's threats. On Monday, for example, the 
president said he was increasing tariffs on South Korea goods because the 
country's legislature has been slow to approve the trade framework announced 
last year. On Tuesday, the country's Finance Ministry responded by saying its 
chief, Koo Yun-cheol, would push lawmakers to quickly approve a bill to invest 
$350 billion as promised in the agreement.

   "The U.S was trying to identify a counterpart that would find it difficult 
to refuse U.S. demands outright, given the depth of its economic and security 
ties," said Cha Du Hyeogn, an analyst at South Korea's Asan Institute for 
Policy Studies.

   Or consider Canada, which sends 75% of its exports to its southern neighbor. 
"Canada and U.S. will always be tightly linked through international trade," 
said Obstfeld, a professor at the University of California, Berkeley. "We're 
talking about adjustments more or less on the margin.''

   But the world's growing rejection of Trump's policies is already having an 
impact, driving down the value of the dollar, long the currency of choice for 
global commerce, to its lowest level since 2022 last week versus several 
competing currencies.

   Syracuse University political scientist Daniel McDowell, author of the book 
"Bucking the Buck: U.S. Financial Sanctions and the International Backlash 
against the Dollar," sees a vibe shift under Trump: Foreign countries and 
investors want to reduce their exposure to the United States, which has moved 
from a source of security and stability to a driver of instability and 
unpredictability under Trump.

   "Trump has shown that he is willing to use foreign countries' economic 
dependence on the U.S. as leverage against them in negotiations," McDowell 
said. "As global perceptions of the US are changing, it is only natural that 
investors -- public and private alike -- are reconsidering their relationship 
with the dollar."