Companies linked to a newly-inked Pacific trade pact may reduce their reliance on the world's largest economy following President Donald Trump's controversial tariffs.
Rising U.S. protectionism reinforces the importance of a multilateral trading order — the kind represented by the Trans-Pacific Partnership deal — strategists have widely argued. It could also see companies based in TPP member nations shy away from doing business stateside.
Known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) or TPP-11, the landmark free-trade agreement will cut tariffs between 11 countries, which include Australia, Canada, Chile, Japan, Malaysia and Mexico. It was signed the same day that Trump authorized steel and aluminum duties — controversial taxes that pushed Beijing to enforce tit-for-tat action on Monday.
"In an environment of growing uncertainty and risk, the CPTPP helps by providing stability," said Deborah Elms, executive director at the Singapore-based Asian Trade Centre. "The agreement itself provides considerable new opportunities for member firms to find new markets or to save money — this should push companies to diversify their own portfolio and rely less on the U.S."
The Trump administration's trade policy is centered on bilateral negotiations rather than multilateral agreements, but that's troublesome for companies based in TPP member countries. When possible, multinationals or small-and-medium sized enterprises could be motivated to strengthen cooperation with fellow TPP members instead of turning to the U.S.