"Uncertainty is being deliberately deployed as an non-tariff barrier with the stated purpose of forcing US companies to repatriate manufacturing activity that has been moved abroad."
June 19, 2018—The Trump Administration is deploying uncertainty as a new weapon in trade protection, according to an analysis published by the C.D. Howe Institute. In “Weaponizing Uncertainty” authors Meredith Crowley and Dan Ciuriak show that uncertainty acts like a non-tariff barrier that impedes trade and investment. Importantly, unlike actual tariffs, uncertainty is only indirectly observed and not subject to the disciplines of World Trade Organization agreements or bilateral or regional free trade agreements.
The authors say uncertainty is being deliberately deployed as an non-tariff barrier with the stated purpose of forcing US companies to repatriate manufacturing activity that has been moved abroad – including automobile production that moved to Mexico, a NAFTA partner – and to reduce incentives for US firms to invest abroad by raising the risk of their facing restrictions on their access back to the US market.
Under the Trump Administration, US trade policy has been characterized by implausible claims, demands, and threats, which are then retracted, then re-asserted, and so on. The list of these uncertainty-inducing actions includes the following:
- Withdrawal or threatened withdrawal from major US trade agreements.
- Undermining the global institutions of rules-based trade, in particular the WTO.
- Threatening tariffs on US imports (under provisions of US law that had been moth-balled by previous administrations, such as NAFTA’s Section 232 national security tariffs).
- Outlandish, unworkable proposals to manipulate trade flows that appear deeply uninformed: threats against US multinationals, proposing negotiations that would break-up EU policy solidarity, flip-flopping on a policy for China.
The world may wind up paying the costs of lost business confidence for years – even if full-blown trade wars do not erupt. Trade wars are not good and the uncertainty their threat generates makes them impossible to win.
This report was presented by Meredith Crowley at Chatham House, London, on June 15, 2018.
Click here to read the full analysis
The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada's most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.
For more information please contact: Dan Ciuriak, Fellow-in-Residence with the C.D. Howe Institute; Meredith Crowley, Lecturer in the Faculty of Economics, University of Cambridge; or Laura Bouchard, Communications Coordinator, C.D. Howe Institute, 416-865-9935 or lbouchard@cdhowe.org