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Trump orders US withdrawal from TPP

The President of the United States, Donald Trump, has signed an executive order to formally withdraw the US from the Trans-Pacific Partnership (TPP) negotiations,  fulfilling one of his key campaign promises within days of taking office. TPP was set up to create a free trade zone among 12 different governments in the Asia-Pacific region, of which only 3 are developed nations, namely the USA, Canada and Australia. The remaining parties are developing nations that saw a benefit in allowing the US and other developed nations free access to their products and raw materials.

Trump slammed the deal as harmful to American interests during his election campaign, believing that its implementation could lead to increased competition in the American marketplace, particularly in agricultural production, as well as a reduction in workspace across the country. As an alternative, Trump is looking to enter into bilateral trade agreements with each country, with built-in mechanisms that would allow for their quick termination should somebody "misbehave", as he puts it.

Now, in turn, we could very well see the termination of the Transatlantic Trade and Investment Partnership (TTIP) with Europe, as well as either the termination or renegotiation of the current NAFTA free trade agreement between the USA, Canada and Mexico. We expect that the termination of the TPP agreement will temporarily weaken the dollar, as the economic benefits of withdrawal to the US will only be realised in the mid-term. The future termination of TTIP may also bring about a temporary weakening of the dollar, strengthening of the euro and perhaps a weakening of the British pound against the euro, given that the UK was actively lobbying for TTIP in the European Union prior to Brexit. Indeed, we can also expect the continued fall of the Mexican peso.


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