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May 30, 2017

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Trump's contempt for trade deals spurs anxiety

WASHINGTON -- Donald Trump is moving quickly to dismantle seven decades of American policy built on trade deals and multinational alliances that help fuel the U.S. and global economies.

And no one is sure what will replace them.

The void risks intensifying uncertainty at home and abroad. Without knowing whether trade will be disrupted, business people in the United States and abroad could be forced to rethink their plans.

"The big problem comes when there is uncertainty," says Marcus Moufarrige of Servcorp, a company in Sydney, Australia, that sells office space and technology services abroad. "Uncertainty stops businesses from making decisions. It stops everything."

For now, stock prices are soaring as investors focus on Trump's pledge to cut taxes and business regulations. But his break with the past is raising worries among some. Fitch Ratings, for instance, warns that the uncertainty surrounding Trump's policies poses global risks — from disrupted trade relations to confrontations that unnerve investors.

The president's hostility toward existing trade deals and suspicion of long-term allies is also leaving a vacuum in global leadership — one that China seems eager to fill. President Xi Jinping last month became the first Chinese head of state to attend an annual gathering of business elites in Davos, Switzerland. Xi used the occasion to declare China a champion of free trade, usurping the traditional U.S. role as the leading booster of globalization. China, the world's leading exporter, wants to expand its global influence.

Trump has offered few details of his trade plans, beyond pressuring U.S. companies to keep or create jobs in America, taking a tougher line in forging deals and slapping tariffs on nations that are deemed to exploit the United States.

"There's not a lot of substance to his policies," says Gordon Hanson, director of the University of California San Diego's Center on Global Transformation. "It consists of two things: Jaw-boning corporate America — 'create more jobs here or else' — and across-the board trade protectionism."

Companies heavily involved in imports or exports can't easily develop their business plans without knowing what specific moves Trump will embrace or achieve.

Among the uncertainties:

— Will Trump insist on taxing imports if he doesn't get the concessions he wants from America's trading partners?

— If America abandons existing agreements, would allies trust it to adhere to any new trade deals?

— Would Trump risk igniting a trade war whereby other countries impose retaliatory taxes and sanctions on U.S. goods? Will America's old alliances endure? If not, what replaces them?

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