On his first full day after taking his seat in the White House, President Trump passed an executive order abandoning negotiations on the Trans-Pacific Partnership (TPP), a pact aimed to strengthen economic ties between the U.S. and 11 countries that border the Pacific Ocean.
It was hoped that by lowering barriers to trade, the TPP would strengthen productivity, economic growth and competition, while promoting transparency and higher living standards within the Trans-Pacific partner countries.
Immediately after signing the executive order, President Trump called the change a “great thing for the American worker.” The President plans to renegotiate the trade agreement, and makes it clear that his aim is to bring manufacturing jobs back to the U.S and and boost our advantage over trade competitors like China.
What It Means for Small Business
Renegotiating the partnership means trade barriers will remain in place, including tariff and nontariff barriers. For consumers this means increased prices on Asian products at home, and U.S. business will have a difficult time competing with foreign companies who can sell comparable goods at a lower cost to consumers.
Small business proponents of TPP argued that the partnership would have been positive for small- and medium-sized U.S. exporters by reducing or eliminating thousands of tariffs on American-made products overseas. Reducing tariffs would have allowed small- and medium-sized businesses to stay competitive selling in the TPP-member countries, some of the fastest-growing markets in the world.
A study released in May 2016 by the U.S. International Trade Commission suggests that businesses in most sectors would have expanded as a result of the TPP. Food and agriculture would have seen the biggest effect from a percentage perspective, and manufacturing, natural resources and the energy sectors would have seen the largest expansion in dollar terms. The study also suggests that business owners offering products sold online currently face a lack of express delivery and e-payment services overseas that the partnership would have helped solve.
Critics of the TPP and its impact on American small business owners cited that the partnership would have allowed Asia-Pacific countries to artificially reduce prices through currency manipulation, hindering U.S. small businesses from being able to compete with Asia-Pacific counterparts and cutting into profit margins for many small business owners. During the presidential campaign season, Democratic party candidate Hillary Clinton also supported putting a stop to the TPP.
How You Can Plan for What’s Next
The withdrawal from the current agreement doesn’t mean that there won’t be future negotiations between the U.S. and Pacific countries.
Businesses looking to prepare for future deals should be thinking about how they would adjust to an environment that would allow them to sell their goods globally or how they would respond strategically to lower-priced competition at home. Will you need new equipment to offer a broader range of products? Or will you need to hire sales reps abroad to help get your goods or services into international markets? Take a look at potential expansion efforts and their costs and benefits to your business.
One part of that process is making sure you’re ready financially for a major upheaval in your business by checking your credit and making sure you understand the business financing options that would be open to you. (You can check your personal and business credit scores for free on Nav to see where you stand.)
This article was originally written on February 2, 2017.