What does Trump’s TPP withdrawl mean for consumer businesses?

On 23 January 2017, US president Donald Trump made a decision to withdraw the US from the Trans-Pacific Partnership (TPP) deal. TTP was initially intended to boost economic growth and deepen ties between the 12 (now 11) signed up nations by slashing tariffs. In the long-term, this could eventually have created a new single market, similar to the EU.

Since TPP had not yet come into force, there is no immediate change for American citizens. However, businesses, including farmers have lost access to potential new markets, meaning they have lost opportunities to promote American exports. 

Under TPP, US farmers could have been able to expand into difficult-to-reach countries such as Japan and Vietnam. Exports play a vital role within farm commodities, making up about 20% value of farm production, according to USDA data used by the Congressional Research Service. 

Increased agricultural exports would undoubtedly have boosted the US economy – USDA reports an additional $1.27 in business activity for every $1 of agricultural exports, claiming an additional $1bn would support 7,550 additional jobs.

Pulling out of TPP does not necessarily guarantee US citizens with jobs but if Trump’s decision does lead to more jobs, there is a high chance that disposal incomes will increase in the short-term. And with that comes the risk that retail prices would increase, influencing the US economy in the long term.

In fact, according to GlobalData’s 2014 global consumer survey, 63% of Americans considered themselves to be a saver rather than a spender, which could mean if a product cannot prove its value for money, consumers would spend less.

Trump is hoping to bypass globalization and promote production growth in the US.  This is likely to benefit smaller companies. Also known as non-employer firms, they are on the increase creating a rise in revenues.  Currently, they are generating 57% of US GDP, and are generating 75% of all new jobs in the country. 

Clearly, small companies are not able to generate revenue at the rate multinational corporations can – but they focus on slow yet long-term revenue instead of short-term success simply because they cannot afford to take such a risk the bigger companies can. Thus they play an important role in the US economy due to their ability to stay stable in an unstable economic condition. 

The remaining 11 TPP countries could continue with their deal, with a major change to their original agreement, and it would be US companies who will suffer the most from losing out in Asia.