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Various Trade Priorities Revealed in Trump Administration’s Budget Request

The Trump administration revealed a number of trade-related priorities in its recently-released budget proposal for fiscal year 2020. Among other things, the US$4.7 trillion proposed budget looks to increase funding for the U.S. Department of Commerce’s International Trade Administration by an additional US$16 million and funding for the U.S. Treasury Department by an additional US$35 million to implement Committee on Foreign Investment in the United States security reviews under the Foreign Investment Risk Review Modernization Act. The budget also plans a new ITA initiative to counter evasion of U.S. antidumping and countervailing duties and proposes to hire additional U.S. Customs and Border Protection officers. However, other trade-related spending would face cutbacks.

At a Senate Finance Committee hearing held 12 March with U.S. Trade Representative Robert Lighthizer, Sens. Pat Roberts (Republican-Kansas) and Debbie Stabenow (Democrat-Michigan) stated for the record that the president’s budget request for the U.S. Department of Agriculture for trade-related issues was inadequate, even while noting that Lighthizer had no jurisdiction over USDA funding. Moreover, in an exchange with Sen. Maria Cantwell (Democrat-Washington) Lighthizer acknowledged the importance of USTR’s Trade Enforcement Trust Fund because it has allowed his agency to hire more lawyers and Mandarin speaking trade specialists to assist with WTO enforcement issues.

The administration’s budget proposal was immediately decried by Democrats. The proposal asks for US$8.6 billion to build a wall on the border with Mexico, which is even higher than the request that ultimately led to the partial government shutdown. It also proposes a four percent boost in defence spending to US$750 billion, using a questionable strategy to circumvent spending caps set out in a 2011 fiscal restraint law. Spending cuts are proposed for non-defence social safety net and entitlement programmes, while the State Department’s budget would be slashed by 23 percent and U.S. foreign aid would fall by US$13 billion. Among many other actions, the budget would add a user fee on e-cigarettes (favoured by the U.S. Food and Drug Administration) and end a tax credit for electric car purchases.

Following the tax cuts passed by the previous Republican controlled Congress, the federal budget deficit has increased to US$900 billion in 2019 and the national debt has risen to US$22 trillion. The FY 2020 budget claims the federal budget would eventually be balanced over the next decade but uses overly optimistic economic growth projections to justify that assertion, estimating that the U.S. economy would expand by 3.2 percent in 2019, 3.1 percent in 2020 and 3.0 percent through 2024. By comparison, the non-partisan Congressional Budget Office in January projected U.S. economic growth of 2.3 percent for this year as well as an average of 1.7 percent from 2020 through 2023. The U.S. Federal Reserve in December 2018 projected growth of 2.3 percent in 2019, 2.0 percent in 2020 and 1.8 percent in 2021, as well as a longer-run average of 1.9 percent.

In any event, this budget is not going to become law as submitted. No recent presidential budget proposal has become law unchanged and significant changes are more likely when the president’s party does not control both houses of Congress.

The annual federal funding process begins with the submission of the president’s annual budget request to Congress, which details the administration’s positions on federal revenue, economic projections and specific funding levels but has no binding authority on Congress. Congress then responds to the administration’s proposal when the budget committees in both chambers develop priorities that eventually lead to a concurrent congressional budget resolution. With passage of this resolution, the funding process moves to the appropriations committees in each chamber. This is done through 12 separate appropriations bills generated by relevant subcommittees for each federal fiscal year. House Budget Committee Chairman John Yarmuth (Democrat-Kentucky) has said his committee will present a budget proposal around the first week of April.

Content provided by Picture: HKTDC Research
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