TPP Withdrawal and Multilateral Trade Retreat: Ceding Pacific Economic Leadership to China

Overview

The Trans-Pacific Partnership was explicitly designed as a geopolitical tool. The Obama administration framed it clearly: the United States was going to set trade rules in the Asia-Pacific region, and those rules were going to reflect democratic values, labor protections, intellectual property standards, and open markets — before China could establish its own trade framework that reflected different values.

Trump withdrew on his third day in office. He had campaigned on it. Populist economics and strategic calculation pointed in opposite directions, and populist economics won.

The Strategic Calculation

China had been working for years to establish trade relationships throughout Asia-Pacific that would give it the dominant economic position in the region. The TPP was the principal U.S. tool for preventing that outcome.

When the U.S. withdrew, the remaining 11 nations completed the agreement without it. Japan, Australia, Canada, and Vietnam — among others — maintained the framework but without American membership. The U.S. exporters who would have benefited from preferential access were disadvantaged. The geopolitical influence the U.S. would have exercised as the dominant member was gone.

China moved immediately to fill the vacuum with its own trade bloc: the Regional Comprehensive Economic Partnership, which covers much of the same region without the labor standards, intellectual property protections, or governance norms that the TPP had included. China's preferred trade norms — reflecting state capitalism rather than democratic market rules — became the default framework for much of Asia-Pacific trade.

Analysts from the right and left reached the same conclusion: the TPP withdrawal was a strategic gift to China that no amount of bilateral trade pressure could undo.