Sneaker producers, automakers and retail giants are facingtumult in their international operations as President Donald Trumppushes ahead with a dramatic overhaul of U.S. trade policy.

His decision not to join the Trans-Pacific Partnership andpledge to renegotiate the North American Free Trade Agreement areforcing companies to rethink supply chains and capital investmentsin a new era of protectionist policies. Trump's moves weigh heavilyon importers such as Nike Inc. and Ford Motor Co. as he seeks toboost domestic manufacturing and create jobs.

“Any company right now that is global is trying to understandwhat will change,” said Simeon Siegel, an analyst with InstinetLLC, a New York broker. The effect on supply chains, taxes and coststructures “is obviously very much in question.”

Trump on Monday signed papers that he said would fulfillpromises to tackle trade policies immediately after taking office.During the campaign, Trump routinely derided the pacts asjob-killers, calling TPP “a potential disaster” and saying Naftawas “one of the worst deals ever.” While the administration didn'trelease the documents, the president has said he would prevent U.S.jobs from being outsourced and may impose punitive tariffs onimports.

“A lot of multinationals and industrial companies will be verydisappointed about the abandonment of the TPP and will be facing alot of uncertainty with the renegotiation of Nafta,” said CaitlinWebber, a trade policy analyst with Bloomberg Intelligence.

Wilbur Ross, Trump's commerce secretary nominee, has a key rolein shaping the president's views on Nafta, said Steve Miller,CEO ofInternational Automotive Components Group, which is more than 60%owned by Ross's private equity firm, WL Ross & Co.

“I'm glad we have responsible adults surrounding Trump that willmake things better for America without hurting trade,” Miller saidin an interview. “Wilbur has said he supports tweaking Nafta, notblowing it up.”

TPP, however, has been abandoned. That could be a blow for majorapparel and footwear companies such as Nike. The world's largestsports brand, which makes Air Jordans and other shoes in Asia, wascounting on the pact for savings on import tariffs. The companysources about 40% of its shoes from Vietnam, a TPP membernation.

Many multinational companies with investments in Asia will nowlikely reassess strategies, said Bloomberg Intelligence economistFielding Chen. Companies with manufacturing facilities have beenmoving away from China to countries such as Vietnam to takeadvantage of cheaper labor costs, he said.

Backing out of TPP is “unfortunate” and losing the potentialbenefits of stronger ties in the Asia-Pacific region will actuallyhelp China, FedEx Corp. CEO Fred Smith said Tuesday in an interviewon Fox Business Network. “The United States being cut off fromtrade would be like trying to breathe without oxygen,” he said.

TPP also would have generated savings for retailers such asTarget Corp., Foot Locker Inc. and Wal-Mart Stores Inc. The cut inimport costs would have been $450 million a year, according to theFootwear Distributors and Retailers of America.

“It won't make people that happy if the price of tennis shoesgoes up, if the price of clothing goes up and if the price of motorvehicles goes up,” said Donald Grimes, an economist at theUniversity of Michigan. “That contradicts the idea of making peoplebetter off.”

Not all industries supported the pact, though. U.S. automakersand steel companies opposed what they saw as insufficient measuresto discourage currency manipulation, Webber said.

Labor groups Monday cheered Trump's moves. United Auto WorkersPresident Dennis Williams commended the president for withdrawingfrom the “deeply flawed” and “corporate-driven” TPP. RichardTrumka, president of the AFL-CIO federation of trade unions, calledthe TPP exit and Nafta pledge “an important first step” and vowedto fight for “new trade and economic rules that end specialprivileges for foreign investors” and big drugmakers.

Renegotiating Nafta could have far-reaching implications for anauto industry that imported almost $80 billion worth of passengervehicles and $68 billion of parts into the U.S. from Canada andMexico in 2015. That's about 44% of imported vehicles and 47% ofauto parts, according to the International TradeAdministration.

Idle Speed

Carmakers are already putting off investments until they knowhow the trade relationship between the U.S. and Mexico will change,said Eric Noble, president of The CarLab, a consulting firm inOrange, California. The added costs could make the roughly $1billion that carmakers invest in each new assembly plant too riskyuntil executives know what Trump wants to do, he said.

Automakers have been a frequent target of criticism by Trump,who threatened General Motors Co. this month with a “big bordertax” on Mexico-made cars. The company subsequently announced a U.S.investment plan. Likewise, Ford canceled plans to build a new plantabroad and said it would create 700 new U.S. jobs instead.

The president met Tuesday with the heads of Ford, GM and FiatChrysler Automobiles NV to discuss issues such as investment in theU.S. and environmental regulations.

Both Canada and Mexico have said they're willing to open talkson updating the 23-year-old Nafta agreement. Insistence on amechanism for balancing trade between the U.S. and Mexico orpushing for a specific import tax on Mexican goods to offset thatcountry's domestic value-added tax would spell trouble for thepact, said Scott Lincicome, an international trade attorney withWhite & Case in Washington.

Negotiations also could include changing or eliminating theNafta panels that handle disputes and modifying rules of origin,which set how much local content is needed to make a producteligible for lower Nafta tariffs.

“If these end up being hypertechnical negotiations on rules oforigin, I don't think you're going to see a significantcontroversy,” said Lincicome. “If they're really broad-basedradical changes, then you have a totally different story.”

Trump's tough talk will likely give way to the reality that openeconomies bring prosperity, said Lance Fritz, chief executiveofficer of Union Pacific Corp., the largest publicly traded U.S.railroad. The answer to worker dislocations caused by trade and, toa higher degree, by technology and automation, is retraining, saidFritz, whose railroad operates at six border crossings with Mexicoand handles cargo from Asia at West Coast ports.

“The international economies today are tightly woven together,”he said.

From: Bloomberg News

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