Within hours of taking the oath of office, President Donald Trump went right to work, making good on his campaign pledge to pull the U.S. from the Trans-Pacific Partnership (TPP) trade deal.
FedEx (FDX) founder and CEO Fed Smith said the executive order shows the president is “certainly a man of his word.” But he urged Mr. Trump to “rethink” his trade positions.
“Trade is what’s made America great over the years. About 27 percent of our entire economy is related to trade, either imports or exports. Average American family benefits to the tune of about $13,000 in lower-price goods than would otherwise be the case,” Smith told “CBS This Morning” on Tuesday.
Mr. Trump touted that the withdrawal from his predecessor’s signature trade deal -- with 11 nations in the Asia-Pacific region, excluding China -- was a “great thing for the American worker.” But Smith -- who met with then President-elect Trump during his transition in November -- said the deal should not be abandoned, but improved.
“Well, we have a trade surplus, which is very important to the president, with the 20 countries we have free trade agreements with. And if you really net it down, the fundamental problem in trade today is Chinese protectionism, mercantilism, their industrial policy, which has kept our exports and our companies out of China while opening our markets to China,” Smith explained.
Throughout his presidential campaign, Mr. Trump has blasted China repeatedly for wiping out U.S. jobs. While Smith agreed that China has historically engaged in “unfair” trade practices, he said the president’s stark anti-China rhetoric is “a little bit out of date” with reality.
“They want to open their markets today. President Xi and the premier both said that over and over again. They just find it hard to do given the subsidies they provide their state-owned enterprises,” Smith said.
Smith said Mr. Trump’s “very able” trade team -- comprising Commerce Secretary pick Wilbur Ross, U.S. Trade Representative Robert Lighthizer and White House National Trade Council adviser Peter Navarro -- should work to “open up trade with China, not walk away from it.”
The North American Free Trade Agreement (NAFTA) could also end up on President Trump’s chopping block. He vowed Sunday he will begin meeting with the leaders of Canada and Mexico to renegotiate the free trade deal. Smith said that would be “catastrophic.”
“When NAFTA was inked in 1994, we did about $400 billion worth of business before we counted the United States and Mexico. It’s now $1.3 trillion. Millions of people make their jobs in trade with Mexico,” Smith said.
Co-host Norah O’Donnell challenged Smith, asking, “When an American worker says, ‘I feel like I’ve lost my job because of this trade,’ what’s the response from a CEO?”
“Well, if you go to New Hampshire, you’ll see all these beautiful abandoned textile mills that have lost their jobs to South Carolinians making textiles in the 19th century. I mean free market economies are a constant change where some people lose jobs and others gain them,” Smith said. “The reality is the benefits of trade are diffused in lowered [prices], better products. The pain of trade is always localized.”
As for himself, Smith has been at the helm of FedEx for more than four decades after its founding. The company today handles around 12 million packages a day and operates in more than 220 countries. But online retail giant Amazon (AMZN) is emerging as a competitor, especially with its expansion of delivery services. Still, Smith said he isn’t concerned.
“Amazon is a retailer. They’re a good customer of ours,” he said confidently. “Ninety-five percent of all e-commerce in the U.S. is delivered by FedEx, UPS and the postal service.”