Here's how Trump will tackle Mexico and China

One key member of Donald Trump’s economic team is cruising toward confirmation, as Yahoo Finance predicted. Private-equity investor Wilbur Ross, Trump’s nominee to be Secretary of Commerce, enjoyed a chummy confirmation hearing with the Senate Commerce Committee, even though he acknowledged having an undocumented worker on his household staff until he discovered the problem recently, and fired the aide.

Trump has characterized Ross as his point man on trade, which puts much of Trump’s agenda on Ross’s shoulders. Trump campaigned heavily on promises to remake trade deals with countries such as China and Mexico, to make them more fair to American workers. During his confirmation hearing, Ross gave some important clues about how this is unlikely to unfold. Highlights:

Mexico will come first. Trump has promised to renegotiate the North American Free Trade Agreement, the 25-year-old pact that has led to booming growth in the Mexican manufacturing of automobiles and other products imported to the United States. “NAFTA is logically the first thing for us to deal with,” Ross said at the hearing. “We’ll work on our own territory before we go off to other jurisdictions. That will be a very, very early topic in this administration.” It’s still unclear if Trump will demand major changes that undermine the entire treaty, or smaller tweaks that will leave it more or less intact. But read on.

China has a lot to worry about. Ross isn’t as bombastic as Trump (who is?), who has said that China is “raping our country” and “eating our lunch.” Instead, Ross demonstrated detailed knowledge of the Chinese economy and policies meant to give it a leg up, such as unprofitable “state-owned enterprises” that flood global markets with underpriced products such as steel and aluminum, undercutting US and European producers. “China is the most protectionist country of very large countries,” Ross said. “They have very high tariff barriers and very large non-tariff trade barriers to commerce. They talk much more about free trade than they actually practice.”

Tariffs may turn out to be more of a threat than anything real. Ross is no fan of tariffs, which raise the price of imported goods and stoke inflation, which harms ordinary consumers. “Tariffs do have a useful role in correcting inappropriate practices,” Ross testified. But he also said he’s “keenly aware” of the damage caused by the Smoot-Hawley tariffs in the 1930s, which were meant to stimulate US production but ended up making the Great Depression worse. “That kind of approach didn’t work very well, and it very likely wouldn’t work very well now,” Ross said. That view will be a relief to many economists and business leaders worried that Trump will ignite trade wars and do more harm than good to the US economy.

Boosting exports will be the first order of business. Ross believes that boosting US exports—without resorting to tariffs—is the best way to reduce the US trade deficit and create more US manufacturing jobs. This is tricky when the dollar is strong, as it is now, since American-made goods become more expensive overseas. But this is likely to be a key fulcrum of trade policy under Trump: Persuading trading partners to buy more US exports, to escape more punitive measures such as tariffs. This could be the opening gambit with Mexico regarding NAFTA, and with China after that. One US product that might fit the bill: Natural gas and other types of energy. Ross also pointed out that many US tech companies get shut out of China because of objections to the uncensored content they publish. Easing such restrictions could give US companies greater access to the booming Chinese market and perhaps create more jobs at home.

Tax cuts and deregulation will be a key part of trade policy. Trump wants to slash the US corporate tax rate, making it more competitive with rates in other developed countries. And he has big plans to reel in the federal red tape American businesses must contend with. This could boost hiring at American companies, by freeing up capital, but it could also lure more foreign companies that would then hire people here. “If we lower the corporate tax rate, it will be a further inducement for them to come,” Ross said. “Some degree of deregulation will also be very, very helpful.” China and Mexico, please come to America.

Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman.