Tariffs as a tool
8/25/2018
President Donald Trump met with automotive industries executives at the White House in May, 2018.
The administration of President Donald Trump is tapping the brakes on an idea the President broached earlier this year: placing tariffs on imported automobiles.
Commerce Secretary Wilbur Ross recently said a report on such a tariff, which he had earlier promised for August, would take longer. Mr. Ross attributed the slowed pace to ongoing negotiations with the European Commission and Mexico and Canada, the U.S.’s two partners under the North American Free Trade Agreement.
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The President’s tariffs on steel and aluminum have laid the groundwork to protect the essential steel industry and have brought our trading partners to the table to discuss America’s new-found determination to engage in fair international trade and to stop being an international trade patsy.
In May, Mr. Trump directed Mr. Ross to launch a study of whether a 25-percent import tax on foreign autos could also be justified as an issue of national security.
And now the mere threat of another tariff has incentivized international trading partners to engage in new talks over the rules for global trade.
All this shows that tariffs can be used as both carrots and sticks — as a response and as a warning.
And it shows that the president’s trade advisers are sophisticated and understand negotiation as well as war.
For, make no mistake, the United States has been in a trade war for a very long time — a war we have been losing.
The new deadline for the completion of the report, which must be done before a tariff can be enacted, is mid-February.
But the threat of an auto tariff, alone, has brought foreign competitors to the table.
A key difference between steel tariffs and tariffs on foreign car imports is that the auto manufacturers oppose the tariff, while steel manufacturers strongly supported the tariffs on steel and aluminum. Ford, Chrysler, and GM all make cars in Mexico, as well as (fewer) in Canada.
But it is worth noting that the United Auto Workers union tends to agree with the President’s initial assessment, that auto manufacturing in this country, and thus auto workers, needs protection.
Stay tuned.