Photo credit: Reuters
WASHINGTON — President Donald Trump on Monday touted a new North American trade agreement as not only a victory for U.S. companies and workers, but also validation of an aggressive policy approach built on threatening trading partners with tariffs to exact concessions.
Recent tariffs on steel and aluminum imports — as well as the threat of tariffs on autos and higher duties on all goods if the U.S. exercised its right to terminate NAFTA — got Canada’s and Mexico’s attention, forcing them to make concessions, Trump said in a televised address from the White House’s Rose Garden to promote the new U.S.-Mexico-Canada Agreement.
The replacement for NAFTA would raise the threshold for regional content in autos crossing North American borders duty-free and add stricter labor standards in the auto trade, including a minimum wage for some products. Canada, which has long supported the labor provisions as a way to defend against the flight of factory jobs, agreed to open up its market further to U.S. dairy products.
“Without tariffs we wouldn’t be talking about a deal,” the president said, comparing lawmakers and others who feared tariffs would backfire to “babies” lacking the stomach to confront trading partners that don’t provide reciprocal market access to U.S. exports.
Trump said tariffs also provide negotiating leverage in other trade disputes.
“Because of the power of tariffs, in many cases, we won’t even have to use them,” he said. “And in many cases, countries that are charging massive tariffs are eliminating them.”
In the past two months, he said, the European Union, Japan and India have reached out to the U.S. to start negotiations designed to address their respective trade surpluses with the U.S.
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Japan talks
Last week, the U.S. and Japan announced the start of trade talks. Trump claimed Japan had refused to talk about opening its market to U.S. goods until he threatened a “very substantial tax” on Japanese auto imports, although Japan had negotiated with the U.S. on the multilateral Trans-Pacific Partnership agreement before Trump withdrew from the deal upon taking office.
The European Union, Trump said, was unwilling to loosen protections on domestic markets until “I said we’re going to put a tax of 20 percent on all the millions of Mercedes and BMWs that they sell here.”
Trump recently suggested tariffs on the EU should be imposed even if regulatory barriers fall away because Europeans don’t have a cultural affinity for American brands. “Billions and billions” of dollars would flow into U.S. coffers, he said.
Steel tariffs not lifted
The U.S. did not lift steel tariffs on Canada and Mexico as part of the new trilateral deal, but Trump and U.S. Trade Representative Robert Lighthizer said talks are underway on a compromise that could involve replacing tariffs with quotas.
The 25 percent tariffs on imported steel have significantly added to production costs for automakers as the price of steel from all sources has surged more than 30 percent.
“We are not going to allow our steel industry to disappear,” Trump said. “It was almost gone. I don’t want plants closing.” U.S. Steel, Nucor and other domestic producers have announced plant expansions this year.
“They’re hiring thousands of workers. I’m not giving that up,” the president said.
Other tariffs
The Trump administration is studying the possibility of imposing wholesale tariffs of up to 25 percent on imported autos and auto parts on the grounds of a potential national security threat they pose and the need to protect a domestic auto manufacturing base. Japan and the EU are under a moratorium from any potential tariffs while trade talks continue, but the White House has made clear they could be imposed if its conditions aren’t met.
German automakers exported 657,000 vehicles to North America last year, with total exports of vehicle components, cars, engines, as well as secondhand vehicles totaling $36.4 billion in 2016, according to the German auto industry association VDA. U.S. Commerce Department figures show the U.S. imported 1.16 million new vehicles from the European Union in 2017, of which 491,587 were from Germany. On a dollar basis, the U.S. imported $42.8 billion worth of vehicles from the EU, while the value of exports to the region was $8.6 billion.
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