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This Week In Trade

Trump faces decision on auto tariffs; House lawmakers’ return could spark USMCA movement

Posted: November 11, 2019

A six-month window for negotiations with the European Union and Japan on autos ends this week, setting up a possible decision by President Trump on how to proceed following a Section 232 probe that automakers and many in Congress have long feared could lead to new tariffs on cars.

Meanwhile, House lawmakers return to Washington, DC, this week for what U.S.-Mexico-Canada Agreement advocates hope will be a productive few days of work that will lead to a vote on the deal this year.

Trump in May directed the Office of the U.S. Trade Representative to pursue talks with the EU, Japan, and any other country USTR deemed “appropriate” to address what the Commerce Department determined was the national security threat of imports of autos and auto parts. Under Section 232, the president can start negotiations with other countries and, if satisfactory agreements are not secured within 180 days, take action to restrict imports.

Commerce Secretary Wilbur Ross last week said he hoped that talks with foreign auto companies about their capital investment plans would “bear enough fruit” to render potential auto tariffs unnecessary.

The U.S. and Japan have reached a preliminary trade agreement since then. While that deal does not explicitly address potential auto tariffs, Japan has said it has received assurances from the U.S. that it will be exempt from any duties or quotas. A Sept. 25 U.S.-Japan joint statement says that “While faithfully implementing these agreements, both nations will refrain from taking measures against the spirit of these agreements and this Joint Statement.”

Talks with the EU have not progressed as far, in part due to a disagreement over whether to include agriculture in negotiations on a broad trade deal. Outgoing European Commission President Jean-Claude Juncker, however, told a German newspaper last week that the U.S. would not impose auto tariffs but did not elaborate.

“Trump is going to make some criticism, but there won’t be any auto tariffs,” Juncker said, according to Reuters. “He won’t do it. ... You are speaking to a fully informed man.”

Senate Finance Committee Chairman Chuck Grassley (R-IA) last week said he had a “gut feeling” that Trump would delay a decision on auto tariffs. Grassley also said he had still not received a copy of Commerce’s autos report despite requesting it months earlier.

“I think it shows they’re embarrassed to make public what the report actually says,” he said.

Grassley said on the Senate floor last week that he was “optimistic” about moving forward with legislation to reform Section 232. Sens. Rob Portman (R-OH) and Pat Toomey (R-PA), both members of the Finance Committee, have introduced separate bills to update the 1962 law. Both would see the Pentagon play a larger role in 232 investigations, but Toomey’s bill would require that Congress approve any tariffs before they could take effect, while Portman’s would allow lawmakers to roll back tariffs via a resolution of disapproval. Portman defended his approach in an interview with Inside U.S. Trade last week.

Trump is set to deliver a speech on trade and the economy in New York on Tuesday. Ahead of his remarks, the Center for American Progress, a left-leaning think tank, released a statement blasting Trump’s trade policies.

“President Trump prides himself on his dealmaking ability and declared on Twitter that ‘trade wars are good and easy to win,’” the statement says. “But the reality is that the Trump administration’s erratic approach to U.S. trade policy is imposing large costs on American families while simultaneously only pushing for corporations’ interests. The Trump administration’s boasts are fake, but the harm this bait-and-switch trade war is causing is real.”

China talks ‘moving along’

Trade talks with China are “moving along” but they’ve progressed “too slowly,” Trump said over the weekend.

“They've moved slowly. Much too slowly for me. But they want to make the deal much more than I do,” Trump told reporters on Saturday. “But the trade talks with China are moving along, I think, very nicely.”

Trump also decried what he called incorrect reporting about a potential deal, including the “level of tariff lift.” A Chinese official last week said both countries had agreed to eliminate some tariffs as part of a “phase-one” deal.

“There's a difference on tariffs, but we're going to always get tariffs,” Trump said. “We never got anything. Just so you understand, China, forever, never paid us 10 cents. Now we have -- literally, we will soon have, literally, hundreds of billions of dollars coming in from China.”

The U.S. China Economic and Security Review Commission will release its annual report on the bilateral trade and economic relationship and its national security implications on Thursday. Also on Thursday, American University’s Washington College of Law will hold an event on the regulatory aspects of the U.S.-China trade conflict. Speakers are set to include Zhou Hanhua, professor of law and deputy director in the Institute of Law, Chinese Academy of Social Sciences; Liao Fan, senior fellow and professor at the Institute of International Law, Chinese Academy of Social Sciences; Jamie Horsley, senior fellow at Yale Law School’s Paul Tsai China Center; and Neysun Mahboubi, research scholar at the University of Pennsylvania Center for the Study of Contemporary China.

Movement on USMCA?

The House will be back in session this week as time runs out for consideration of the U.S.-Mexico-Canada agreement this year. House Agriculture Committee Chairman Collin Peterson (D-MN) said last week that House Ways & Means Committee Chairman Richard Neal (D-MA) told him USMCA could “move” this week. A source familiar with the talks told Inside U.S. Trade that implementing legislation for USMCA could be sent to the Hill this week, setting up a vote in early December. The president can submit the implementing bill on a day when both the House and Senate are in session; the next is Tuesday.

House Minority Leader Kevin McCarthy (R-CA) continued to press Speaker Nancy Pelosi (D-CA) on the deal in an interview on Fox News on Sunday.

“This speaker of the House, in name only, she has said for the last 10 months she's working to getting to yes,” McCarthy said. “She holds all the power to bring that -- to bring it up. And we would pass the USMCA. No one is fighting it. It would only make this country stronger in our negotiations with China.”

Events this week

  • The Port of Los Angeles on Tuesday will unveil a study showing the negative effects of trade tensions on the U.S.’ largest port.
  • George Washington University’s Elliott School of International Affairs will host a discussion on Wednesday on “Japan and South Korea’s Trade and Political Conflicts: History, Factors, and Implications.” Speakers include Shihoko Goto, senior associate at the Wilson Center; Yonho Kim, associate director of the GWU Institute for Korean Study; Scott Snyder, director of the Council on Foreign Relation's Program on U.S.-Korea Policy; and Henry Nau, professor at GWU.
  • The Conference Board will host its Fall Policy Conference on Wednesday including a session on U.S.-China relations. Speakers include Xiaoqing Boynton, vice president at Albright Stonebridge Group; Doug Grob, senior vice president at Albright Stonebridge Group; Hollis Hart, former president of international franchise management at Citi; Oriana Mastro, Georgetown University assistant professor and American Enterprise Institute resident scholar; Vanessa Sciarra, vice president of legal affairs, trade and investment policy at the National Foreign Trade Council; and Vicki Poponi, vice president of digital customer journey at American Honda Motor Co., Inc -- Anshu Siripurapu (anshus@iwpnews.com)