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Trump Delays Auto Tariffs in Press for Deal With Japan, Europe Trump Lifts Metal Tariffs and Delays Auto Levies, Limiting Global Trade Fight
(about 5 hours later)
WASHINGTON — President Trump on Friday said he would delay a decision on whether to impose tariffs on automobiles imported from Europe, Japan and other countries for six months, setting a tight deadline for the United States to reach trade agreements that have so far proved elusive. WASHINGTON — President Trump agreed on Friday to lift tariffs on metal imports from Mexico and Canada, removing a major irritant for two important allies that in exchange agreed to stop punishing American farmers with their own taxes on pork, cheese and milk.
Mr. Trump determined that imports of foreign cars and car parts were causing harm to the American automobile industry and threatening national security and said other countries had 180 days to address the problem through trade agreements with the United States. At the same time, Mr. Trump postponed a decision on whether to impose tariffs on automobiles imported from Europe, Japan and other countries for six months, setting a tight deadline for the United States to reach trade deals that have so far proved elusive.
Together, the actions remove the threat of an all-encompassing global trade war and allow Mr. Trump to focus on pushing China to agree to the United States’ trade terms, as well as pressuring Europe and Japan to reach a trade deal before the 2020 election. His trade war has hurt many of the farmers who make up his political base, and he is eager to make good on a 2016 campaign promise to rewrite trade deals in America’s favor.
“I’m pleased to announce we’ve just reached agreement with Canada and Mexico. We’ll be selling our product into those countries without the imposition of tariffs,” Mr. Trump said on Friday.
The United States trade representative said in a statement that the metal tariffs would be removed and both Mexico and Canada “had agreed on the removal of all retaliatory tariffs imposed on American goods by those countries.”
The easing of trade tensions in North America could give Mr. Trump more leeway as he pursues an ambitious trade fight with China, which has imposed tariffs on American products in retaliation for the president’s levies on $250 billion worth of Chinese goods. Mr. Trump on Wednesday announced sweeping restrictions against Chinese telecom companies like Huawei, and he has threatened to tax all Chinese imports, prompting concerns from farmers and other businesses caught in the cross-fire.
On Friday, it became clear that pressure to reach an accord with Canada and Mexico before the 2020 elections outweighed the president’s affection for the steel and aluminum tariffs he imposed last year.
The metal tariffs are linked to a broader free trade agreement, the newly negotiated Nafta, called the United States-Mexico-Canada Agreement. Mr. Trump had described the tariffs as a source of leverage in negotiating a revision to that deal, which has yet to be ratified by legislatures in all three countries.
But both Republicans and Democrats had said they would not sign off on that deal until the White House removed metal tariffs on Canada and Mexico. They argue that the levies are raising costs for American companies and consumers, and that Canadian and Mexican retaliation is hurting American farmers and businesses.
A congressional aide who has been involved in the talks between the three countries said the White House was growing increasingly sensitive to pressure from Republicans in rural states whose farmers have been suffering from reprisal that diminished their access to sell in neighboring markets. Their problems were compounded when talks with China broke down this month, this person said.
Vice President Mike Pence, who has spent weeks traversing states to sell the new United States-Mexico-Canada Agreement in Congress, returned from a recent trip telling Mr. Trump, “We’ve got to get moving on this.”
While rescinding the metal tariffs will remove one important obstacle to the passage of the trade deal, others remain. House Democrats have insisted that the pact include more labor and environmental protections.
Speaker Nancy Pelosi, Democrat of California, is in no particular rush to give the president a major domestic policy victory in 2020, according to people familiar with her views.
Jesús Seade, the under secretary for North America at Mexico’s Foreign Ministry, said that he hoped that ending the dispute would give “an extra push” toward ratifying the agreement. Mexico will lift its retaliatory tariffs in a couple of days, he said.
Speaking from Stelco, a steel producer in Hamilton, Ontario, Prime Minister Justin Trudeau of Canada said on Friday that the deal was “pure good news” and would help clear the way for the passage of the agreement. “We are very optimistic we will be able to move forward in coming weeks,” he said.
As the White House eased tensions with Canada and Mexico on Friday, it continued to pressure allies elsewhere, including Europe and Japan. Those governments are still not exempt from the steel and aluminum tariffs, and they are likely to bear the brunt of auto tariffs that could reach 25 percent, should Mr. Trump opt to impose them.
The White House’s announcement Friday of a delay in determining whether to impose levies on foreign automobiles delivered a temporary reprieve to global automakers and auto suppliers, which had been bracing for punishing tariffs on millions of cars imported into the United States each year. But it also set up a tense six-month period for the White House to reach trade deals with Japan, Europe and other nations that have already been complicated by mistrust and disagreements.
In a proclamation Monday, Mr. Trump said that imports of foreign cars and car parts were causing harm to the American automobile industry and threatening national security and that other countries had 180 days to address the problem through trade agreements with the United States.
If agreements “to address the national security threat” are not reached, Mr. Trump said he would determine “whether and what further action needs to be taken,” a step that could include imposing 25 percent tariffs on foreign cars.If agreements “to address the national security threat” are not reached, Mr. Trump said he would determine “whether and what further action needs to be taken,” a step that could include imposing 25 percent tariffs on foreign cars.
The decision offers a temporary reprieve to global automakers and auto suppliers, which had been bracing for punishing tariffs on the more than 8 million cars imported into the United States each year. But it sets up a tense six-month period for the White House to reach trade deals with other nations that have already been complicated by mistrust and disagreements. Car companies and industry groups said that a delay did not go far enough and that Mr. Trump should abandon any plan to impose car tariffs.
The delay comes as the Trump administration prepared to roll back tariffs on other trading partners that were imposed to protect American national security. The White House was preparing to announce agreements with Canada and Mexico, perhaps as early as Friday, that would lift tariffs on imported steel and aluminum, people familiar with the matter said. Such a move would remove one impediment to the passage of the revised North American Free Trade Agreement and resolve simmering tensions between the three countries.
The metal levies — of 25 percent on steel and 10 percent on aluminum — remain in place for Europe and Japan, both of which have chafed at the Trump administration’s determination that their exports pose a threat to national security.
While removal of the metal tariffs on Mexico and Canada could give Europe and Japan more incentive to strike a deal with the United States, big obstacles remain to securing firm agreements.
The United States has struggled to make headway in preliminary negotiations with the European Union, which has balked at Mr. Trump’s demands to allow more agricultural products like chicken and cheese into Europe. Mr. Trump previously rejected a more straightforward proposal from Europe to simply scrap automotive tariffs on both sides of the Atlantic. And talks with Japan have yet to move beyond the initial stages.
A decision to impose auto tariffs would have been Mr. Trump’s most aggressive trade measure yet. His administration has already imposed stiff levies on steel and aluminum and $250 billion worth of Chinese goods. But a tariff on cars and car parts was seen as an economically damaging escalation in the president’s quest to revise trade terms to benefit the United States.
Charles E. Grassley, a Republican senator from Iowa, said in a statement that he was “glad” the president had decided to delay these tariffs, and that he would continue to work on legislation that would give Congress the ability to stay the president’s hand on levies like these.
“As the president knows, I’m not a fan of tariffs. And I have serious questions about the legitimacy of using national security as a basis to impose tariffs on cars and car parts,” Mr. Grassley said.
Car companies and industry groups said a delay did not go far enough and said the ongoing threat of tariffs could hurt the automotive sector.
“The continued threat of tariffs on cars and auto parts only creates more uncertainty weakening our economy,” said Neil Bradley, the executive vice president of the U.S. Chamber of Commerce.“The continued threat of tariffs on cars and auto parts only creates more uncertainty weakening our economy,” said Neil Bradley, the executive vice president of the U.S. Chamber of Commerce.
While the prospect of a 25 percent tariff provoked an outcry from both industry and foreign governments, that opposition did not appear to be the primary reason behind the Trump administration’s decision. Many outside the administration have criticized the linkage of cars with national security, pointing out that the bulk of American auto imports come from the country’s closest allies. Mexico, Japan, Canada, Germany and South Korea were together responsible for more than 85 percent of American automotive imports in 2018. Canada and Mexico have negotiated exclusions to the car tariffs as part of their earlier trade negotiations, but it is unclear if car tariffs will affect other countries, including South Korea.
Instead, United States officials believed it was not the right time to pursue the tariffs, given fractious trade negotiations with China, which have nearly collapsed, as well as a continuing effort to pass the revised North American trade agreement into law. In a statement, Toyota called the White House’s announcement “a major setback for American consumers, workers and the auto industry,” saying that it “sends a message to Toyota that our investments are not welcomed, and the contributions from each of our employees across America are not valued.”
Mr. Trump has promised to rewrite trade deals in America’s favor but the administration has struggled to make good on that promise. The administration’s newly negotiated Nafta, called the United States-Mexico-Canada Agreement, faces opposition from Democrats who are concerned that its protections for labor and the environment do not go far enough. Both Democrats and Republicans had also insisted that the White House remove metal tariffs on Canada and Mexico as part of the deal, arguing that the levies, while aimed abroad, are hurting American farmers, businesses and consumers.
The president has made heavy use of tariffs as a cudgel to both extract concessions from trading partners and limit the influx of foreign goods into the United States. But the tariffs rest on a controversial and little-used legal provision that gives the president broad authority to limit imports to protect the national security of the United States. Mr. Trump’s Friday proclamation said a Commerce Department investigation concluded that imports of autos and certain auto parts threatened to impair the national security of the United States. It mentioned innovations in the automotive sector, including autonomous driving and engine technology, saying that the rapid application of such commercial breakthroughs was “necessary for the United States to retain competitive military advantage.”
“Automotive technological superiority is essential for the national defense,” the White House proclamation said. “In light of all of these factors, domestic conditions of competition must be improved by reducing imports.”
But many outside the administration have criticized the linkage of cars with national security, saying that view of national security is overly broad, and pointing out that the bulk of American auto imports come from the country’s closest allies. Mexico, Japan, Canada, Germany and South Korea were together responsible for more than 85 percent of American automotive imports in 2018.
“The idea that U.S. automakers are threatened by automotive imports is fundamentally flawed and ill conceived,” said John Bozzella, the president of Global Automakers, which represents foreign car brands. “No automaker or auto parts supplier asked for this ‘protection.’”“The idea that U.S. automakers are threatened by automotive imports is fundamentally flawed and ill conceived,” said John Bozzella, the president of Global Automakers, which represents foreign car brands. “No automaker or auto parts supplier asked for this ‘protection.’”
Economists and industry analysts have argued that the tariffs would raise the cost of American cars and weigh on the United States economy. The Center for Automotive Research, a research group partly funded by the industry, estimated the measures could increase the price of a new vehicle by $455 to $6,875, depending on the specific policy taken. The United States has struggled to make headway in preliminary negotiations with the European Union, which has balked at Mr. Trump’s demands to allow more agricultural products like chicken and cheese into Europe.
At a hearing last July on the tariffs, every witness present, including representatives of foreign governments, car companies, parts makers and dealerships, testified in opposition to the measure. The only exception was the United Automobile Workers union. Mr. Trump has repeatedly criticized Europe for flooding the American market with cars while limiting imports of United States vehicles, and has called for revised trade terms that make the relationship more fair. But he also previously rejected a more straightforward proposal from Europe to simply scrap automotive tariffs on both sides of the Atlantic.
Jennifer Kelly, the union’s research director, said that the tariffs could address real problems with American automotive factories moving offshore, but that “rash actions” might also have “unforeseen consequences, including mass layoffs of American workers.” Speaking to the National Association of Realtors on Friday at a Washington hotel, the president denounced the European Union for putting up trade barriers to American farm products and cars.
Daniel Price, a former economic official in the George W. Bush administration, said the White House proclamation Friday made a “stunning assertion” that automotive manufacturing and research and development only contributes to the economy and national security if it is performed by a company that is American-owned. “The European Union treats us, I would say, worse than China. They’re just smaller,” he said. “They send Mercedes-Benzes in here like they are cookies.”
Foreign automotive companies, including BMW and Mercedes, have invested tens of billions of dollars in states including Ohio, Indiana, South Carolina, Alabama and Mississippi, he said, but “the proclamation thus sends a message to foreign automakers that their investment is not welcomed or valued.” The European Commission said in a statement Monday that it would work constructively with American partners. “Neither the U.S. nor the E.U. can have an interest to enter a trade conflict.”
Mr. Trump has repeatedly criticized Europe for flooding the American market with cars while limiting imports of United States vehicles, and has called for revised trade terms that makes the relationship more fair.
American and European negotiators have been in talks for nearly a year in an attempt to resume trade negotiations between the governments. European officials have been eager to evade tariffs on automobiles, which would hit Germany especially hard. But talks have proceeded slowly, with the two sides sparring over whether agriculture will be part of the deal.
The Trump administration wants Europe to buy more American farm products, like meat and dairy, and says a deal without agriculture will not pass Congress. But Europe insists that agriculture is not on the table.The Trump administration wants Europe to buy more American farm products, like meat and dairy, and says a deal without agriculture will not pass Congress. But Europe insists that agriculture is not on the table.
“We will continue working constructively with our U.S. partners on the basis of the mandates given to us by the EU Council of Ministers,” the European Commission said in a statement. “We are convinced that a strong and balanced trans-Atlantic relationship on the basis of reciprocity is a win-win situation for both. Neither the U.S. nor the EU can have an interest to enter a trade conflict.” Reaching a deal with Europe in six months could be difficult, especially given that elections for the European Parliament next week are expected to strengthen protectionist parties on both the left and the right. Leaders of the Green coalition in Parliament say they will not sign trade agreements with countries that have not ratified the Paris climate change accord, which Mr. Trump has pulled out of.
Reaching a deal with Europe in six months could be difficult, especially given elections for the European Parliament next week are expected to strengthen protectionist parties on both the left and the right. Leaders of the Green coalition in Parliament say they will not sign trade agreements with countries that have not ratified the Paris climate change accord, which Mr. Trump has pulled out of. The United States and Japan have also been discussing a bilateral trade deal that could give American farmers more access to Japan’s market. But those talks, which began nearly two years after Mr. Trump pulled out of a multilateral trade deal with Japan known as the Trans-Pacific Partnership, also have yet to move beyond the initial stages.
Mr. Trump’s statement suggested he will demand quotas or other restrictions on car imports, which could violate World Trade Organization rules. Japanese officials say that they are counting on the close relationship between Mr. Trump and Prime Minister Shinzo Abe to keep trade negotiations from souring between the two countries. Mr. Trump is scheduled to visit Japan next week, and his hosts are planning a full slate of high-level hospitality. That includes a state dinner with the new emperor and empress, rounds of golf and a visit to a sumo wrestling championship, where Mr. Trump will award the winner’s trophy.
“That would hardly be acceptable to the E.U.,” the German industry association known as VDMA, which represents machinery makers that supply the auto industry, said in a statement Friday. “That would raise the risk that negotiations over a limited free trade agreement would be over before they began.”
The United States and Japan have also been discussing a bilateral trade deal that could give American farmers more access to Japan’s market. But those talks, which began nearly two years after Mr. Trump pulled out of a multilateral trade deal with Japan known as the Trans-Pacific Partnership, are at an early stage.
Toshimitsu Motegi, Japan’s minister for economic and fiscal policy and its chief trade negotiator, said he directly asked Robert Lighthizer, the United States trade representative, whether the Trump administration would impose import controls on Japanese automakers.
Speaking to reporters on Friday in Tokyo, he said he told Mr. Lighthizer that Japan would object to such import controls. “Japan has repeatedly told the U.S. side that it opposes such measure to distort open and fair trade,” Mr. Motegi said.
Mr. Motegi said that Mr. Lighthizer assured him that the United States would not restrict the volume of cars that Japan exports to America. “I confirmed with the U.S. side that they wouldn’t seek such a measure,” he said.
Japanese officials say that they are counting on the close relationship between Mr. Trump and Prime Minister Shinzo Abe to keep trade negotiations from souring between the two countries. Mr. Trump is scheduled to visit Japan next week, and his hosts are planning a full slate of high-level hospitality, including a state dinner with the new emperor and empress, rounds of golf, and a visit to a sumo wrestling championship, where Mr. Trump will award the winner’s trophy.
A spokesman for the United States trade representative declined to specify Friday whether Canada, Mexico and South Korea had been exempted from the auto tariffs.
He said that the president had directed his advisers to negotiate agreement with “any countries” that would be appropriate to address the national security threat, but that the administration had already taken “significant steps to help address the detrimental effect of auto-related imports from both Canada and Mexico.”
“On Korea, the Administration has a longstanding policy of not negotiating in public and, at this time, we cannot comment further on the scope of these negotiations,” the spokesman said.