President Donald Trump would give the European Union and Japan 180 days to agree to a deal that would “limit or restrict” imports into the U.S. of automobiles and their parts, in return for delaying new auto tariffs, according to a draft executive order seen by Bloomberg News.
According to the order, which people familiar with the matter say Trump is expected to sign this week, the administration has determined that imports of cars into the U.S. present a threat to national security because they have hurt domestic producers and their ability to invest in new technologies.
Trump was facing a Saturday deadline to make a decision on the tariffs.
A report by the Commerce Department had found that America’s innovation capacity “is now at serious risk as imports continue to displace American-owned production.”
“The lag in R&D [research and development] expenditures by American-owned firms is weakening innovation and, accordingly, threatening to impair our national security,” according to the draft executive order.
Representatives of top U.S. trade negotiator Robert Lighthizer and Commerce Secretary Wilbur Ross did not immediately respond to a request for comment.
Japanese and European officials have made clear a quota arrangement like the one that Mexico and Canada agreed to in the new North American trade agreement is a red line for them. The U.S. is in talks with both trading partners but autos are not currently part of discussions with the EU.
Trump will refrain from imposing tariffs for up to six months as trade negotiations with the EU and Japan are underway.
The proclamation will exempt South Korea from any future tariffs because it has renegotiated the U.S.-Korea Free Trade Agreement last year. Korean officials for months have lobbied the White House for an exemption of the potential tariffs but the U.S. trade representative’s office wouldn’t commit to agreeing on one.
Canada and Mexico agreed to limit exports of cars and parts to the U.S. as part of the United States-Mexico-Canada Agreement, although the limits are far above current exports. The agreement is a renegotiated North American Trade Agreement, which Trump has criticized as unfair to the U.S.
The U.S. imported $191.7 billion in passenger vehicles and light trucks in 2018 with more than $90 billion of those imports coming from Canada and Mexico, which are duty-free under NAFTA. Passenger cars are now subject to a 2.5% U.S. tariff but Trump has threatened to raise that to 25%, arguing that the EU and other countries have higher barriers to U.S. auto exports.
American allies Mexico, Canada, Japan and Germany are the leading sources of imported cars and trucks. Any new tariffs would hit cars from Japan, South Korea and Europe hardest. But they also would hit the supply chains of many domestic producers who rely on imported parts and foreign automakers with manufacturing operations in the U.S.
General Motors deferred comment on the tariff decision delay to industry representatives, while Ford declined to comment and Fiat Chrysler couldn’t be immediately reached.
“The case remains clear — cars are not a national security threat,” the Alliance of Automobile Manufacturers, an industry trade group, said in a statement. The group said imposing tariffs on imports of autos and auto parts would end up costing as many as 700,000 American jobs.
Trump and a small group of aides including Ross and trade adviser Peter Navarro are seen to be in favor of the new import duties against the advice of other advisers.
But people close to the discussions say even advocates of tariffs are still debating the scope of any action, complicating the discussions.
Trump advisers have cautioned the president that action on auto tariffs could risk serious push-back from Congress. Trump’s own party is threatening to move forward with legislation to limit the president’s tariff authority with many in Congress saying duties on cars would be a step too far.
The multipronged battle over trade being waged by the Trump administration has some stock market analysts and economists worried that extra costs and disruptions to supply chains could crimp consumer spending, hurt corporate profits and slow down the U.S. economy, which grew at a 3.2% pace in the first quarter. Trump says past trade deals such as NAFTA were tilted against the U.S. and that competitors such as China and even allies in Europe have taken advantage of the U.S. when it comes to trade.
Treasury Secretary Steve Mnuchin told a Senate Appropriations subcommittee Wednesday that the U.S. is making progress on lifting tariffs imposed on steel and aluminum from Canada and Mexico, potentially overcoming a key hurdle toward approval of the new trade pact.
Mnuchin said he expects to travel to Beijing soon with Lighthizer to resume negotiations.
Mnuchin’s positive comments about trade Wednesday helped reverse early losses on Wall Street. The Dow Jones industrial average closed with a gain of 115.97 points.
Trump imposed tariffs last year on imported steel and aluminum from China and a number of other nations, invoking a rarely used provision of a 1962 law to claim that the foreign metals posed a threat to U.S. national security.
The administration retained the tariffs on Canada and Mexico even after the two countries agreed to Trump’s demands to overhaul NAFTA.
Mnuchin told the panel he and Lighthizer have been in discussions with the Mexico and Canada over the tariff issue. “The president has instructed us to try to figure out a solution,” he said, calling resolution of the higher tariffs on aluminum and steel a “very important part” of passing the new trade deal.
On China, Mnuchin reiterated the administration’s stance that the two countries were recently close to a deal but things went “in a different direction.” The United States is lifting from 10% to 25% its penalty tariff on Chinese goods and China promised to retaliate by expanding its list of U.S. products being hit with punitive tariffs.
Mnuchin said that Trump expects to meet with Chinese President Xi Jinping at the Group of 20 leader’s summit in Japan on June 28-29.
“I can assure you that President Trump is determined that we have free and fair trade,” Mnuchin said. “He wants to have a fair relationship with rules [so] that we can compete fairly.”
Information for this article was contributed by Jenny Leonard, Shawn Donnan and Margaret Talev of Bloomberg News and by Martin Crutsinger, Lorne Cook, Paul Wiseman and Tom Krisher of The Associated Press.
A Section on 05/16/2019
Print Headline: Trump dangles deal on auto levy
- Shopping for an Auto Loan?
- Report: Bolton called Trump lawyer Guiliani a ‘hand grenade’
- New Automobile Fits in Pocket - New Auto Loans
- How To Save Thousands On A Great Auto Loan
- Low Interest Auto Loans - How to Get the Best Car Loan Deal
- Low Interest Rate Auto Loans - Advantages of Applying Online
- Auto Financing With Bad Credit - Important Guides To Remember For Getting The Best Rates
- How To Get The Best Interest Rates On Used Car Auto Loans
- Top 5 Mistakes To Avoid When Getting Used Car Auto Loans
- Auto Loans - 3 Tips for Getting a Good Car Loan Deal