Trade Update (February 4)
President Trump signed an executive order on Thursday (Jan 31), which will “encourage recipients of new Federal financial assistance awards to use, to the greatest extent practicable, iron and aluminum as well as, steel, cement, and other manufactured products produced in the United States in every contract, subcontract, purchase order, or sub-award that is chargeable against such Federal financial assistance award.” This order builds upon the “Buy American and Hire American” executive order the president signed on April 18, 2017.
US-Mexico-Canada Agreement (USMCA) and Tariffs
Ways and Means Ranking Member Kevin Brady (R-TX) and Trade Subcommittee Ranking Member Vern Buchanan (R-FL) met with US Trade Representative Robert Lighthizer on Monday (Jan 28) to formulate a plan for USMCA passage. However, Rep. Brady said, “One of the key things in my discussion with members — Republicans and Democrats — are they’re not really willing to consider this agreement until the steel and aluminum tariffs are ensured to be lifted off, including quotas.” Outside of the tariffs, Democrats are concerned about the ability of the agreement to enforce labor provisions, while Republicans are concerned about investor-state provisions, the sunset provision, and government procurement.
Senate Homeland Security Chairman Ron Johnson (R-WI) along with Senators Joni Ernst (R-IO), Doug Jones (D-AL), Pat Toomey (R-PA), Mike Enzi (R-WY), Jerry Moran (R-KS), Ted Cruz (R-TX), and James Lankford (R-OK) sent a letter to President Trump demanding he remove the steel and aluminum tariffs on Canada and Mexico. They point to multiple statements from the administration, including a tweet from President Trump and a statement from Commerce Secretary Wilbur Ross, which both stipulate tariffs will only be removed after a “new & fair North American Free Trade Agreement (NAFTA) is signed.” They argue the tariffs add “uncertainty to markets” and that by removing the tariffs against allies, it will be easier to “achieve China’s full compliance and end its theft [of intellectual property and unfair trade practices] by presenting a united front with our global allies.”
The US International Trade Commission (ITC) announced that as a result of the 35-day partial government shutdown, that all investigations will be delayed by 35 days. This delay will impact the USMCA investigation and ultimately postpone congressional votes on the deal, according to Senate Finance Chairman Chuck Grassley (R-IA).
The USMCA is being negotiated under the Trade Promotion Authority (TPA), which requires the president to notify and consult with Congress throughout the negotiation process and sets specific procedures for congressional consideration to implement the agreement. As directed by TPA, the Trump administration sent a document to Congress on Tuesday (Jan 29) outlining “changes to existing law required to bring the US into compliance” with provisions in the USMCA. Some changes will be carried over from the original North American Free Trade Agreement (NAFTA) but other issues, such as the more stringent auto content rules, will require additional changes.
Despite the shutdown, the Trump administration was able to send these legislative changes to Congress within 60 days after it was signed, which preserves the “fast track” provisions. The provision allows the president to submit the trade agreement to Congress for a simple yes or no vote.
US-China Trade Relations
This week, Chinese and US officials met in Washington, DC to try to reach an agreement for the ongoing trade dispute. The two days of negotiations focused on trade, structural issues, and enforcement. The negotiations culminated with a meeting between President Trump and Vice Premier Liu He in the Oval Office in which Liu He said China would buy 5 million tons of US soybeans. USTR Lighthizer said “substantial progress” was made and plans are in motion for President Trump to meet with Chinese President Xi Jinping in February after the planned summit with North Korean Leader Kim Jong Un.
The trade truce lasts until March 2, 2019. If an agreement is not reached by that date, tariffs on $200 billion worth of Chinese imports will increase from 10% to 25%. However, after the successful meetings this week, President Trump said he might consider accepting a limited agreement by the March deadline, which would allow for a more comprehensive deal in the future.
 Peter Navarro. “Peter Navarro: Trump is keeping his promise to buy American, hire American.” FoxNews.com, 31 Jan 2019. https://www.foxnews.com/opinion/peter-navarro-trump-is-keeping-his-promise-to-buy-american-hire-american
 James McCarten. “Democrats, Repblucans alike won’t support USMCA with tariffs in place: Brady.” CTV News, 29 Jan 2019. https://www.ctvnews.ca/politics/democrats-republicans-alike-won-t-support-usmca-with-tariffs-in-place-brady-1.4273629
 Megan Cassella. “A new tariff bill in town.” Politico, 30 Jan 2019. https://www.politico.com/newsletters/morning-trade/2019/01/30/a-new-tariff-bill-in-town-494720
 “Trade Promotion Authority.” USTR.gov, 2019. https://ustr.gov/trade-agreements/other-initiatives/Trade-Promotion-Authority#
 Megan Cassella. “A new tariff bill in town.”
 Lingling Wei, Bob Davis, & Michael C. Bender. “Trump Gives Upbeat Assessment of Trade Talks with China.” The Wall Street Journal, 31 Jan 2019. https://www.wsj.com/articles/china-trade-negotiators-proposing-trump-xi-meeting-in-china-next-month-11548940089