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Tariffs with Mexico, Canada
The Trump administration told lawmakers that it has the right to hit Canada and Mexico with unilateral tariffs if either of those countries failed to abide by a process to resolve disputes in the revised North Atlantic Free Trade Agreement (NAFTA).The 39-page document was sent to Capitol Hill despite opposition that House Democrats have expressed about the new trade pact. House Speaker Nancy Pelosi (D-CA) said last week that the submission was “not a positive step” in getting the deal approved. However, U.S. Trade Representative Robert Lighthizer attempted to reassure lawmakers by saying the document “provides an outline for further discussions with Congress on these issues.”
The action began a 30-day window that must pass before the Trump administration is allowed to submit the full implementing legislation to Congress.[1] Democrats have sought changes to a provision that allows a country to effectively block a dispute panel from forming, although the Trump administration could challenge this by using Section 301, the same law that allowed President Trump to impose tariffs on China.
Auto Tariffs
The administration continues to use potential tariffs as a means of negotiation in a variety of industries. Automakers on Tuesday (June 4) said the president’s proposal to implement tariffs on Mexican-made goods could cost its major suppliers more than $1 billion.
Trump has said he will apply tariffs of 5% on Mexican goods on June 10 if Mexico does not halt the flow of illegal immigration, largely from Central America, across the U.S.-Mexican border. Those tariffs would gradually rise to 25% by Oct. 1 if Mexico does not satisfy Trump’s demands.[2] Automakers said they could absorb an initial 5 percent tariff but a 25 percent tariff for a sustained period could produce potentially devastating impacts on the auto industry while cutting US new vehicle sales by up to 1.5 million units annually.
Possible 232 Tariffs on Australia
On Sunday (June 2), The New York Times reported that the Trump administration considered imposing tariffs on imports from Australia within recent weeks, but ultimately decided against it after fierce pressure from military and State Department officials. USTR Lighthizer, among other top trade officials in the White House, backed the tariffs on Australia, who have remained exempt from steel and aluminum tariffs under Section 232 of the Trade Expansion Act of 1962.
President Trump imposed a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum from many countries last June, marking its one-year anniversary. The move was an effort to shield American producers from low-priced imports, which the administration said were a threat to the domestic industrial base and therefore national security.[3]
The potential implementation of tariffs could damage the US’ relationship with a key ally in the region, as Australia has helped constrain China’s influence in the Asia-Pacific region. Australian Prime Minister Scott Morrison noted the tensions on Friday.
“Trade conflict between the U.S. and China is testing the system as never before,” said Morrison, who was on his first overseas trip since winning last month’s election. “As independent sovereign nations in the Indo-Pacific, we don’t see our options as binary and nor do we wish them to become so.”[4]
US-China Relations
President Trump told reporters on Thursday (June 6) that he will decide whether to implement another $325 billion in Chinese imports after the Group of 20 (G20) summit at the end of the month. The summit will be held June 28 and 29 in Japan where Trump will likely meet with Chinese President Xi Jinping. French President Emmanuel Macron and Trump held a bilateral meeting on the sidelines of the D-Day commemorations on Thursday (June 6) where the pair discussed the upcoming G20 summit.
Lighthizer will send his deputy, Dennis Shea, to represent the US at the G20 trade ministers meeting in Tsukuba, Japan, on June 8-9. Shea, U.S. Ambassador to the World Trade Organization, “will advance the Trump Administration’s commitment to trade policies that reward innovation and ensure fair market access,” USTR said, adding that he’s also expected to have several bilateral meetings with “key trading partners.”
References
[1] Behsudi, Adam. “Trump administration asserts new trade deal allows it to hit Mexico and Canada with tariffs in disputes.” Politico Pro. 5 June 2019. https://subscriber.politicopro.com/article/2019/06/trump-administration-asserts-new-trade-deal-allows-it-to-hit-mexico-and-canada-with-tariffs-in-disputes-1509119
[2] Carey, Nick. “Automakers say Trump’s threatened Mexico tariffs would cost billions.” Reuters. 4 June 2019. https://www.reuters.com/article/us-usa-trade-mexico-autos-exclusive/auto-industry-tallies-cost-of-trumps-threatened-mexico-tariffs-idUSKCN1T52BH
[3] Swanson, Ana. Haberman, Maggie. Tankersley, Jim. “Trump Administration Considered Tariffs on Australia. The New York Times. 2 June 2019. https://www.nytimes.com/2019/06/02/business/trump-australia-tariffs.html
[4] Heijmans, Philip. “Australia’s Morrison Warns Against ‘Binary Choice’ in Trade War.” Bloomberg. 7 June 2019. https://www.bloomberg.com/news/articles/2019-06-07/australia-s-morrison-warns-against-binary-choices-in-trade-war
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