Tariffs prompt trouble in Congress for Trump trade agenda
Washington — Republicans in Congress are increasingly willing to speak up in opposition to President Donald Trump’s proposal to place tariffs as high as 25 percent on imported autos as soon as May. And that could spell trouble for the president’s trade agenda in Congress.
Trump has possession of a report from the U.S. Commerce Department that contains recommendations about whether he should impose tariffs on imported autos under a section of law that allows him to do so if a national security threat is determined to exist.
The White House has not released the findings of the report, but U.S. Rep. Fred Upton, R-St. Joseph, introduced bipartisan legislation with U.S. Rep. Terri Sewell, D-Ala., to block the president from unilaterally imposing tariffs on imported cars. Republican senators like Sen. Rob Portman, R-Ohio, and Chuck Grassley, R-Iowa, have also spoken out against Trump’s proposal.
At the same time, trouble is brewing on the left for Trump’s proposed U.S. Mexico Canada trade agreement that is supposed to replace the North American Free Trade Agreement. Prominent Democrats in the U.S. House have called for the deal to be re-opened, which would jeopardize concurrent approval processes that are underway in Canada and Mexico.
Labor unions like the AFL-CIO have also indicated that they don’t support the proposed NAFTA replacement, which could make it hard for Trump to bring Democrats on board with the proposal.
Upton said the fates of Trump's proposed trade deal with Canada and Mexico — and the tariffs he has floated for imported cars — are likely going to be intertwined on Capitol Hill.
He said if the president doesn't lift the proposed tariffs on imported cars, it's going to make hinder chances for the new trade deal. "I think that's real...," Upton said. "If this sticks on autos, tariffs could well boomerang on the prospects of passing the USMCA."
Trump seemed to indicate Wednesday that he is using the threat of placing tariffs on imported autos as leverage in trade negotiations with European countries.
"It's up for review, and the European Union has been very tough on the United States for many years but nobody talked about it," the president said. "And so we're looking at something to combat it.
"We'll see what happens," Trump continued. "We'll see whether or not they negotiate a deal. If they negotiate a deal, a fair deal, that's a different story."
Upton said the White House has been trying to pressure lawmakers to support the trade deal regardless of their feelings about the potential import auto tariffs with frequent visits from the U.S. Trade Representative Robert Lighthizer.
Lighthizer was peppered with questions about the potential import tariffs during his most recent appearance before a Congressional committee.
U.S. Sen. Rob Portman, R-Ohio, said in a March 12 Senate Finance Committee the USMCA is "an improvement over NAFTA." But he questioned whether it can be approved by any of the three countries if the Trump administration moves forward with import tariffs.
"I can’t imagine, with what I’m hearing from the Canadians and Mexicans already on steel and aluminum, that if we did autos we could have a successful completion of USMCA here on the Hill and that they could be able to ratify it," Portman said.
Democrats have also raised questions about the viability of the USMCA, throwing into doubt its ability to pass the Democratically-controlled U.S. House.
"We were not in Congress when President Trump signed the revised NAFTA, now referred to as the U.S.-Mexico-Canada Agreement (USMCA)," a group of 23 freshmen lawmakers led by U.S. Rep. Haley Stevens, D-Rochester Hills, wrote in a letter to Lighthizer. "As such, we were not consulted in the negotiating of the agreement and therefore, our votes should not be taken for granted."
Complicating matters further for the Trump administration, the AFL-CIO has said recently that Mexico must reform its labor laws before the confederation of unions can support the pact.
"If the administration insists on a premature vote on the new NAFTA in its current form, we will have no choice but to oppose it," the AFL-CIO said in a statement.
The agreement now before Congress calls for increasing from 62.5 percent to 75 percent the percentage of a car's parts that have to come from the U.S., Canada or Mexico to qualify for duty-free treatment. Additionally, the USMCA requires that 40-45 percent of an auto's content be made by workers earning at least $16 per hour.
It contains provisions to protect up to 2.6 million cars and $32.4 billion worth of parts imported from Canada and Mexico from tariffs on imported vehicles that are being considered separately by the Trump administration. Vehicles not meeting the requirements would be subject to a 2.5 percent duty.
Kristin Dziczek, vice president of the Center for Automotive Research, said the uncertainty about trade rules is wreaking havoc on automakers' ability to plan for the future.
"All the confusion for automakers means they don't know the rules of the game they have to continue playing, or planning to play, for the next decade or so," she said. "This is not an industry that works well in uncertain environments."
Charlie Chesbrough, senior economist and senior director of industry insights for Cox Automotive, said lawmakers who are pushing back on the idea of tariffs on imported autos are likely reacting to pressure they are feeling from car dealership owners in their districts.
"It's thousands of dollars per vehicle and there's really no way to avoid paying them," he said.
Chesbrough said automakers have responded to the threat of import tariffs with recent announcements about domestic production increase, which is Trump's desired effect.
"There's been interesting moves by manufacturers in recent months that suggest even the threat of tariffs has spurred additional domestic production," citing recent announcements from Ford Motor Co. and Toyota about expansions at plants in Flat Rock and Alabama that drew positive tweets from Trump.
Chesbrough said automakers will likely have to continue to adjust to uncertainty as long as Trump is president.