On Wednesday, European Commission President Jean-Claude Junker will meet with Trump in Washington to talk trade. The meeting will give President Trump a shot at smoothing over troubled trade relationships with U.S. allies in Europe and avoid imposing tariffs on cars — an opportunity he should take.
Trump, however, has sent mixed messages on his willingness to negotiate, saying Monday that he was hopeful about reaching a deal, but doubling down on tariffs in a tweet Tuesday morning.
Tariffs are the greatest! Either a country which has treated the United States unfairly on Trade negotiates a fair deal, or it gets hit with Tariffs. It’s as simple as that – and everybody’s talking! Remember, we are the “piggy bank” that’s being robbed. All will be Great!
— Donald J. Trump (@realDonaldTrump) July 24, 2018
The specific focus of the negotiation will likely be on Trump’s threat to slap 20-25 percent tariffs on cars and car parts imported to the U.S. — an outcome that countries like Germany are keen to prevent and that would also hurt Americans.
To put the discussion in perspective, the scope of the proposed tariffs is huge. Last year U.S. auto and auto parts imports totaled more than $300 billion. For comparison, steel and aluminum imports together amounted to around $50 billion.
Trump has zeroed in on what he sees as unfair trade practices with car imports from Europe and Germany in particular. At a news conference earlier this year, for example, Trump told reporters, “[The European Union doesn’t] take a lot of what we have, and yet they send Mercedes in to us, they send BMWs in to us, by the millions.” He added, “It’s very unfair, and it’s very unfair to our workers and I’m going to go straighten it out.”
[Related: Trump defends tariffs on EU, Canada, Mexico: ‘They’re our allies but they take advantage of us’]
While the president is right that tariffs are unbalanced (currently there is a 2.5 percent tariff on all car imports coming into the U.S., while European nations impose 10 percent tariffs on cars), this is not the full picture as the U.S. imposes 25 percent tariffs on imported light trucks and vans.
Moreover, Trump’s plan of a 25 percent tariff for cars wont actually help U.S. automakers. Last week, various enterprises in the auto industry such as manufacturers, suppliers, and dealers testified at a hearing that was held to supposedly help the Commerce Department decide if importing cars and car parts from elsewhere is a national security threat.
During the two days of testimony, automakers and part suppliers small and large made their case against tariffs. They told the Commerce Department that imposing the tariffs the president has threatened would hurt jobs, raise the cost of cars for U.S. consumers, and prompt retaliatory tariffs from Europe that would damage the industry. Even the United Auto Workers union warned against rash actions that would disrupt supply chains.
As an example, BMW, one of the German automakers Trump singled out for criticism, actually makes cars in the U.S. and even uses the tagline “Made in America.” Likewise, many U.S.-based automakers source a large percentage of the parts used to manufacture vehicles from abroad, meaning that despite Trump’s promise to help U.S. industries, auto companies would be hurt. Tariffs on imports would mean real losses for American workers as well as increasing the costs of vehicles that most Americans depend on.
If the Commerce Department does make its determination that having too many BMWs and Volkswagens on America’s roads is a threat to U.S. security, then that would pave the way for the president to impose his proposed tariffs on cars. To do so, he would again rely on a provision of the Trade Expansion Act signed in 1962 that allows the president to restrict imports based on a recommendation that they pose a national security risk from the Commerce Department without the support of congress.
Instead of exploiting executive power to escalate a trade war that is damaging the U.S. economy, Trump would be wise to take the opportunity to find agreement with the European Commission president and declare victory for his negotiating skills.
