The Trump administration is weighing whether to invoke national security to place tariffs on cars, even as questions linger about the effectiveness of similar tariffs on steel and aluminum imports.
Almost eight months after those steel and aluminum tariffs went into effect, the U.S. remains embroiled in a trade war with China, and some of America’s closest allies — Canada, Mexico and the European Union — are caught in the crossfire.
The Commerce Department is set to conclude in February its 270-day Section 232 investigation into whether to use national security as justification for an additional tariff on cars and auto parts. Imposing those tariffs could drive a further wedge between the U.S. and its allies.
Section 232 of the Trade Expansion Act of 1962 authorizes the Commerce Department to scrutinize whether tariffs are needed to protect U.S. security and economic interests and make recommendations to the president. Prior to the Trump administration, the imposition of tariffs as a result of that process has been rare.
As part of the larger trade war with Beijing, the existing tariffs have helped slow the rapidly growing Chinese economy, said Dov Zakheim, who served as the Pentagon’s comptroller during the George W. Bush administration.
Not even close
Nonetheless, Commerce Secretary Wilbur Ross said Thursday the U.S. and China aren’t close to striking a trade deal.
“I’d be very surprised if the Chinese cave,” Zakheim observed.
In the meantime, any effort by the White House to target China’s economy is likely to provoke retaliation.
“That’s what a trade war is about, people shooting in both directions,” Zakheim said.
Phil Levy, who focused on trade for George W. Bush’s Council of Economic Advisers, is less sanguine on the consequences of the steel and aluminum tariffs.
“It’s alienated our erstwhile allies, and has proved costly for American producers and farmers who have faced retaliation,” said Levy, who is now a senior fellow on the global economy at the Chicago Council on Global Affairs.
Several countries, including China, Mexico, Canada and Norway, as well as the European Union, have asked the World Trade Organization to decide whether the U.S. has properly invoked national security as a justification for its trade actions.
No matter what the WTO decides, it will end up losing, Levy said. If it sides with the U.S., any country is free to invoke national security as its reason for imposing tariffs, effectively stripping the WTO of its authority to resolve such disputes. If it rules against the U.S., it could provide the Trump administration with a convenient narrative — anonymous bureaucrats in Geneva determining the U.S. fate — to justify withdrawing from the WTO.
“It’s a time bomb for the WTO,” he said.
It’s unclear how long Americans hurt by China’s retaliatory tariffs — and by extension, Congress — will tolerate the ongoing trade war.
“A lot of people supported the president on the basis of retaliation and suffering being temporary,” said Levy. “This stuff starts to look like the new normal.”
Imposing tariffs on autos would hit a handful of key U.S. allies harder than it would hit China, said Jeff Bialos, a partner at the law firm Eversheds Sutherland who served in senior posts at the Defense and Commerce departments during the Clinton administration.
According to Commerce Department figures, the top exporters of cars and light trucks to the U.S. in 2017 were, in order: Mexico, Canada, Japan, Germany, South Korea and the United Kingdom. China ranked 10th , behind Sweden and Slovakia.
“You have a president who thinks we might get better deals bilaterally in terms of trade, and our allies are under a security blanket without paying their share,” Bialos said. “There’s some deconstructionist risk this year,” he added, referring to possible U.S. withdrawals from WTO and NATO.
Hesitant to act
In Congress, trade is more a parochial issue than a partisan one, and lawmakers have been loath to take any concrete action on Section 232.
In July, the Senate approved a non-binding resolution on an overwhelming 88-11 vote that expressed support for congressional approval of tariffs based on Section 232. But legislation introduced last year by Rep. Mike Gallagher, R-Wis., an Armed Services Committee member, and then-Sen. Bob Corker, R-Tenn., who was Foreign Relations Committee chairman at the time, that would require congressional approval ultimately went nowhere.
Similar legislation authored by Gallagher and Sen. Patrick J. Toomey, R-Pa., will be introduced soon in both chambers, a congressional aide said.
Meanwhile, Rep. Sean P. Duffy, R-Wis., has already floated a draft bill that would expand the president’s ability to unilaterally impose tariffs on imports.
Under then-Defense Secretary James Mattis, the Pentagon expressed lukewarm support for the steel and aluminum tariffs. Throughout his tenure, Mattis touted the importance of alliances and warned against hurting the U.S.’s military relationships with its partners.
It’s unclear how Acting Defense Secretary Patrick Shanahan’s policy positions might differ from his predecessor's, but he reportedly stressed “China, China, China” in his first meeting with senior department officials this year.
“He will be very supportive, I think, of anything that squeezes the Chinese,” Zakheim said.
But an indiscriminate tariff on cars would hit American allies in the European Union a lot harder than it would hit Beijing.
“If they put automobile tariffs on, any hope of the world working together to get China to change its behaviors just goes out the window,” Zakheim said.
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