Did Trump And China Make A Deal On Car Tariffs?

Trump wrote a late-night tweet. China remains silent.

By now everyone is aware of the ongoing trade war between the US and China. President Trump made the first strike months ago when he imposed tariffs on imported Chinese goods. China responded in kind, and its response hurt. It tacked on tariffs for US-made cars imported to China and American automakers were not happy, to say the least. However, it appears a deal of some sort has been made.

Trump wrote on Twitter that “China has agreed to reduce and remove tariffs on cars coming into China from the U.S. Currently the tariff is 40%.”

Little else has since been said by the president. China hasn’t said a thing. But already shares of German automakers like BMW and Daimler have rallied following Trump’s comment. Tesla will also be very happy about this deal because it desperately needs China’s business. Although it is about to begin construction of a new plant in China, Tesla will still need to import vehicles for the foreseeable future. Just last week, China said that tariffs on US-built cars would be 15 percent if not for the ongoing trade dispute. Instead, it called for negotiations with the goal of ending the trade war.

Trump and Chinese president Xi Jinping recently met face to face at the G20 summit in Argentina and it appears that meeting was fruitful. If there’s no deal in place, then there’ll be a 15 percent to 25 percent increase of some $200 billion worth of Chinese-made products at the beginning of next year. That’s less than one month from now. Fortunately, it sure sounds like something positive is happening.

Trump also tweeted the following: “My meeting in Argentina with President Xi of China was an extraordinary one. Relations with China have taken a BIG leap forward! Very good things will happen. We are dealing from great strength, but China likewise has much to gain if and when a deal is completed. Level the field!” We’ll update this space if and when an official announcement is made.

Senate panel votes to advance Trump pick to head consumer watchdog

The Senate seems likely to confirm Kathy Kraninger, but Democrats are continuing to press for details on the precise role she may have played in implementing the immigration policy that separated families. Photo credit: REUTERS

WASHINGTON -- The U.S. Senate Banking Committee voted on Thursday to advance President Donald Trump’s pick to head the federal consumer watchdog despite criticism from Democratic senators.

Kathy Kraninger, a senior official in the Office of Management and Budget, was approved on a 13-12 party-line vote to run the Bureau of Consumer Financial Protection. She would replace Mick Mulvaney, the OMB chief who is also serving as acting director at the agency since November.

Her nomination now advances to the full Senate, which has yet to schedule a confirmation vote.

The Senate seems likely to confirm Kraninger, but Democrats are continuing to press for details on the precise role she may have played in implementing the immigration policy that separated families.

In July, Kraninger told Congress that while she did attend meetings relating to the administration’s “zero tolerance” immigration policy, she did not play a role in setting or developing Trump’s “zero tolerance” immigration policy that separated more than 2,000 children from their parents.

Democratic Senators Sherrod Brown and Elizabeth Warren have said Kraninger has not been sufficiently detailed in her answers. But it was unclear if that will be enough to discourage Republicans from supporting her.

“Kathy Kraninger was part of the Trump Administration’s effort to traumatize kids and rip them away from their families. She should be held accountable and fired — not promoted,” Warren told Reuters in an email on Wednesday.

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Trump vows to scrap NAFTA, threatens Canada after reaching deal with Mexico

President Donald Trump speaks to Mexico's President Enrique Pena Nieto on the phone as he makes an announcement on the status of the North American Free Trade Agreement in the Oval Office. Photo credit: Reuters

UPDATED: 8/27/18 3:00 pm ET

WASHINGTON -- U.S. officials reached a “preliminary agreement” with Mexico on a framework to rebalance manufacturing in North America after resolving key differences related to the cross-border movement of finished vehicles and auto parts.

The tentative deal, if finalized, would increase the regional content value of passenger cars, light trucks and auto parts required to qualify for duty-free status, create a labor content value rule and tighten enforcement of rules of origin, according to the U.S. Trade Representative's Office.

President Donald Trump, announcing the deal at the White House on Monday, said he would terminate NAFTA and send the tentative bilateral deal with Mexico to Congress for approval, adding that Canada might be incorporated or get a separate bilateral deal. In the absence of a Canadian agreement, Trump threatened to slap tariffs on the country's auto exports.

“We’re going to call it the United States/Mexico Trade Agreement,” he said. NAFTA “has a bad connotation because the United States was hurt very badly by NAFTA for many years.”

A senior U.S. trade official told Reuters talks with Canada were expected to begin immediately in the hopes of reaching a final agreement by Friday.

Auto provisions

The Trump administration's deal with Mexico would require that 75 percent of auto content be made in the U.S. and Mexico, up from the regional requirement of 62.5 percent under NAFTA. It also requires that 40 to 45 percent of auto content be made by workers earning at least $16 per hour, while streamlining certification and verification of rules of origin to make enforcement easier. Passenger vehicles would also need to include a certain percentage of North American-produced steel and aluminum.

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According to press reports and sources familiar with the negotiations, the two sides also agreed that vehicles that did not meet the content requirements would be bound to the World Trade Organization’s 2.5 percent tariff for "most favored nation" countries if made at an existing factory, but for nonconforming vehicles made at future greenfield sites the vehicle would be subject to tariffs of 20 to 25 percent, pending the U.S.’s determination on auto imports posing a national security threat. The USTR statement, however, made no mention of nonconforming vehicles.

The U.S. and Mexico agreed to review the deal after six years, softening a demand by American negotiators for a clause to kill the pact after five years unless it’s renewed by all parties.

'Long way to go'

Eric Miller, a trade and government relations consultant, cautioned that the preliminary deal lacks concrete details and is not yet a legal text that both sides can agree to.

“We shouldn’t exactly send the white smoke up yet," Miller said. “There’s a long way to go in order to get this resolved."

From an automotive perspective, Canada can live with the U.S.-Mexico deal, said Miller, who heads Rideau Potomac Strategy Group and counts Canadian auto interests among his clients.

Canada, which has also expressed concern about lost manufacturing jobs to Mexico, can accept the higher regional content value as well as the $16 per hour labor formulation because it proposed that to steer the U.S. away from its original demand that a certain percentage of each vehicle include U.S.-made components, he said. In addition, Canada produces very few vehicles that don’t conform to NAFTA content requirements, “so it’s not going to be a hill it dies on.”

The American Automotive Policy Council, which represents the Detroit 3, said in a statement “we are optimistic that the new agreement will maintain and encourage the ongoing competitiveness of the United States and North American auto industries . ... We commend the United States and Mexican negotiators for their success and urge them to work with their Canadian counterparts to complete this negotiation.”

Foreign-brand automakers have told lawmakers they do not support raising local content requirements and that smaller companies could have trouble complying.

“We encourage a renewed focus on a three party agreement that includes Canada,” the Motor & Equipment Manufacturers Association, said in a statement. “Furthermore, at the close of the negotiations between Mexico and the United States, the parties agreed to a potential cap of Mexican motor vehicle parts exports into the U.S. MEMA is concerned that this may serve to decrease American manufacturing jobs and exports and put U.S. businesses at a global disadvantage — all while increasing costs to consumers.”

Campaign promises

Monday’s developments helped fulfill campaign promises to renegotiate NAFTA or terminate it unless the U.S. received more favorable terms that reduced outsourcing of manufacturing jobs to low-wage Mexico and incentivized more domestic investment. The broad understanding between the U.S. and Mexico also addresses agriculture, textiles, intellectual property, digitial trade and other industry sectors.

How the administration could achieve a separate bilateral deal is uncertain because any new deal would require Congress to ratify it and the president has fast-track authority only to renegotiate NAFTA, a trilateral trade agreement. Ratification would take several months, at a minimum, and by then the House of Representatives could be in Democratic hands, making approval for any trade agreement more difficult.

Mexican President Enrique Pena Nieto participated in the announcement by conference call and said he hoped Canada would be folded into the revised agreement.

Canadian Foreign Minister Chrystia Freeland was reported heading to Washington to begin talks after Canada was sidelined while the U.S. and Mexico resolved their differences.

U.S. Trade Representative Robert Lighthizer said he planned to send the Mexico trade deal to Congress on Friday, triggering a 90-day review period, although that seemed to presuppose that the deal will be finalized by then. Analysts said it was unlikely Canada could sign on so quickly.

“These guys like to use time as their pressure point. What they are trying to do is compel Canada to come back to the table and make a deal quickly, by saying ‘the bus is leaving so you better get on,’ “ Miller said.

Reuters and Bloomberg contributed to this report.

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Trump: EU offer to drop auto tariffs is 'not good enough'

President Donald Trump rejected a European Union offer to scrap tariffs on cars, likening the bloc's trade policies to those of China.

“It's not good enough,” Trump said of the offer from Brussels during an Oval Office interview with Bloomberg News. “Their consumer habits are to buy their cars, not to buy our cars.”

Trump's comments come just hours after Trade Commissioner Cecilia Malmstrom told European Parliament lawmakers that the EU would be “willing to bring down even our car tariffs to zero, all tariffs to zero, if the U.S. does the same.” Autos were previously excluded from the discussions that focused on manufactured products bought and sold between the two markets.

Trump compared the EU to China, where the president is engaged in another escalating trade war.

“The European Union is almost as bad as China, just smaller,” Trump said.

Trump has ordered the Commerce Department to investigate whether light-vehicle imports imperil national security, under the same provision he invoked to impose global tariffs on steel and aluminum earlier this year. The president has indicated he could impose tariffs of as much as 25 percent on the foreign-made autos.

The findings of the auto study are due by February, though the president could decide to act before then. This week, Trump threatened Canada with auto tariffs if the country failed to join his trade deal with Mexico to replace NAFTA.

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