President Donald Trump backed off his threat to levy tariffs on cars imported to the U.S. from the E.U. during a recent meeting with European Commission President Jean-Claude Juncker. It appears that Trump had warned that he would move forward with 25 percent tariffs on auto imports if the meeting with Juncker didn’t go well, prompting the E.U. to respond that such a move would bring significant retaliatory measures on U.S. goods. Wow! Now Trump indicates that he’s willing to open up further trade negotiations with the E.U.
Trump has also tweeted that his administration is considering introducing tariffs on auto imports from Canada and Mexico, much to the displeasure of the American auto industry. You see, in today’s world, many auto parts are supplied from sources outside the U.S. Indeed, the average Big Three vehicle is comprised of anywhere between 40 to 60 percent of parts manufactured outside the country. American auto tariffs will simply disrupt the supply chain, reduce efficiencies, increase costs, cause a major downturn in the industry, and eventually increase the costs of all vehicles to American consumers.
American tariffs on Chinese goods, including steel and aluminum, are already having an impact on the agricultural sector, especially on soybean exports. As a result, Trump has pledged $12 billion to farmers to help ease trade pain caused by tariffs aimed at China which had retaliated against U.S. farm products. However, farmers have made it clear that they don’t want handouts, but prefer to be able to sell their products and are concerned about the long-term damage caused by tariffs.
As for negotiating separate trade agreements with Canada and Mexico, the chances are pretty slim that either country would agree to do so. Mexican and Canadian officials have reiterated that talks on the North American Free Trade Agreement (NAFTA) will remain a three-way negotiation. Canada has a strong participant in Foreign Affairs Minister Chrystia Freeland who has proven to be an excellent representative from the Canadian Cabinet. She has made it very clear that Canada is working to obtain a modern NAFTA which is fair and beneficial to all three countries. Minister Freeland met with Mexican President-elect Andres Manuel Lopez Obrador, who will take office on Dec. 1rst, and was given assurance that Mexico also has the same objectives for a trilateral trade agreement.
I firmly believe that President Trump has underestimated just how much the E.U., China, Mexico and Canada are willing to go to protect their interests and promote free trade. Before the terrible and costly consequences of international trade wars happen, I would suggest that the President take a close look at his strategy and consider backing off even more. I’m sure even the Republicans, who historically promoted free trade as opposed to protectionism, would very much support such a move. We can only hope.
FROLITICKS 