This article was originally published in the Journal of Commerce on June 26, 2018
By David Rish, President, Global Trade Management, Livingston International
Given the volume and diversity of trade-related news emerging out of Washington as of late, American businesses can be forgiven for getting lost in what seems an infinite stream of diplomatic jabs, jibes, compliments, shifting proclamations and policy announcements.
It is difficult to recall a period in recent memory when the trade file held comparable weight in diplomacy and focus in the media.
A year ago, many had understandably assumed that Washington’s obsession with the investigation of potential trade barriers – from the NAFTA renegotiations, to the imposition of steel tariffs on the basis of national security, to the threat of tariffs on Chinese imports – were clever posturing by President Trump ala “The Art of the Deal”.
In retrospect, however, these investigations and threats of trade “remedies” to reduce the U.S. trade deficit were more than just bluster on the part of an outspoken president. On each count, the government’s executive branch has followed through on its stated objectives in spite of heavy opposition from its own party in Congress, industry groups and the leaders of allied nations.
With such consistency in his follow through, each of the president’s statements should be taken quite seriously – be they made through the mainstream press or his Twitter account. The president acts and waits for others to react, seeking to move them from the status quo. Every action in the trade action tool box is being employed toward this objective. The uncertainty created is uncomfortable for the trade negotiators seeking stability. Those negotiators must either offer concessions or up the ante – creating more instability and uncertainty.
Trump’s proposed 25 percent tariff may not be just posturing
For this reason, it should be tremendous cause for concern that he has floated the idea of applying a 25 percent tariff on auto imports, and would be unwise to discount this as a next possible action.
Imposing these tariffs on autos would dramatically escalate a trade dispute with key allies and trading partners, such as Canada, Mexico and Germany. Many feel there will be unnecessary and inevitable hardship for the U.S. auto sector and tens of thousands of workers on both sides of the border who rely on it for their livelihood.