Trump Trounces NAFTA Hopes, Orders "National Security" Probe Of Auto Imports

Earlier in the day President Trump tweeted that "there will be big news coming soon for our great American Autoworkers," promising that " After many decades of losing your jobs to other countries, you have waited long enough!"

This was followed up during the day by hopeful comments from various officials in the NAFTA negotiations that prompted hope for a positive resolution for an auto trade deal - which sparked aggressive buying in the Mexican Peso.

However, it seems Trump's "big news" is perhaps 'less good' for the NAFTA deal as the president has just instructed Commerce Secretary Wilbur Ross “to consider initiating a Section 232 investigation into imports of automobiles, including trucks, and automotive parts to determine their effects on America’s national security."

Statement from the President on Potential National Security Investigation into Automobile Imports

Today, I met with Secretary of Commerce Wilbur Ross to discuss the current state of our automobile industry.

I instructed Secretary Ross to consider initiating a Section 232 investigation into imports of automobiles, including trucks, and automotive parts to determine their effects on America’s national security.

Core industries such as automobiles and automotive parts are critical to our strength as a Nation.

As a reminder, this is the same provision of U.S. trade law in March when he called for tariffs on foreign-made steel and aluminum.

As The Washington Post reports, the Trump administration's move, trade analysts said, was designed to put pressure on Mexico during the final stages of negotiations for a new North American trade deal.

Negotiators for the United States, Mexico and Canada remain deadlocked over rules for granting duty-free status to vehicles under a new North American trade deal.

The talks have been underway for more than nine months and appear likely to continue into 2019, Treasury Secretary Steven Mnuchin said this week.

The threat to impose an import tax on cars was seen as an attempt to press Mexican officials to accept a U.S. demand for a higher percentage of auto content to be made in American factories.

Talks over a replacement for the 1994 North American Free Trade Agreement among the United States, Mexico and Canada have made limited progress.

Negotiators remain divided on a host of contentious U.S. proposals, including a provision that would require the deal to be formally renewed every five years.

The proposed import tax was seen as an additional pressure point in the negotiations , with Mexico and Canada already scheduled to lose their exemption from Trump's metals tariffs in little more than a week.

"This has been discussed for some time, which makes me suspect that this is being leaked to put pressure on Mexico during NAFTA and on other parties seeking steel and aluminum exemptions ," said attorney Dan Ujczo of Dickinson Wright.

Initial reaction to the idea of an import tax on cars based on national security needs was unfriendly, with one veteran trade lawyer saying it would prompt "pant-wetting laughter — followed by retaliation" among U.S. trading partners.

So far no "pant-wetting laughter" but the peso is sliding lower.

Of course, this is not just NAFTA, as The FT notes, the national security investigation would clear the way for the imposition of new tariffs on cars from Europe, Japan and South Korea and lead to a major escalation of global trade tensions. 

A unilateral move by the US to raise tariffs would also almost certainly be challenged at the World Trade Organization and lead to further retaliation by US trading partners.

“It’s flabbergasting. What makes the imports of cars a threat to the national security of the United States? It’s flagrant protectionism,” said one European official.

We suspect "who needs enemies" phrase will be heard tomorrow from America's European and Asia "allies."

So much for Mnuchin's plan.

Comments

Fiat Currency King of Ruperts Land Wed, 05/23/2018 - 23:20 Permalink

CBC = Canada's Pravda & represents our left-of-the-left-elites ... so stop listening. Also, when NAFTA was negotiated, Canadians thought that we caved to the Americans on almost everything to get a deal. Obama thought he would be cute in his second election and threatened to cancel NAFTA to win some votes in Michigan. Canadians were publicly begging him to cancel it as we had been ripped off, and he quickly backed down from this posture. Do what you will - its your country. The world wants our resources and will buy them - even if there is a temporary hurt for us. The sad part is ... my family members spilled blood on the same ground beside Americans numerous times. We don't invade your country with illegals, steal your jobs, overwhelm your social programs, or send our gang members to rape and kill your people. If you think we are your enemies - you should look closer - as your list of International friends seems to be shrinking. 

In reply to by King of Ruperts Land

skbull44 Fiat Currency Thu, 05/24/2018 - 07:03 Permalink

"...your list of International friends seems to be shrinking." 

This is what tends to happen with empires during their waning years. A big question that remains is will the US Empire go out with a bang (global thermonuclear war?) or a whimper (see The Long Descent [John Michael Greer] or The Long Emergency [James Howard Kunstler]). 

And, yes, CBC is little more than a means of propagating Neoliberal and Canadian government narratives. I tune to it occasionally when I want to hear what the latest government or 'mainstream' propaganda is--always good for a laugh. 

 

https://olduvai.ca

In reply to by Fiat Currency

LetThemEatRand tmosley Wed, 05/23/2018 - 20:58 Permalink

As a clown, I expect this is a delay tactic used to help promote the Red Team in the mid-term election.  Trump knows how to gauge his audience (or voters as it were), and he knows they want him to be tough on trade.  He also knows a Blue Team Congress would initiate impeachment proceedings.  So he's ordered a study that will delay any actual NAFTA decision until November.  Some time later, he will announce a yuge trade victory against Mexico, in that they will send in one less car a year.  Fortunately for Mexico, they still will not need to worry about a wall, much less paying for one.

In reply to by tmosley

Oliver Klozoff LetThemEatRand Wed, 05/23/2018 - 21:49 Permalink

Nowhere in the bill's language does it state the comm. dept has the right to use all ("within") of the 270 days.

Trump, like any boss, can instruct ross to an accelerated timeline.

He wants action from mehico. The votes will come naturally after mehico caves.

My fondest wish is that the legal definition of "imports" can be stretched to include h1b's.

In reply to by LetThemEatRand

buzzsaw99 Wed, 05/23/2018 - 20:47 Permalink

starting a trade war with japan and or south korea is a mistake imo.  europe, germany in particular, fuck yeah.  china, double fuck yeah.  i really don't have a problem with canada either.  the only thing i don't like about mexico is the open border.

LetThemEatRand buzzsaw99 Wed, 05/23/2018 - 21:13 Permalink

The irony is that trade with Japan and SK are what it should be -- survival of the fittest based on quality and price of product without the use of slave labor and virtually no pollution standards to cheat on price.  I am all for trade with countries that have similar labor and environmental laws, as Japan and SK do, even if it means lost jobs in the US.  

In reply to by buzzsaw99

Oliver Klozoff LetThemEatRand Wed, 05/23/2018 - 22:08 Permalink

And I'm old enough to remember sayings like"cheap jap shit" about everything from Asia.

It was japan's and later, south korea's adoption of the American's Ed Deming's statistical process control that enabled their improvement in production methods.

That and the workerbee mentality of those asian societies.

Their factories may outproduce American factories on any given day but American driven,innovation-led obsolescence, especially from automation, will render human factories extinct. This will require a new formulation of society for it to remain productive but America will lead in that too.

MAGA.

In reply to by LetThemEatRand

petroglyph LetThemEatRand Thu, 05/24/2018 - 04:21 Permalink

In the 80's American beef was 80$ lb, because of all the taxes in Japan. Cars had to be taken apart and re assembled.

Pat Chote [of Ross Perot fame] wrote a book, " agents of influence'', really revealing about how America was getting fucked by Japan. Pretty eye opening with them being the largest holder of American debt. All kinds of price fixing. 

In reply to by LetThemEatRand

philipat buzzsaw99 Wed, 05/23/2018 - 21:40 Permalink

Again, nobody FORCED US Corporations to manufacture in China etc. The profit from which China hardly benefits (other than employment and a small contract manufacturing margin) and which mostly accrues to said US Corporations in tax havens as a result of transfer pricing and IP fees; whilst the US working and middle classes are destroyed. Not very patriotic, no?

In reply to by buzzsaw99

GreatUncle LetThemEatRand Thu, 05/24/2018 - 04:11 Permalink

The need to use tarrifs to equalise trade value shows how skewed free trade the globalists pushed really is.

There has always been competition between nations economically and free trade actually hides the true reality of the cost difference between nations.

Not the material though 1Kg of copper is equatable through international markets, it is the cost difference of labor and taxation.

In reply to by LetThemEatRand

philipat my new username Wed, 05/23/2018 - 21:11 Permalink

It's just a coincidence that Germany is moving ahead with Nord Stream2 and looking at loosening sanctions on Russia?

Unlike the US, Germany made a pact with its Manufacturers and Unions to keep manufacturing back home in return for wage growth concessions linked to productivity; a sensible deal. Nobody FORCED US manufacturers to offshore all their manufacturing. Again, don't shoot the messenger, the real culprit is large US Corporations, which Ross and Munchkin are, of course, now trying to protect as loyal globalists.

In reply to by my new username

LordWillingly Wed, 05/23/2018 - 20:54 Permalink

Trumptards are going to like driving American made shit cars that get 10 miles to the gallon as well as paying 25% more for gasoline.

They are Winning :)

At least there won't be any football players kneeling.

ArmchairQB Wed, 05/23/2018 - 20:56 Permalink

It is times like these that I almost pull for him. But he always folds like a cheap suite a week later. Probably front running his bullshit. Scammer in chief.

Mike Rotsch Wed, 05/23/2018 - 21:05 Permalink

Hell. . . if the auto industry really starts coming back to life again, I just might consider buying up cheap Detroit real estate.

Who knows, right?

Thordoom Wed, 05/23/2018 - 21:05 Permalink

He is doing it at the time when China rolls back tariffs on cars.If any of you think its just to the please Trump you are dead wrong. They do it for the Europeans.They wooing Germans on their side while Trump is pissing everyone off which i applaud to him because i do not like any of this globalist pricks .It will end up badly for the US empire which i am all for.US needs to become The republic again instead of being rotten Empire.

MuffDiver69 Thordoom Wed, 05/23/2018 - 21:25 Permalink

I find it funny...as Trump exits one crappy deal for American workers after another the globalist bitch and moan more and more and the left must reflexively criticize anything...We had them defend North Korea,MS-13, Hamas and the Mullahs of Iran last week...I’m enjoying this timeline...and losing international prestige is music to my ears...

In reply to by Thordoom

Drop-Hammer Wed, 05/23/2018 - 21:26 Permalink

Our fuzzy foreigner competitors were rampaging bulls who were allowed by our past presidents and past/present corruptocrats to run rough-shod over us.  GEOTUS Trump fitted them with nose-rings so that we can lead them by the nose as docile and obedient beasts.  GEOTUS Trump did this.

Versengetorix Wed, 05/23/2018 - 21:56 Permalink

Canada, more than anyone else has been the big winner on NAFTA for 35 years. For that, they have pissed on our shoes every fucking time.  They are now run by the French and they love importing Muslims.  War on 25 years.

hooligan2009 Thu, 05/24/2018 - 02:24 Permalink

what proportion of materials used in cars sold in the US, is made in the US? 5%? cars are "assembled" and sold in the US. the components, bit and pieces are imported. mostly from asia. te same applies to cars shipped in from mexico and germany. the bits and pieces are not made in mexico and germany , they are assembled in germany and mexico, then shipped to the US.

does this impose a security risk when tesla, GM, Ford, VW, Mercedes etc use parts batteries that burst into flames, airbags that take people's heads off, keys that fall out of ignition sockets, cars that cheat on lead-poisoning emissions? how many millions of cars have had to be recalled over the last ten years because of faulty parts used in cars? ten million? 20 million? 100 million?

now, is that a national security risk and is that a "hard" security risk (where surveillance chips are inbuilt into software - like satnav/geolocators/traffic sensors - that track the movement of cars to enable autnomous driving, but also enable "engine shutdown/brake failure/steering failure" by remote control

OR

"soft" security risks - like the deskilling of american manufacturing so that it will NEVER be able to compete in the manufacturing of component bits and pieces, currently manufactured in asia for assembly in the US or Mexico.

it has some similarities with the question "how much of an airforce jet, or a tank, or an aircraft carrier, should be made in a foreign country? zero %, 20% or 100%? or should certain parts be allowed that are generic and none of the "secret" stuff? (then of course, how much should be sold as arms to overseas countries that can "reverse engineer" it.