Was the announcement of steel and aluminum tariffs a ploy to pressure Canada and Mexico into greater concessions in the NAFTA renegotiations? Many assumed that Donald Trump meant to take aim at China with his trade action, although China exports a relatively small amount of either metal to the US, and that our NAFTA partners were collateral damage. Two tweets this morning suggest that Trump took deliberate aim at the two North American partners as leverage to score a political win on a trade agreement that has been deeply unpopular with Trump’s base:
We have large trade deficits with Mexico and Canada. NAFTA, which is under renegotiation right now, has been a bad deal for U.S.A. Massive relocation of companies & jobs. Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed. Also, Canada must..
— Donald J. Trump (@realDonaldTrump) March 5, 2018
…treat our farmers much better. Highly restrictive. Mexico must do much more on stopping drugs from pouring into the U.S. They have not done what needs to be done. Millions of people addicted and dying.
— Donald J. Trump (@realDonaldTrump) March 5, 2018
Was this Trump’s strategy all along, or is it an on-the-fly adaptation necessitated by criticism from his own allies in the GOP? Axios’ Jonathan Swan reports on the tick-tock of the decision to impose the tariffs, which turns out to be neither as arbitrary nor whimsical as some imagined. Peter Navarro and Wilbur Ross have been laying the groundwork for months, and Trump has been champing at the bit to fulfill his campaign promise. However, Trump may have still jumped the gun a bit last week:
They [Gary Cohn and Rob Porter] thought they’d got Trump to agree to a sequence: first impose tariffs on solar panels and washing machines (already done); then impose tariffs on hundreds of Chinese products to punish China for stealing American intellectual property (this action was imminent); then only impose the steel and aluminum tariffs after that (though in their minds hopefully Trump would be satisfied after whacking China so hard and wouldn’t feel the need to go further.) Lastly, they were considering an investigation into unfair foreign treatment of American car companies.
In the interim, the Porter disaster happened, and Trump became more and more agitated with the direction of the White House. The day Hope Hicks announced her departure, he was hopping mad, raging at Jeff Sessions and furious about the avalanche of negative stories about Jared Kushner. Trump was angry, agitated, and fed up. So he cut “the globalists” out of the picture, told Ross and Navarro to bring him the tariffs he’d been demanding for months, and made the announcement.
The process was so rushed that the tariffs don’t actually exist yet — the details haven’t been ironed out or legally vetted. The interagency process effectively died with Porter’s departure — though several senior White House officials have told me they think Porter and Cohn were being too clever by half and were never going to succeed at staving off the president’s wishes for hardline tariffs on steel and aluminum. The president promised his people tariffs and he demanded them from his staff for months.
So it’s clear that Trump and everyone else understood that the steel and aluminum tariffs wouldn’t damage China, at least not primarily. Trump had been trying to force Canada and Mexico into significant concessions in NAFTA talks all during this process, with little success. At times, Trump threatened to tear up NAFTA altogether rather than default back into the original treaty. It now seems that this tariff announcement might be a way to deliver the first shot across the bow and incentivize enough concessions for Trump to declare a victory.
That makes House Ways and Means chair Kevin Brady (R-TX) perhaps a little naive:
“There will be an exemption procedure for particular cases where we need to have exemptions, so that business can move forward,” Navarro said on CNN’s“State of the Union” program.
Asked whether the United States’ two North American Free Trade Agreement allies should be exempted, Brady told reporters in Mexico City:“Yes, and going further, excluding all fairly traded steel and aluminum, not just from these two countries.”
“I think we can make a very strong case for other countries as well,” said the Republican lawmaker, adding he hoped Trump could be persuaded to step back.“We’re going to continue to make the case to the White House,” added Brady, who met with Canadian Foreign Minister Chrystia Freeland at the Canadian embassy later in the afternoon.
Good luck with those White House talks if Trump wants to use this as leverage in NAFTA talks. But there may be a country that could see an exception, especially since Australia claims Trump promised them one:
Donald Trump “emphatically” promised to exempt Australian steel and aluminium from US tariffs during a meeting with Prime Minister Malcolm Turnbull last year, it can be revealed. …
This revelation explains why the Australian Government has been stunned by Mr Trump’s declaration last week that the tariff regime will be enforced, and subsequent statements by Mr Ross that country-specific exemptions are unlikely.
The conversation between the President and the Prime Minister was in the so-called “Steel Cage”, a secure communications pod that travels with the US President.
Sources have told the ABC Mr Trump’s promise was emphatic and that he instructed Mr Ross to work out the specifics to “make it happen”.
If we see an exception for Australia and not for Canada or Mexico, that will tend to corroborate the theory that this was intended for our NAFTA partners all along. But will Trump stick to it if Canada and Mexico balk at concessions in NAFTA talks? Swan wonders about that too, especially given the lack of legal preparation before last week’s announcement. Trump will have plenty of time to rethink this, or at least to pose as rethinking it, before it becomes reality.