Trump Cites Car-Tariff Threat as Biggest Trade Leverage - WSJ/Foxnews

WASHINGTON—President Donald Trump said he sees his threat to impose global auto tariffs as his biggest weapon to extract concessions from trading partners, shedding more light on his broader trade policy strategy.

“You know, the cars are the big one,” Mr. Trump told Fox News in an interview broadcast Sunday. “We can talk steel, we talk everything. The big thing is cars.”

Mr. Trump was referring to a study launched by his administration in late May into whether to impose 20% tariffs on imported vehicles in the name of national security.

Administration officials have said no decision has been made on whether to actually do so, but they have suggested they are looking to make a decision before the November elections.

Mr. Trump used a similar rationale—invoking a rarely used Cold War-era law that gives the president wide discretion to block imports—to justify recently imposed steel and aluminum tariffs. His latest remarks suggest that was a kind of dry run for a bigger fight on autos.

While the president has talked repeatedly about moving to stymie car imports, his comments cast the threat in a new light, showing how he views the sector as his most important leverage in trying to win concessions from trading partners around the world, especially Mexico, Europe, and Japan.

In discussing ongoing talks to renegotiate the North American Free Trade Agreement with Mexico and Canada, for example, the president said in the Fox interview that “if they’re not fine, I’m going to tax their cars coming into America, and that’s the big one.”

“The European Union is possibly as bad as China just smaller, OK,” Mr. Trump said. “It’s terrible what they did to us. European Union—take a look at the car situation. They send a Mercedes in; we can’t send our cars in.”

Mr. Trump has repeatedly complained about Europe’s 10% tariff on car imports compared with the 2.5% imposed by the U.S., but he hasn’t mentioned the 25% tariff the U.S. imposes on imports of light trucks.

The Trump trade team has tried to use the metals tariffs as broad leverage—to get big concessions on Nafta, to get Europe to slash its autos tariffs and boost defense spending, and to get Japan to promise to buy more American goods.

But so far at least, those countries have called the U.S. bluff, absorbing the American tariffs and, in the case of Canada and Europe, fighting back with penalties of their own.

Canadian retaliatory tariffs took effect Sunday. And Europe has claimed a victory of sorts in that tiff, when Harley-Davidson Inc., the Milwaukee-based motorcycle maker, said last week it would shift some production outside the U.S. to avoid the cost of European tariffs.

China on Sunday followed through on a pledge announced in May to cut tariffs on car imports to 15% from 25%. But in recent weeks both countries have edged closer to a full-scale trade war, and Beijing is preparing to slap an additional 25% tariff on U.S. auto imports this Friday.

Rather than back down, Mr. Trump says he now wants to raise the stakes, by adding autos to the mix.

The American car market is much bigger than the steel market, and the economies of Mexico, Germany, and Japan in particular are much more dependent on exporting vehicles to the U.S.

The U.S. imported about $29 billion in steel in 2017, compared with about $192 billion in cars. The car industry makes up nearly a quarter of the country’s $500-billion-plus trade deficit.

According to the Center for Automotive Research, an Ann Arbor, Mich., think tank, 44% of the vehicles sold in the U.S. last year were imported. The Nafta partners combined accounted for about half the imports, followed by Japan and Germany.

Mr. Trump in the interview expressed confidence that his strategy would work—that he would persuade foreign auto companies to build more in the U.S. and to export less.

“What’s going to really happen is there’s going to be no tax,” he said. “You know why? They’re going to build their cars in America. They’re going to make them here.”

But the threat to expand his trade pressure to the auto sector has spooked global markets and big business, including U.S.-based auto makers.

General Motors Co. warned Friday that global auto tariffs would hurt its competitiveness, cost U.S. jobs and result in “a smaller GM.” The statement was made in a formal comment submitted to the administration as part of the study weighing the prospect of the levies. Other auto makers have weighed in with similar warnings.

Lawmakers in Mr. Trump’s own Republican party have weighed in against the prospect, with two GOP senators—Bob Corker (R., Tenn.) and Pat Toomey (R., Pa.)—proposing legislation that would make it harder for presidents to invoke the national-security law to block imports.

“The president needs to use the national-security waiver in ways that I think visibly meet the test,” Sen. Roy Blunt (R., Mo.) said after the threat was first raised in May. “I didn’t think aluminum and steel met the test. I certainly don’t think automobiles meet the test.”

Some of Mr. Trump’s own aides have cautioned against the move. His top economic adviser, Lawrence Kudlow, said in a June interview that he had argued internally against moving ahead with tariffs on automobiles. “I am concerned. I have spoken up,” he said. “I speak up.”

While Mr. Trump’s exploration of across-the-board auto tariffs has little precedent in modern American policy, he isn’t the first president to tangle with allies over car imports.

President Ronald Reagan in the 1980s forced Japan to accept “voluntary” export limits on cars, a move that helped prompt Japanese auto makers to build cars in the U.S. President Bill Clinton engaged in protracted negotiations with Tokyo in the 1990s to try to sell more American cars and car parts in the Japanese market.

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