A Mercedes-Benz hood ornament sits on a Mercedes S-Class. (Michaela Handrek-Rehle/Bloomberg News)
July 25 at 10:34 AM

Several of President Trump’s senior economic advisers believe he plans to push forward with 25 percent tariffs on close to $200 billion in foreign-made automobiles later this year, three people briefed on internal discussions said.

Trump wants to move forward despite numerous warnings from GOP leaders and business executives who have argued that such a move could damage the economy and lead to political mutiny.

But Trump has become increasingly defiant in his trade strategy, following his own instincts and intuition and eschewing advice from his inner circle. He has told advisers and Republicans to simply trust his business acumen, a point he tried to reinforce Wednesday morning in a Twitter post.

“Every time I see a weak politician asking to stop Trade talks or the use of Tariffs to counter unfair Tariffs, I wonder, what can they be thinking?” Trump said Wednesday. “Are we just going to continue and let our farmers and country get ripped off?”

Trump’s trade strategy, and his potential auto tariffs, hit a key juncture Wednesday, when the U.S. president is scheduled to meet with European Commission President Jean-Claude Juncker. Trump said Tuesday that Juncker has come to negotiate with him over trade matters, suggesting that his hard-line stance had forced other leaders to offer concessions.

But so far there is little evidence that this trade approach is working, despite Trump’s pleas for patience and unity. The disunity within the White House and Trump’s insistence on pushing ahead on auto tariffs were described by three people briefed on the status of negotiations who spoke on the condition of anonymity because they were not authorized to reveal internal deliberations.

 3:17
How to win a Trade War

In the game of Trade Wars, perhaps the winning move is not to play.

Juncker is expected to propose two ideas to try to calm tensions with the White House, said a European official briefed on the plan who spoke on the condition of anonymity to describe the E.U. position. One option would be lower tariffs among all major auto-exporting countries, while another would be a targeted deal between the United States and the E.U. to eliminate tariffs on industrial products, including cars.

Trump suggested a similar idea Tuesday evening on Twitter, but he seemed to suggest the Europeans would never accept the proposal he desired, making it appear that an agreement was still out of reach.

Trump has said imposing tariffs on foreign cars could push Americans to buy more U.S. automobiles, helping U.S. workers. But critics think tariffs would drive up the cost of all cars and pass those inflated prices on to consumers.

The United States imported a record $192 billion in new passenger vehicles in 2017. The E.U. charges a 10 percent tariff on imports of U.S. automobiles, and the United States has a 2.5 percent tariff on European cars. The United States also charges a 25 percent tariff on light truck and sport-utility vehicle imports from other countries. Complicating matters further, a number of top European automobile companies, such as BMW and Mercedes, already make many automobiles in the United States, as do Japanese companies such as Honda, Nissan, Toyota and Subaru.

Commerce Department officials are now considering a variety of options to address Trump’s insistence that cheap foreign cars are flooding the U.S. market, and some of those measures would stop far short of imposing tariffs, two people briefed on the discussions said. But several of Trump’s advisers think he is expected to follow the approach he took with steel and aluminum imports and choose the most severe restrictions and his favored tool — tariffs across the board, according to the three people briefed on White House discussions.

The constant back-and-forth of meetings, threats, tariffs and countertariffs has spooked many Republicans, splintering the GOP and many of the business groups that marched in lockstep with Trump last year in his push to lower taxes.

While Trump is meeting with Juncker, Sen. Lamar Alexander (R-Tenn.) plans to introduce a bill that would make it much harder for Trump to impose tariffs on foreign automotive imports, showing more cracks in the Republican Party as members fear political consequences in the midterm elections.

Several months after Trump first imposed tariffs on steel and aluminum imports, the United States is now in economic skirmishes with China, Japan, the E.U., Canada, Mexico and Turkey. Trump has also recently complained about what he views as unfair trade practices from India, suggesting he could soon turn his attention to the world’s second most-populous country.

The disharmony within the White House is spilling into public view, something that appears to be bothering Trump. On Wednesday, White House budget director Mick Mulvaney said at a CNBC event that he and National Economic Council Director Larry Kudlow were at odds with others on how to proceed on trade, but that Trump made the ultimate decisions on his own.

“The president hears all the arguments, but he makes the final decision,” Mulvaney said.

Trump appears to be irked by people questioning his approach.

“When you have people snipping at your heels during a negotiation, it will only take longer to make a deal, and the deal will never be as good as it could have been with unity,” he said in another Wednesday morning Twitter post. “Negotiations are going really well, be cool. The end result will be worth it!”

Before Trump could impose tariffs on auto imports, the Commerce Department must issue a finding that they pose a national security threat to the United States. Several Republican lawmakers have said such a finding would be laughable, but the Commerce Department has flexibility to make a determination on its own.

A Commerce Department official, speaking on the condition of anonymity to discuss the process so far, said the review had not been completed and no final decisions had been made.

But even with a final decision at least one month away, many of Trump’s fellow Republicans are getting nervous.

“There are some in the economic community who view this as the bright line,” said Douglas Holtz-Eakin, a Republican and former director of the Congressional Budget Office. If Trump does this, Holtz-Eakin said, many Republicans have told him they will no longer “support the president any more. They are done.”

There are growing signs, though, that Trump is cognizant of the GOP trade criticism and taking steps to try to quell a mutiny. His administration on Tuesday announced up to $12 billion in emergency aid to farmers who are facing retaliatory tariffs from Mexico and China, among other countries.

Farmers have called on Trump to back down from his tariff strategy, but Trump made clear Tuesday and Wednesday that he had no plans to, believing it gives him the upper hand in negotiations.

Trump’s defiance stands in sharp contrast to what happened in the White House last year, when senior advisers were able to prevent Trump from following his protectionist instincts on trade decisions. The president had wanted to withdraw from the North American Free Trade Agreement and a trade deal with South Korea, but he was talked out of it.

Former senior economic adviser Gary Cohn was a lead voice among those cautioning Trump against protectionism, warning that a schism over trade would threaten the fragile GOP unity his party needed to pass the tax bill.

But Cohn is gone, having departed the White House shortly after Trump announced plans for tariffs on imported steel and aluminum. Trump has cast off the more measured approach favored by advisers such as Kudlow, Cohn’s successor, and Treasury Secretary Steven Mnuchin, instead arguing that an all-or-nothing stance garners the most respect from foreign leaders.

And the remaining pro-free-trade faction of the White House is less organized than a year ago. Last year, there was a process for weekly meetings on trade policy among top advisers. But that process has mostly broken down since Cohn’s departure, and there is not a broad consensus among White House officials how to proceed.

This has given Trump more running room to follow his own instincts, with his approach often backed up by Peter Navarro, one of his top trade advisers who often clashed with Cohn last year. Navarro is a trade hawk who thinks China and other countries have destroyed millions of American manufacturing jobs over decades through their trade policies.

The Commerce Department held an open meeting last week and heard from 45 different groups on the automotive review, with all but one cautioning against these tariffs. The only group that offered measured support was the United Auto Workers.

Some outside advisers have privately urged Commerce officials to tailor any restrictions so that they only affect advanced technology used in cars and not the cars themselves, creating an opening for U.S. companies without inadvertently driving up broad costs on consumers.

But Trump was presented with a similar array of proposals on the steel and aluminum tariffs, and he selected the most severe one, arguing it was needed to correct what he viewed as unfair practices by foreign countries.

“The one thing I do know about Trump is that he’s not going to back down,” said Steve Moore, who was a top economic adviser to Trump during the 2016 campaign. “He’s not going to be bullied. That means the ball is in these other countries’ court.”

Jeanne Whalen, Erica Werner and Quentin Ariés contributed to this report.

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