Föhrenbergkreis Finanzwirtschaft

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Trump Tariffs Spark GOP Rift

Posted by hkarner - 7. März 2018

Date: 06-03-2018
Source: The Wall Street Journal

President tries to extract Nafta concessions while GOP congressional leaders work to derail proposal

President Donald Trump said last week he plans to impose tariffs on steel and aluminum. Shown, US Steel Corp.’s plant in Clairton, Pa.

House Speaker Paul Ryan warned Monday that President Donald Trump’s plan to impose tariffs on steel and aluminum imports could trigger a trade war, as the president sought to wrest economic concessions from Canada and Mexico by turning up pressure on the proposal.

Mr. Trump’s evolving trade policy drew harsh criticism from congressional Republicans, who said they are concerned the president’s new threats will provoke retaliation rather than draw concessions.

“We are extremely worried about the consequences of a trade war and are urging the White House to not advance with this plan,” said a spokeswoman for Mr. Ryan (R., Wis.), referring to Mr. Trump’s statement last week that he planned to impose global tariffs of 25% on steel and 10% on aluminum.

Congressional Republican leaders aren’t ruling out potential legislative action aimed at blocking such tariffs, according to a Republican familiar with the matter. Any such legislative action would take the relationship between the GOP-led Congress and the Republican president into new waters.

Top Republicans overseeing trade policy have also begun circulating a letter to Mr. Trump, warning that tariffs are a bad idea.Mr. Trump rolled out a new muscular approach Monday morning on renegotiating the North American Free Trade Agreement with Canada and Mexico when he tweeted that “we have large trade deficits” with the two nations. “Tariffs on Steel and Aluminum will only come off if new & fair Nafta agreement is signed,” he wrote.

The blending of two typically separate aspects of U.S. trade policy came as Mr. Trump’s chief negotiator was wrapping up the latest round of Nafta talks in Mexico City with his Mexican and Canadian counterparts.

U.S. officials were hoping that the new carrot-and-stick approach would help accelerate the slow-moving talks that are aimed at rewriting the 24-year-old pact, a deal Mr. Trump has branded “a disaster.” But the initial reaction from Mexico and Canada suggested the president’s threat could further stall the negotiations.

“As to whether we’re willing to make concessions on the issues under negotiation or in other areas to obtain the exclusion [from the steel tariffs], consider it ruled out,” said Ildefonso Guajardo, Mexico’s economy minister, after having discussed the matter with U.S. Trade Representative Robert Lighthizer. “To make concessions to protect ourselves from these tariffs, is not a scenario.”

Foreign Minister Chrystia Freeland of Canada was equally cool to the suggestion, saying “as far as we are concerned, these are separate negotiations.”

Mr. Lighthizer said Monday he hoped the prospect of avoiding steel and aluminum tariffs would help accelerate the Nafta negotiations. He said if Mexico and Canada could reach “an agreement in principle” in a few weeks, they would never face those duties.

Mr. Trump’s injection of the tariffs into the Nafta talks marks his most explicit attempt yet to reorient U.S. economic policy by using the threat of restricted access to the U.S. market—the world’s largest and most lucrative—as a club to extract concessions from trading partners.

Mr. Trump and aides have repeatedly said the U.S. trade policy after World War II has been misguided and naive. The criticism is that it helps other countries build their economies and fosters a global free-trade system, while giving away access to the U.S. market for little in return.

Mr. Trump’s linkage of metal tariffs to renegotiation of an existing trade pact could soon be applied well beyond North America.

The U.S. is seeking changes in a free-trade agreement with South Korea, a major steel producer and historically a supplier of pipe to the U.S. oil-and-gas industry. The European Union has said it would retaliate against U.S. exports if Mr. Trump follows through with the tariffs, to which Mr. Trump in turn threatened trade barriers against European-built cars, a much larger portion of global trade.

Trade experts warn that such threats could backfire, making it politically difficult for foreign governments to make concessions to the U.S.

“He’s opened up this Pandora’s box,” said Chad Bown, senior trade expert at the Peterson Institute for International Economics, which opposes the tariffs. “It puts you in a potential state of chaos, because you have to be worried about how everyone else will respond as well.”

Nafta is in many ways an evolving first case study of the administration’s approach to trade. The continuing talks are being watched closely by other nations to see just how far Mr. Trump will go in carrying out threats and how much he is willing to compromise.

As the latest round of renegotiations wrapped up Monday—the seventh since the process was launched last August—Mr. Lighthizer expressed frustration with the pace, saying “we have not made the progress that many had hoped in this round,” In particular, he said, there wasn’t progress on the Trump administration’s controversial demands to rebalance the pact on terms more favorable to the U.S.

Still, Mr. Lighthizer and his counterparts did hail some advances on parts of the pact aimed at modernizing the agreement, saying they had closed out chapters on harmonizing regulations and food-safety standards across the continent.

And Mr. Lighthizer indicated a new patience and flexibility to let the talks continue for a few more weeks—and possibly even a few more months—without renewing the threat of killing the pact, as negotiators said a March 31 deadline for completing the talks was no longer feasible.

“We probably have, you know, a month or a month and a half or something to get an agreement in principle,” before the talks will stall due to Mexico’s July presidential election as well as elections in the U.S. and Canada, Mr. Lighthizer said.

Asked if he would consider suspending the talks for the summer and resume them after the elections, he said: “It’s conceivable that that happens….it’s not irrational to think you would have lower-speed talks…at some point just to kind of keep the talks going.”

But he made clear he was hoping the negotiations would wrap up sooner.

“It’s my view that it’s an incentive to get a deal,” said Mr. Lighthizer, referring to the planned tariffs. “The idea is that if we have a Nafta agreement, Canada and Mexico would be excluded from those tariffs.”

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