Complex trade map could tie Trump's hands

ASHINGTON — Auto tariffs may seem like a foregone conclusion, but there are pieces on the policy chessboard that could constrain President Donald Trump from fulfilling his threats.

With one wrong move, the White House could get checkmated.

Decisions in any one area — the China trade war, the pending U.S.-Mexico-Canada trade deal, bilateral trade deals with the European Union and Japan, existing tariffs on steel and aluminum — have consequences elsewhere.

Gauging the political winds is also important. While there is little political support for tariffs on imported autos and auto parts, businesses, unions and lawmakers generally agree that China's trade practices are unfair and hurt U.S. businesses.

"Legally, these are all distinct and separate tracks, but from [U.S. Trade Representative Robert] Lighthizer's perspective, mission No. 1, far and away, is bringing China to heel. That is where he is putting his energy," said Bernd Janzen, a trade attorney at Akin Gump.

While automakers and their workers would be hurt by tariffs, with a win on China, "There could be a big round of applause all around, on the Hill, in a lot of U.S. industry," he said. "So, I think there's a big difference in the pecking order."

Yet there are risks there, too. A weak deal with China could alienate the president's supporters and embolden other trading partners.

The auto sector is trying to influence the outcome as much as it can. But ultimately, no amount of scenario planning can account for Trump, who tends to work outside traditional channels of political and industry advisers.

However he proceeds, Trump will be eager to fulfill a campaign promise to aggressively tackle large trade deficits and the migration of manufacturing jobs out of the U.S., which he sees as an economic and security threat.

Last month, the Commerce Department sent the White House its closely guarded investigative report on whether auto imports hurt national security. Industry officials universally expect the report will recommend tariffs, which Trump previously suggested might be as high as 25 percent, along with other options.

Many stakeholders question the merits of that investigation. Janzen noted that Commerce officials sent auto producers detailed questionnaires about their operations but didn't query parts makers.

The administration is holding the threat of auto tariffs over the EU and Japan to force them into comprehensive trade talks. But those governments may not see the threat as credible, knowing that it doesn't have industry or congressional support, analysts say.

Trump has directed much of his ire at Germany for its exports of luxury vehicles to the U.S., leading many to believe that punitive auto tariffs could be targeted at the EU or at imported luxury autos specifically. But EU officials have pledged that any tariffs would invite swift retaliation across a broad list of products and scuttle chances for a trans-Atlantic trade pact, several lobbyists said.

Auto tariffs also would distract Congress from considering the USMCA trade deal — a signature Trump deliverable — and severely damage any chance of approval, trade professionals say. Members of Congress have introduced bills to limit the president's authority to invoke national security powers over trade, and lawmakers likely would devote more time to trying to pass them, rather than USMCA legislation, if those Section 232 tariffs are imposed. Many lawmakers and companies have said steel and aluminum tariffs on Canada and Mexico need to disappear before they can support USMCA.

"The continued existence of steel and aluminum tariffs undermines any benefit that the USMCA provides our industry," said Paul Ryan, a vice president at the Association of Global Automakers, "and 232 on autos and auto parts would completely undo the benefits."

Lighthizer warned House members at a hearing last week that U.S. credibility on other fronts, especially with China, is wrapped up in the USMCA debate. It will be difficult to have a meaningful and sustainable process of engagement with China and other trading partners, he said, if Congress doesn't approve the new North American free trade agreement — a sentiment shared by some Republicans.

Several manufacturing companies, including automakers, have announced or re-announced domestic investments in an apparent effort to steer the president away from tariffs.

"It's part of this dance the auto industry is doing to both find ways to make the White House feel committed to the industry and prevent the White House's worst instincts from happening," said Vanessa Sciarra, vice president for trade and investment policy at the National Foreign Trade Council.

As for steel and aluminum tariffs, don't expect them to be removed anytime soon, except possibly for Canada and Mexico, she said.

"They have a constituency they are playing to," she said, "and that constituency doesn't want the tariffs to be removed."