Now that it’s become increasingly obvious that we’re in at least a trade skirmish with China (see this morning’s Dow plunge as evidence), it’s imperative that we strengthen our trading relationship with our friends and allies now.
The administration, Republicans and Democrats in Congress, and the business community are united in wanting to get China right. While we wait for a resolution to our challenges with China, here are five things the administration and Congress should do to make the United States, Canada, and Mexico the world’s most competitive trade bloc and to unleash the U.S. economy:
1) Get rid of the tariffs on imported steel and aluminum from Canada and Mexico. The U.S. last year slapped 10% tariffs on imported steel and 10% tariffs on imported aluminum. Only a few countries were exempted, and they didn’t include our northern and southern neighbors. The administration should cancel the tariffs now.
If the tariffs were intended to punish China for dumping product onto the world market, they missed. Canada’s our biggest foreign source of steel and aluminum, which means manufacturers who rely on these key inputs have seen their costs go up. And it leads to tit-for-tat retaliation, with our trade partners slapping their own tariffs on the stuff marked Made in the U.S.A. Consumers and manufacturers both lose.
2) Cut out the auto tariff rhetoric. The Trump administration has been threatening to apply tariffs to imported automobiles. To say the president’s justification for the tariffs is a head-scratcher is being nice.
The White House is supposed to act this week on a February report prepared by the Commerce Department on whether Section 232 tariffs, which are supposed to be reserved for products that threaten U.S. national security, should be applied to imported automobiles and parts. The idea that the Honda Accord is undermining the world’s greatest superpower’s security is a stretch. Many in the car industry suspect the president will extend the deadline to act on the report’s recommendations by another 180 days. He should lose the report in drawer.
Who picks up the tab for these trade taxes? Consumers. The Center for Automotive Research pegs the likely average car price increase at $2,750. Since the tariffs would apply to imported parts and not just finished vehicles, U.S.-built cars’ prices would go up, too, reflecting the higher manufacturing costs.
Equally disappointing is the president’s threat to impose tariffs on cars to protest the Mexican government’s handling of the surge of asylum-seeking migrants from Central America. There are many things the two nations should do to address the migrant crisis, but making cars more expensive to manufacture, sell, and buy isn’t one of them.
3) Let the tomatoes in. What does the Commerce Department have against fresh tomatoes from Mexico? They’re delicious! In fact, Americans prefer the Mexican greenhouse-grown, vine-ripened varieties over tomatoes grown in Florida.
But Florida claims that Mexico is dumping tomatoes on the U.S. market and has successfully lobbied the Commerce Department to withdraw the U.S. from the Tomato Suspension Agreement—the agreement that has governed tomato trade between the two nations for over two decades. As a result, duties are being assessed on imported tomatoes from Mexico and, you guessed it, prices are set to go up in the produce section. A recent study from Arizona State University says consumers can expect to see tomato prices spike from 40%-85%. (My trip to Trader Joe’s over the weekend confirms that the price hike is real.)
The Commerce Department says it will keep a dialogue going between Florida and Mexican farmers as it attempts to reach a new deal. The department should work quickly. Singling out a Mexican-grown product to appease a regional U.S. interest runs completely counter to the spirit embodied by NAFTA and the soon-to-be-implemented USMCA.
4) Cut the wait times at the ports of entry. Struggling to keep up with an unprecedented surge of migrants from Central America, the Department of Homeland Security has been forced to reposition hundreds of Customs and Border Protection officers away from their usual duties inspecting cargo and travelers at ports of entry. Officers instead are assisting Border Patrol in that agency’s processing of migrants.
The result from the diversion of CBP human resources from the ports has been a dramatic spike in wait times for commercial traffic waiting to be processed for entry into the U.S. In the early days of the crisis, waits of anywhere from four to seven hours were common.
Now that DHS has been able to smooth out staff shifts to also begin redeploying officers from the northern border and air and seaports, wait times have begun to improve. But the crisis lays bare what many involved in cross-border trade have known for years: the ports of entry are chronically understaffed. Credit to Arizona Senators Kyrsten Sinema and Martha McSally for working hard to address the staffing challenges and to keep the trade flowing.
The Trump administration is seeking supplemental spending for the current fiscal year to help with the border crisis. Over $1 billion of the $4.5 billion request would be for border operations, including personnel. Congress should act on the request and ensure CBP and the rest of DHS have the resources necessary to keep the nation’s border and economy secure.
5) Pass the USMCA. This is the big one. Trade advocates in the business community are urging the administration and Congress to keep their eyes on the prize: the adoption of legislation to implement the United States-Mexico-Canada Agreement, or USMCA, the successor agreement to NAFTA.
The USMCA’s articles on topics like e-commerce and intellectual property bring North American trade into the 21st century, and updates to agricultural access and auto content are a win for U.S. ranchers, farmers, and manufacturers.
According to a new analysis by the U.S. International Trade Commission, even though the U.S. will move from the already-tariff-free NAFTA to the tariff-free USMCA, the U.S. real GDP is still poised to grow by $68.2 billion, or .35%, and it will result in an estimated 176,000 new U.S. jobs.
The administration won’t send implementing language to Speaker of the House Nancy Pelosi until she signals that she and her caucus are ready for it. Once language is presented, time is limited to hold an up or down vote according to the Trade Promotion Authority terms Congress and the administration are acting under.
In addition to Speaker Pelosi, Senate Finance Chairman Charles Grassley (R-Iowa) is key because it’s his committee that will take up the agreement in that chamber. He’s made it clear that USMCA is dead on arrival unless the administration removes the steel and aluminum tariffs, just one more reason for the White House to move swiftly to cancel them.
In light of the trade turmoil with China, acting on these items isn’t a nice-to-have, it’s a must-have. Remove tariffs on our friends, get our border functioning, and pass the USMCA.
Glenn Hamer is president and CEO of the Arizona Chamber of Commerce and Industry.