White House Reassesses Auto Tariffs as It Focuses on China Fight

White House Reassesses Auto Tariffs as It Focuses on China Fight


WASHINGTON — The White House has decided to delay for six months a decision due Friday about whether to impose levies on foreign cars and car parts, people familiar with the situation said. Such a move would have taken aim at Japan and Europe, big auto manufacturers, and likely disrupted trade talks that the Trump administration had just begun.

The decision reflects the administration’s reassessment of pieces of its tariff strategy with allies around the world as it focuses on an all-encompassing trade war with China.

On Wednesday, Treasury Secretary Steven Mnuchin also said that the United States was closing in on an agreement with Mexico and Canada to roll back tariffs on steel and aluminum, which were imposed last year. If the administration does, it would end a standoff that has heightened tensions among the three countries and complicated efforts to pass the new North American Free Trade Agreement into law.

“I think we’re close to an understanding with Mexico and Canada,” Mr. Mnuchin said at a Senate hearing Wednesday, although he added that he was not ready to say that the United States was lifting tariffs. “I can assure you it is a priority of ours.”

Asked after the hearing about the prospect of a deal with China, Mr. Mnuchin was cautious.

“I’m hopeful,” he said. “I wouldn’t say I’m confident.”

The potential rollback of certain tariffs reflects the challenge of fighting trade wars on multiple fronts. Lawmakers and businesses are putting more pressure on the White House to concentrate their efforts on combating China’s unfair trade practices, while reversing far more unpopular tariffs on allies like Europe, Canada and Mexico.

Yet the outcome for these tariffs is still uncertain. Mr. Trump has long been a devotee of tariffs, viewing them as an effective way to rebalance trading relationships. Political advisers and auto industry executives have emphasized that the president will make the final decision on whether to impose tariffs of up to 25 percent on foreign cars.

The specter of auto tariffs has hung over relations with the European Union and Japan, both major suppliers of automobiles to the United States. Canada and Mexico have negotiated a quota with the United States as part of their trade agreement that would exempt them from the measure.

The president has frequently floated the idea of auto tariffs in the past, but two people familiar with the matter said that the White House had decided to delay a decision on the levies for six months, one of the president’s options under current trade law.

The decision was due by Friday, but the tariffs have provoked fierce opposition among industry leaders and in Congress. In addition, the White House is now engaged in preliminary trade talks with the European Union and with Japan, and auto tariffs would throw a bomb into those negotiations.

“Pleased that @POTUS has delayed decision on auto tariffs,” Senator Rob Portman, Republican of Ohio, tweeted Wednesday in response to media reports that the levies would not be imposed.

Auto tariffs would have opened another front to Mr. Trump’s trade war, but one with much smaller potential benefits and larger political liabilities. Auto industry executives on both sides of the Atlantic are opposed to tariffs, and the duties would have inflicted collateral damage on some of his most loyal voters in states like Alabama and South Carolina, which are home to big Mercedes-Benz and BMW factories.

“Our biggest market is Germany,” said Jeppe Kofod, a member of the European Parliament from Denmark. “The mere fact that Germany is hurt — we would be very much affected by that.”

The 25 percent tariff on steel and the 10 percent tariff on aluminum that the Trump administration imposed last year have had a more muted economic effect, but they have done much to rattle alliances.

Mexico and Canada, both of which retaliated with tariffs of their own, have previously appeared to be close to an agreement. But Mr. Trump has been hesitant to relent over his desire to protect America’s steel and aluminum sectors and his belief that the tariffs might be used as further leverage.

The United States and Canada sent mixed signals Wednesday about the future of the steel and aluminum tariffs. The Canadian foreign minister, Chrystia Freeland, declined to say whether the countries had struck a deal to lift those tariffs after meetings with lawmakers and Robert Lighthizer, the United States trade representative, in Washington on Wednesday.

Ms. Freeland said that her conversations had been “productive” and that the two sides had been in constant contact in recent weeks. But she suggested that it would be a mistake to predict how long negotiations would last.

“As has been the case from the outset, we believe that these tariffs need to be lifted,” Ms. Freeland said.

Even if the president rolls back metal levies on Canada and Mexico, the current level of tariffs in the United States would remain high. The levies that Mr. Trump has put in place have given the United States a tariff rate that is twice as high as the rates imposed by Canada, Britain, Italy, Germany and France. And the overall tariff would increase greatly should Mr. Trump choose to impose measures on foreign cars.

Republicans and Democrats in Congress have been sharply critical of the metal tariffs, warning that the new Nafta deal would not pass until they were removed.

Ms. Freeland said Wednesday that a failure to remove the tariffs could doom the deal in Canada.

“As long as the tariffs are in place, ratification will be very, very problematic,” she said.

The United States has been trying to persuade Canada and Mexico to agree to a quota system for steel and aluminum in exchange for rolling back the tariffs. Canada and Mexico have pushed back.

It is unclear what terms the three countries are close to settling on. But Mexican officials have expressed optimism on the topic. A senior Mexican official said this week that recent talks about removing the tariffs had been “fruitful.”





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