Trade Lawyers Say 2019 Will Have More Trade Turmoil Than 2018
Four trade lawyers from White & Case say that 2019 could have even more trade tumult than did 2018, especially if the Trump administration levies tariffs on auto imports from Europe or Japan. Their alert, published Feb. 6 and with Scott Lincicome as the lead author, talks about prospects for a China trade deal, ratification of the new NAFTA, a continuing truce with Japan and Europe, and other trade developments expected this year.
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They note that Democrats' support -- and House Speaker Nancy Pelosi's in particular -- is necessary to ratify the NAFTA replacement, and that even pro-trade Democrats have said the new deal is not adequate. Unions, whose positions are important for most Democrats, are also pretty negative about the deal. Even the United Automobile Workers Union, whose members are supposed to benefit from changes to the rules of origin, said it is concerned "the agreement as currently written does not go far enough in addressing the US-Mexico auto and auto parts trade imbalance," and suggested negotiations should be reopened.
On China, the alert says business groups that are hearing about negotiations say there's been progress on market access, electronic payments and intellectual property enforcement, but that China has made no "substantive concessions on structural issues such as technology transfers and industrial subsidies."
The lawyers say three outcomes are possible -- an escalation of tariffs on list three on March 2, from 10 percent to 25 percent; extending negotiations while keeping current tariffs in place; or coming to either a deal or a partial deal, but with the 25 percent escalation in the back pocket if China doesn't fulfill its commitments, and/or if further concessions are not achieved. Even with a deal, they said, it's unclear that the 25 percent tariffs on lists one and two will be lifted, or that the 10 percent tariff on list three will be rolled back.
The ways the auto tariffs could play out are quite complex, the alert says. The authors say a draft suggests the president could go for a global 25 percent tariff on parts and vehicles, as he has often threatened; a tariff only on automated, connected, electric and shared (ACES) vehicle technologies; or a middle ground between the two.
Matt Blunt, who leads the American Automotive Policy Council, has told International Trade Today that even the narrowest option is unacceptable to his members -- Fiat Chrysler, General Motors and Ford.
The alert says it's not clear if the required Commerce Department report will be delayed because of the recently ended partial federal government shutdown; if it comes out on time, President Donald Trump has up to 270 days to raise tariffs. The statutory deadline is Feb. 17.
If the tariffs are levied, the lawyers express doubt Europe will be spared. With Americans insisting on agriculture -- and phytosanitary standards -- as part of any new trade deal, and Europe's refusal to talk about the sector, there's "not much assurance that the current 'truce' will hold," they said.
They note that Congress has done nothing concrete to respond to Trump's trade moves, and they expect that inertia to continue -- unless tariffs are levied on automobiles, or he says he's withdrawing from NAFTA. Either action, they write, "could cause Congress to consider legislation to prevent these actions and the serious political and economic turmoil they would create."