87: Trump Shifts His National Security Threats (Again)

Episode Summary

Executive Summary: The episode dissects two abrupt Trump trade moves on May 17: declaring Japanese/EU autos a national-security threat while lifting steel and aluminum tariffs on Canada and Mexico. The hosts argue the auto move is economically incoherent, globally entangled, and likely a bargaining tactic, while the metal deal offers limited relief, preserves uncertainty, and may foreshadow future disputes.

Main Topics: Auto imports framed as a national security threat (Priority: 5/5): Trump’s proclamation treats imported cars and parts from Japan and the EU as a security risk; the hosts argue this is really an anti-import economic policy, not a genuine defense issue. Questioning the logic behind boosting domestic R&D through tariffs (Priority: 5/5): The discussion challenges the claim that imports suppress U.S. automaker R&D, noting many causes of market-share decline and the global, interconnected nature of auto innovation. Globalized auto industry and blurred firm nationality (Priority: 4/5): The podcast emphasizes that automakers, suppliers, R&D centers, and partnerships span countries, making it difficult to define 'American-owned' firms or isolate national-security threats. Tariffs on steel and aluminum lifted for Canada and Mexico (Priority: 5/5): The hosts summarize the surprise joint statements ending Section 232 tariffs on Canada and Mexico, describing the outcome as better than expected for those countries but not a full return to normal. Trade policy as leverage, not just economics (Priority: 4/5): Both announcements are interpreted as bargaining tools—autos as a pressure tactic for concessions and metals as a way to clear the decks for China talks and help USMCA politics. Unresolved uncertainty and future conflict risk (Priority: 4/5): Even with tariff relief, safeguard snapbacks, lingering WTO cases, and vague enforcement language suggest continued volatility and possible renewed retaliation.

Key Arguments: The auto proclamation is economically absurd because cars and parts are not a national-security threat; it is mainly an attempt to limit imports. Import pressure is not the only reason GM and Ford have lost market share; foreign automakers also produce in the United States and compete there. Research and development in autos is highly globalized, involving subsidiaries, suppliers, and cross-border partnerships, so restricting imports will not cleanly shift R&D back to U.S.-owned firms. If the administration truly wanted more domestic R&D, grants and targeted research programs would be more direct and effective than tariffs. The auto announcement likely aims to force export limits or other concessions from Japan and the EU, with tariff threats as the fallback. The Canada/Mexico metal deal is a partial de-escalation, but it still leaves higher North American prices than the rest of the world and creates future snapback risk. The new metal arrangement may make it easier for the U.S. to reimpose restrictions later because it requires less proof of injury than traditional trade-law safeguards. Ending the Canada/Mexico steel and aluminum tariffs removes an obstacle to USMCA passage, but it does not resolve broader political and legal disputes. Trump’s simultaneous celebration of World Trade Week underscores the irony of his administration’s protectionist actions versus trade-friendly rhetoric.

Data Points: Date of announcements: Friday, May 17, 2019 - The episode centers on the same-day auto and metals announcements. Review period for auto proclamation: 6 months - USTR Robert Lighthizer was directed to update the President in six months. Share of U.S. light vehicle sales from imports from Japan and Germany: around 13% - Used to contextualize the scale of imported autos in the U.S. market. Steel tariff start date on Canada/Mexico: June 1, 2018 - The hosts note the tariffs had been in effect almost a year. U.S. steel capacity utilization: 82% - Reported as having risen from under 77% a year earlier after tariffs. U.S. steel capacity utilization a year earlier: less than 77% - Baseline used to show the effect of tariffs on domestic steel production. Canada/Mexico share of U.S. steel imports: about 25% - Combined pre-tariff share of U.S. steel imports. Canada/Mexico share of U.S. aluminum imports: over 40% - Combined pre-tariff share of U.S. aluminum imports. Ford estimated cost from metal tariffs: $1 billion - The Ford CEO cited this as the cost to the company and competitiveness. Japanese auto exports to the U.S.: more than a third - Autos account for over one-third of total Japanese exports to the United States. Trump state visit to Japan: May 25, 2019 - Seen as politically sensitive for Prime Minister Abe. G20 summit in Osaka: late June 2019 - Another key diplomatic moment for Japan during negotiations. Japanese parliamentary elections: July 2019 - Raises political stakes for Abe during trade talks. World Trade Week proclamation: May 19–25, 2019 - Trump proclaimed the week after issuing protectionist trade actions.

Pivotal Quotes: "Obviously, this is totally, totally ridiculous. Car imports and car power imports from the EU and Japan are not actually a national security threat." — Samir Keynes: Opening critique of the auto proclamation. "There are ways to incentivize that. There are research programs and grant programs that they could put out that would very much target those research efforts on the things that are important to national security." — Kristin Jicek: Explaining better tools than tariffs for encouraging domestic R&D. "This is just different. This is turning into the restriction of competition in an attempt to help out some unrealistic definition of what they want to be an American-only company." — Chad Bown: Characterizing the shift in Trump’s auto policy.

Implications: The episode suggests U.S. trade policy is being used for leverage and industrial reshaping rather than coherent security goals. Automakers, suppliers, and allies face continued uncertainty, while the metal rollback may ease pressure only temporarily.