87: Trump Shifts His National Security Threats (Again)

Episode Summary

Executive Summary: This Trade Talks episode dissects two Trump-era trade actions from May 17: auto imports from Japan and the EU were labeled a national security threat, while steel and aluminum tariffs on Canada and Mexico were lifted. The hosts argue the auto rationale is economically incoherent, globally interwoven, and likely to trigger legal and diplomatic backlash, while the metals deal offers short-term relief but preserves uncertainty and potential future conflict.

Main Topics: Autos as a 'national security' threat (Priority: 5/5): The hosts criticize the proclamation that imports of cars and parts from Japan and the EU threaten U.S. national security, arguing it is really a protectionist economic policy aimed at limiting imports and forcing negotiations. Imports, market share, and R&D (Priority: 5/5): The discussion centers on the administration’s claim that imports are squeezing GM and Ford, reducing their market share and therefore their ability to invest in R&D, a premise the hosts view as oversimplified and unsupported. Globalized auto industry makes the policy incoherent (Priority: 4/5): The episode emphasizes how automakers and suppliers are multinational, with production, R&D, and ownership structures crossing borders, making the line between 'American' and foreign firms blurry and the policy hard to apply. Political and negotiation context for Japan and the EU (Priority: 4/5): The timing of the auto threat is examined against major upcoming diplomatic and political events in Japan, as well as broader U.S.-China tensions, which could make alliance management and trade talks harder. Lifting steel and aluminum tariffs on Canada and Mexico (Priority: 5/5): The hosts explain why the removal of Section 232 tariffs on metals was a surprise, what political forces may have driven it, and how Canada and Mexico received relatively favorable terms. Uncertainty, safeguards, and future trade conflict (Priority: 4/5): Although tariffs were lifted, the agreement includes vague safeguards and retains the possibility of snapback tariffs if imports surge, potentially creating more uncertainty and future disputes. World Trade Organization disputes and broader trade strategy (Priority: 3/5): The episode notes that Canada and Mexico agreed to end WTO disputes over these tariffs, but other countries’ cases remain active, while the broader effect may be to clear obstacles to USMCA passage rather than resolve trade tensions.

Key Arguments: The auto proclamation is not about genuine national security; it is a disguised effort to restrict competition and pressure Japan and the EU into export restraint or other concessions. The argument that imports are causing the decline of GM and Ford is weak because foreign firms also build cars and conduct R&D in the United States, and many competitive pressures come from multinational firms already operating domestically. Research and development in autos is increasingly done through global partnerships across firms and supply chains, so isolating it to American-owned companies is unrealistic and economically inefficient. If the administration truly wants more domestic auto R&D, targeted incentives and grant programs would be more logical than restricting imports. The steel and aluminum tariff rollback helps Canada and Mexico, but the deal’s safeguard language preserves the possibility of renewed tariffs and adds uncertainty to North American trade. The deal may have been driven by domestic political concerns, including farmer retaliation and the need to focus on the China trade fight, rather than by a shift in trade philosophy. Ending the tariffs removes one obstacle to USMCA ratification, but it does not eliminate broader political or legal resistance. The auto threat is likely to strain relations with allies at a moment when the U.S. needs support against China, not additional friction with Japan and Europe.

Data Points: Date of announcements: May 17, 2019 - The episode focuses on two major trade announcements released on the same day. Section 232 steel and aluminum tariffs start date: June 1, 2018 - Tariffs on Canada and Mexico had been in place for almost a year before being lifted. U.S. light vehicle sales share from Japan and Germany: around 13% - Used to argue that imports are meaningful but not the sole cause of GM/Ford market-share losses. Canadian and Mexican share of U.S. steel imports: about 25% combined - Shows the importance of Canada and Mexico as steel suppliers to the U.S. Canadian and Mexican share of U.S. aluminum imports: over 40% combined - Demonstrates why aluminum tariffs hit Canada especially hard. U.S. steel capacity utilization: 82% - Reported as the post-tariff level, up from the prior year. U.S. steel capacity utilization a year earlier: less than 77% - Comparison point used to show tariffs raised domestic utilization. Ford tariff cost estimate: $1 billion - Ford’s CEO said metal tariffs cost the company roughly this amount and hurt competitiveness. Trump visit to Japan: May 25, 2019 - Highlighted as a key diplomatic moment amid auto-trade tensions. G20 summit in Osaka: end of June 2019 - Another major political and trade event for Japan. Japanese parliamentary elections: July 2019 - Makes Prime Minister Abe especially sensitive to trade pressure. World Trade Week proclamation period: May 19 through May 25, 2019 - Trump’s proclamation ironically celebrating trade in the same period as new trade restrictions and concessions. U.S. autos’ share of Japanese exports to the U.S.: more than one third - The hosts note Japan’s vulnerability because autos are such a large part of its exports to America.

Pivotal Quotes: "Obviously, this is totally, totally ridiculous." — Samir Keynes: His reaction to the claim that car imports threaten U.S. national security. "There is a whole lot of reasons for the fall of market share of General Motors and Ford... restricting imports of vehicles doesn't necessarily make General Motors and Ford do more R&D here." — Kristin Jicek: Explaining why the administration’s import restriction logic is too simplistic. "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." — Samir Keynes: A summary criticism of the administration’s auto policy approach.

Implications: The episode suggests Trump’s trade actions may create short-term political wins but add legal risk, strain alliances, and preserve uncertainty for North American industry. Automakers, suppliers, and trade partners should expect more bargaining, not stable policy.