Mara Lee

President Donald Trump will terminate NAFTA and start over if Mexico and Canada do not agree to change their ways, he said in a June 19 speech. Trump, who was speaking to the small business association National Federation of Independent Business, pivoted to NAFTA after complaining that Mexico does not prevent Central Americans from traveling to the U.S. to seek asylum. "They do nothing for us, and I see it through NAFTA," he said of Mexico. "I see with $100 billion-plus that they make on trade through NAFTA -- one of the worst deals ever made by this country. A disaster." Trump acknowledged that people ask him not to terminate NAFTA, and he said he tells them, "But it's no good." He said they respond: "Yeah, but we know what we have." The audience laughed.

Republicans and Democrats on the Senate Finance Committee criticized Commerce Secretary Wilbur Ross on June 20 over the steel and aluminum tariffs and the implementation of granting exclusions for certain imports subject to those tariffs. Democrat Sen. Claire McCaskill, who described a nail maker in her home state of Missouri who is laying off more than half its 500-person workforce as its inputs' cost increases, told him: "it appears to me a chaotic and, frankly, incompetent manner you're picking winners and losers." Only Sen. Sherrod Brown, D-Ohio, asked supportive questions during the hearing on tariffs.

Passage of the Miscellaneous Tariff Bill in the Senate is blocked because Sen. Roy Blunt, R-Mo., is asking that his OUTDOOR Act move with it, or get a vote on its own. Blunt, in a brief hallway interview on June 19, said he has a hold on the MTB, though he doesn't know if his is the only hold. The OUTDOOR Act would eliminate tariffs on 69 recreational outerwear items (see 1708140031). Although those goods would no longer be subject to tariffs, the importer would pay a 1.5% fee on clothing from most countries, and that money would seed a Sustainable Textile and Apparel Research Fund.

While some think the threat of an additional 10 percent tariff on $200 billion in Chinese goods (see 1806180058) could come to fruition as soon as August, China economic scholars disagree on whether a trade war is really beginning, or whether China will agree to buy more U.S. goods before these tariffs ever bite. Edward Alden, a trade expert at the Council on Foreign Relations, said the fact that the administration set the tariff at 10 percent, not a prohibitive level, means that importers will largely keep their Chinese suppliers. "It's quite clear its purpose is to be imposed rather than being used as market leverage," he said. "At the moment, I don't see any way out of this. Anyone who thinks it stops here isn't paying attention."

Despite repeated lobbying trips from Commerce Secretary Wilbur Ross, the Senate passed a version of the defense authorization bill June 18 that includes an amendment designed to retain the seven-year export ban on Chinese telecommunications equipment manufacturer ZTE. However, the way the amendment is written, the Commerce Department would retain the discretion to allow ZTE to continue importing semiconductors from U.S. sources.

Nearly 60 trade groups asked Congress to hold hearings on the president's use of tariffs and quotas on allies, and to consider "whether amendments to existing delegations of authority are necessary to clarify Congress’ important role in the execution of the nation’s trade policy." The letter, sent June 18, also praised Senate Finance Committee Chairman Orrin Hatch, R-Utah, for scheduling such a hearing for June 20.

Most of the computer, aviation and automotive, electrical and machinery products that will be hit by tariffs under Section 301 are produced by foreign companies operating in China, according to an updated study from the Peterson Institute for International Economics. The think tank says it aims to do "truth telling about the benefits of globalization" as well as study labor market adjustment due to globalization and how to find a sustainable growth model for mature economies.

The U.S. will begin collecting an additional 25 percent in tariffs on 818 lines of the original 1,333 tariff lines proposed in April, the Office of the U.S. Trade Representative announced June 15. The tariffs will take effect July 6. Televisions, one of the most significant consumer products on the original list, are no longer facing tariffs.

China will implement retaliatory 25 percent tariffs on 545 tariff lines, largely agricultural and auto targets, but also "aquatic products," on July 6, it said in a statement. Like the U.S., it is saving an additional $16 billion in targets in reserve. For China, those will be chemicals, energy imports and medical equipment. For the U.S., semiconductors, plastics, railcars, tractors, cranes and new industrial machinery lines could be in the second phase. China's tariffs are in response to the Section 301 tariffs on imports into the U.S. set to begin July 6 (see 1806150003)

Citing the inflationary effect of antidumping and countervailing duties on softwood lumber, Reps. Kenny Marchant, R-Texas, and Brian Higgins, D-N.Y., led a letter asking that the administration reopen discussions with Canada, with the goal of reaching a negotiated agreement on softwood lumber imports. The two countries operated under the most recent agreement from 2006 to 2015. Canadians have said they're willing to agree to a new agreement with an export cap, but, if demand is high, a mechanism to lift the cap (see 1708240031). The June 12 letter to Commerce Secretary Wilbur Ross and U.S. Trade Representative Robert Lighthizer said the antidumping and countervailing duties strain the relationship with one of the country's closest allies and cause "unnecessary cost increases" for home builders. In a press release announcing the letter, Marchant cites a National Association of Home Builders estimate that the duties add $7,000 to the cost of building a new house.