Donald Trump, budget hawk who runs trillion-dollar deficits and free-market Republican who slaps tariffs on everything from metals to French wine to residential washing machines to imported Chinese badger hair, is angling to dictate who makes cars, when, where and how.
As part of the wrangling process around the USMCA (which Trump continues to insist is being held up by “Do Nothing Democrats”) the administration has engaged in talks with automakers both at home and abroad in an effort to convince everyone (including Congress) that the White House should be able to “unilaterally administer the production rules for companies”.
That’s according to yet another trade scoop from Bloomberg, whose Jenny Leonard cites people familiar with the “effort”. (And “effort” in this context is a polite euphemism for “grandiose bullying campaign”.)
This push is going on as Bob Lighthizer labors to get the USMCA past House Democrats and over the finish line. The administration has touted “new NAFTA” as an example of the president’s purportedly “legendary” dealmaking prowess, although not everyone is convinced the deal is as monumental as Trump claims.
Talks between automakers and Lighthizer’s minions are focused on “transition plans” which allow up to five years before companies need to fully meet the rigorous stipulations to qualify for duty-free, cross-border market access. Those plans permit each country to take a case-by-case approach to dealing with companies affected by the trade deal.
Hopefully, you can see the problem with that arrangement. Hint: It opens the door to the Trump administration picking favorites, which in turn gives a president who isn’t shy about bringing the power of his office to bear on private enterprise, carte blanche to do just that.
Specifically, it would allow Trump to approve or reject transition plans based not on a strict, well-articulated set of rules, but rather on a subjective assessment. Not to put too fine a point on it, but that arrangement is straight out of a Sopranos episode. Companies would be bribing Trump officials in no time and when it comes to big decisions with the potential to make headlines, the White House would almost surely leverage the process to secure outcomes that would make the president look good.
And so, auto companies and Congress are, to quote Bloomberg, “asking USTR to commit to uniform rules so they can plan accordingly and don’t have to fear retribution for opening a plant in Mexico, for instance, instead of the US”.
In addition to being right out of a script for a mob docudrama, this situation threatens to negate one of the only objectively good outcomes that passage of the USMCA would unequivocally deliver: certainty.
This has now hung in limbo for so long that corporate management teams just want it to be over with, but if the process described above isn’t changed to something less prone to political interference, executives will face an “out of the frying pan and into the fire” type scenario.
From a macro perspective, it would be impossible to summarize this any better than Bloomberg’s Leonard, who notes that “the push comes amid Trump’s tariff-led assault on supply chains that run through China [and] illustrates how much his administration has drifted from Republicans’ free-market ways and is willing to employ the sort of coercive tools used in command economies like China to force domestic production”.
Any questions?
And Trump wants to get NAFTA – excuse me, USMCA – approved when?