At a ceremony in the White House President Donald Trump signed an executive order authorizing a 25% tariff on imported steel and 10% on imported aluminum. The tariffs will go into effect in 15 days. Mexico and Canada are exempt from the tariffs for an indefinite time.
By exempting these two countries the President may have seriously weakened the U.S. case for these tariffs before the World Trade Organization. The Trump administration has argued that the tariffs are required by national security. Canada is the biggest supplier of steel and aluminum to the United States. Mexico is the #4 steel supplier. The United States and these countries wrapped up the seventh round of talks on NAFTA this week.
The President used the occasion to single out China’s auto industry as an instance of unfair competition. President Trump read Twitter posts today by Tesla founder Elon Musk at the ceremony to repeat that China charges a 25% import duty on cars, ten times the 2.5% tariff the United States puts on cars built in China.
Tesla (TSLA) has been mired in negotiations to open a factory in Shanghai. Chinese law now requires that any factory built in China be a 50/50 joint venture between the overseas company and a Chinese partner. Tesla wants to be the sole owner of the plant.
President Trump also challenged China to come up with a plan to cut the U.S. trade deficit in goods with China by $1 billion. That would seem to offer China (and the United States) an easy way to back away from confrontation since, according to figures the President repeats, the U.S. trade deficit with China is $800 billion. (Assuming that the President really meant $1 billion. I’ve seen stories saying it was $100 billion. And that the President said the U.S. trade deficit with China was $500 billion.)