FACT CHECK: Trump off about auto trade
WASHINGTON — President Donald Trump offers an incomplete picture of American trade in making his case for penalties on foreign goods. Here’s a look at his recent comments as he prepares to impose big tariffs on imported steel and aluminum and threatens action on a broader trade front:
TRUMP: “If the E.U. wants to further increase their already massive tariffs and barriers on U.S. companies doing business there, we will simply apply a Tax on their Cars which freely pour into the U.S. They make it impossible for our cars (and more) to sell there. Big trade imbalance!” — tweet Saturday.
THE FACTS: He’s wrong that automakers find it impossible to sell U.S.-made cars in Europe and that European cars come into the U.S. “freely.” He’s right about a big imbalance, but his impulse to exaggerate is on display here.
The U.S. Census Bureau shows $13.8 billion in U.S. auto and parts exports last year to four countries in Europe: Germany, Britain, Belgium and France.
It shows $51.3 billion in U.S. imports of autos and parts from five countries in Europe: Germany, Britain, Sweden, Italy and Austria.
The EU applies a 10 per cent duty on cars made in the U.S. The U.S. applies a 2.5 per cent duty on cars made in Europe.
In addition, Ford and Fiat Chrysler make vehicles in Europe, while Mercedes, Volkswagen-Audi and BMW have factories in the U.S. — operations that could also become part of a trade war.
TRUMP: “The United States has an $800 Billion Dollar Yearly Trade Deficit because of our ‘very stupid’ trade deals and policies. Our jobs and wealth are being given to other countries that have taken advantage of us for years. They laugh at what fools our leaders have been. No more!” — tweet Saturday.
THE FACTS: No, the trade deficit is not $800 billion. It’s $566 billion. The U.S. in 2017 bought $810 billion more in foreign goods than other countries bought from the U.S., says the Census Bureau. That deficit in goods was offset by a $244 billion trade surplus in services, like transportation, computer and financial services, royalties and military and government contracts.
Similarly, Trump has complained about a trade deficit with Canada even though the U.S. runs an overall surplus with that country — thanks to the value of services.
The president said in December that he corrected Canadian Prime Minister Justin Trudeau on this matter when they spoke. But the U.S. Trade Representative’s Office said the U.S. enjoyed a $12.5 billion trade surplus with Canada in 2016. A $12.1 billion U.S. deficit in goods was overcome by a $24.6 billion surplus in services.
TRUMP: “When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!” — a tweet on Friday in support of his announcement that he will impose tariffs of 25 per cent on steel imports and 10 per cent on aluminum imports.
THE FACTS: Trade wars have not been easy to win.
The president’s argument, in essence, is that high tariffs will force other countries to relent quickly on what he sees as unfair trading practices, and that will wipe out the trade gap and create factory jobs. But the record shows that tariffs, while they may help certain domestic manufacturers, can come at a broad cost. They can raise prices for consumers and businesses because companies pass on at least some of the higher costs of imports and imported materials to their customers. A trade war is also bound to mean that other countries will erect higher barriers of their own against U.S. goods and services, thereby punishing American exporters.
The United States first became a net importer of steel in 1959, when steelworkers staged a 116-day strike, according to research by Michael O. Moore, a George Washington University economist. After that, U.S. administrations imposed protectionist policies, only to see global competitors adapt and the U.S. share of global steel production decline.