Trump's New Tariffs Could 'Cripple' US Automakers

Plus - Is the military stretched too thin? By Michael Rainey Trump’s Latest Mexico Tariffs Could Cost US Consumers $92 Billion President Trump abruptly announced on Thursday new tariffs on goods imported from Mexico, which he said were intended to pressure the country to stop the flow of immigrants across the U.S. southern border. A 5% tariff will go into effect on June 10 and rise 5% each month until it reaches 25%, Trump said in a [tweet](. The tariffs will continue “until the Illegal Immigration problem is remedied,” the president wrote. Defending the tariffs Friday, Trump expanded his argument beyond immigration, citing the trade deficit and drug trafficking as issues he was also targeting. “Mexico has taken advantage of the United States for decades,” Trump [tweeted](. “Because of the Dems, our Immigration Laws are BAD. Mexico makes a FORTUNE from the U.S., have for decades, they can easily fix this problem. … In order not to pay Tariffs, if they start rising, companies will leave Mexico, which has taken 30% of our Auto Industry, and come back home to the USA. Mexico must take back their country from the drug lords and cartels. The Tariff is about stopping drugs as well as illegals!” The surprise move rattled markets Friday, and drew criticism from numerous and varied sources. Here’s a roundup of comments and reactions: Billions in added costs: CNBC’s Jeff Cox [did some quick math]( on how much the tariffs could cost: “Based on 2018 trade numbers, in which the U.S. imported $371.9 billion from Mexico, that would equate to a tax on U.S. consumers that would start at $18.6 billion and escalate to just shy of $93 billion.” Key Republicans not on board: Multiple lawmakers said they oppose the new tariffs, including several Republicans. Sen. Chuck Grassley of Iowa [said]( in a statement, "Trade policy and border security are separate issues. This is a misuse of presidential tariff authority and counter to congressional intent." Grassley added, "I support nearly every one of President Trump’s immigration policies, but this is not one of them.” Sen. Pat Toomey (R-PA) [commented]( “The president’s use of tax hikes on Americans as a tool to affect change in Mexican policy is misguided. It is past time for Congress to step up and reassert its Constitutional responsibility on tariffs.” Big business registers a complaint: The Business Roundtable released a [statement]( saying, “Imposing unilateral tariffs on Mexican imports would be a grave error. Business Roundtable strongly urges the Administration not to move forward with these tariffs, which would create significant economic disruption and tax U.S. workers, farmers, consumers and businesses.” U.S. automakers are particularly vulnerable: If the tariffs were to fully take effect, they would “cripple” American car manufacturers, [according to analysts]( at Deutsche Bank. U.S. automakers, who are highly dependent on Mexican imports, would face $23 billion in increased costs, resulting in an average price hike for consumers of $1,300 per vehicle. Even Trump’s top trade adviser is opposed: The Wall Street Journal’s Vivian Salama and William Mauldin [report]( that U.S. Trade Representative Robert Lighthizer argued against the new tariffs, saying they would make it harder to ratify the new U.S.-Mexico-Canada Agreement, which is meant to replace NAFTA. Chris Krueger of Cowen Research underlined that point: “In the space of a few hours last night, Trump overturned all we thought we understood about the near term direction of the Administration’s trade strategy,” Krueger wrote. “Trump unveiled a one-two punch that we believe will make USMCA extremely hard to pass in both Mexico and the U.S.” Taking back the tax cuts: Joseph Brusuelas, chief economist at RSM, [tweeted]( “Policy incoherence in action: Increasing taxes to 25% on all Mexican imports would yield $86.6 billion. That would offset more than half of the fading effects of the 2017 TCJA which was designed to boost productivity enhancing investment. Real economy will pay the price.” Losing credibility: “I don’t see how our trading partners will continue to negotiate with us as if we have any credibility going forward,” Emily Blanchard, a trade economist at Dartmouth, [told]( The New York Times’ Neil Irwin. “They’re going to have a much harder time selling any costly domestic reform or sacrifice that is a concession to the U.S., because the U.S. is acting like an erratic bully.” Is it just a distraction? Some critics speculated that Trump’s move served as a distraction from bad press surrounding the Mueller investigation and that Trump would withdraw the tariffs this summer, when immigration levels across the southern border tend to fall due to the heat. Vox’s Matthew Yglesias [wrote]( that “six to eight weeks from now, Trump should have a pretty easy off-ramp from this policy and an opportunity to declare victory even if the concessions he manages to wring from Mexico are relatively minor.” Immigration hardliners applaud: Some Trump supporters see the move as long overdue. “President Trump went out of his way to work with Mexico to alleviate this crisis,” former White House adviser Stephen Bannon [told]( The New York Times. “They failed to act. Now he dropped the hammer. The ratcheting up to 25 percent will get their attention.” Map of the Day: Big Drop in Medicaid and CHIP Enrollment A [new study]( by the Georgetown University Health Policy Institute finds that about 828,000, or 2.2 percent, fewer children were enrolled in Medicaid and CHIP nationally at the end of 2018 compared to the year before. Such a large drop is unusual and is unlikely to be driven by a strong economy pulling more children into private insurance plans, the report says. Instead, the decrease is likely connected to the “repeal of the individual mandate penalty, reduced funding for outreach and consumer assistance, anti-immigrant rhetoric and policy, and administrative procedures,” the report says. This map from the[Desert News]( shows state-level changes in Medicaid and CHIP enrollment. A New Test Case for Medicaid Spending Caps Utah Gov. Gary Herbert (R) [released]( a new proposal to cap Medicaid spending in his state on a per capita basis. Long a conservative objective, the move would have to be approved by the Trump administration. Last year, voters in Utah approved the expansion of Medicaid in the state under Obamacare, but the Republican-controlled legislature limited eligibility to people with incomes up to 100% of the poverty level, not the 138% percent as defined by the Affordable Care Act, as part of an effort to control costs. Spread the word! Tell your friends they can [sign up here]( to get their own copy of this newsletter. Send your tips and feedback to yrosenberg@thefiscaltimes.com. Or connect with us on Twitter: [@yuvalrosenberg]( [@mdrainey]( and [@TheFiscalTimes](. Quote of the Day: A Stretched Military “The bottom line for both the Navy and the Air Force is that their capacity goals of 355 ships and 386 operational squadrons respectively are likely unattainable, and attempting to achieve them risks severely unbalancing the composition of the joint force.” – Susanna V. Blume of the Center for New American Security, a bipartisan think tank in Washington that focuses on national security issues. In a recent analysis of the $750 billion defense budget request for 2020, Blume [said]( that high demands on the military are putting a squeeze on both military readiness and essential investments in advanced technologies. Your Prize for Making It Through the Week A [dog mayor]( Why not. No stranger than an [eight-way tie for first in a spelling bee](. News - [Trump Forges Ahead with Tariff Threat on Mexican Imports Despite Protests]( – Washington Post - [Trump’s Two-Front Trade War Triggers Alarms]( – Politico - [Trump Bets the U.S. Economy on Tariffs]( – New York Times - [Trump Risks Throwing Manufacturers Offline]( – Bloomberg - [Trump’s Mexico Tariffs Would Hit Some Key 2020 States Particularly Hard]( – CNBC - [German Bond Yields Hit New Sub-Zero Record; Treasuries Surge]( – Bloomberg - [Company Touted by Trump to Build the Wall Has History of Fines, Violations]( – CNN - [Trump’s Metals Tariffs Added Some Jobs and Raised Consumer Prices]( – New York Times - [Spray Cheese, Beef Jerky and Stuffed Olives to Be Counted as Staples Under Trump Administration Food Stamp Proposal]( – Washington Post - [Mired in Medical Debt? Federal Plan Would Update Overdue-Bill Collection Methods]( – Kaiser Health News Views and Analysis - [The New Tariffs Against Mexico Signal the U.S. Isn’t a Reliable Negotiating Partner]( – Neil Irwin, New York Times - [Stop Trump on Trade]( – Michael R. Bloomberg, Bloomberg - [The Trump Tariffs vs. the Trump Tax Cuts — and the Impact on Economic Growth]( – James Pethokoukis, American Enterprise Institute - [Just a Few of the Reasons That Trump’s Mexico Tariffs Are Deeply Stupid]( – Catherine Rampell, Washington Post - [Trump’s Threatened Mexico Tariffs: Credible, Irrational, Doomed]( – Karl W. Smith, Bloomberg - [Why Trump's New Mexico Tariffs Won't Work]( – Joel Mathis, The Week - [Tariffs, Mr. Trump’s Miracle Cure]( – New York Times Editorial Board - [What Marco Rubio Gets Right — and Wrong — About the Decline of American Investment]( – Lawrence H. Summers and Anna Stansbury, Washington Post - [Cold Warriors Tanked Big Pharma Regulation]( – Livia Gershon, JSTOR Daily - [The Striking Evidence That Medicaid Expansion Can Help Single Moms Get Jobs, Briefly Explained]( – Dylan Scott, Vox - [Many Adults Targeted by Medicaid Work Requirements Face Barriers to Sustained Employment]( – Michael Karpman, Urban Institute - [Expanding the EITC for Workers Without Resident Children]( – Elaine Maag, Kevin Werner and Laura Wheaton, Urban Institute Copyright © 2019 The Fiscal Times, All rights reserved. You are receiving this newsletter because you subscribed at our website, thefiscaltimes.com, or through Facebook. Our mailing address is: The Fiscal Times 399 Park AvenueNew York, NY 10022 [Add us to your address book]( If someone has forwarded this email to you, consider signing up for The Fiscal Times emails on our [website](. Want to change how you receive these emails? [Update your preferences]( or [unsubscribe](.