Toyota Awaits Some Details on USMCA Implementation, Confident Changes Manageable

Implementation of the USMCA isn't the level of change that's expected to add costs to Toyota, according to Leila Afas, director of international policy for Toyota North America. “We fortunately are in a very good position,” she said in response to a question from International Trade Today during a Nov. 19 webinar hosted by the Peterson Institute for International Economics. She said Toyota sources a lot of its engines and transmissions in the U.S.

She had no news on Toyota's request for a longer phase-in for some models that won't meet the regional value content in three years. She said that as far as she knows, it's still under review. With regard to the rapid-response mechanism, she said companies are “eager to see how the i's are dotted and the t's are crossed” -- for instance, will complainants have to offer evidence? What response will companies be allowed to make during an investigation?

Afas gave an example of a far more disruptive moment for Toyota, when President Donald Trump threatened to close the border with Mexico over migration issues, or put tariffs on all imports from Mexico. She said employees from dozens of divisions flew down to Toyota North America's headquarters in Texas, trying to assess the risks and figure out if they could mitigate them. Although the tariffs never came to pass, Afas said, that time was a “deadweight loss.” She said the economic impact of tariffs isn't just the cost of more expensive inputs, but also includes the uncertainty of how long those costs will last.

Although Congress has introduced bills that would limit the president's ability to enact tariffs under the authority for that Mexico action, under Section 301 and under Section 232, PIIE Senior Fellow Gary Hufbauer said one of House Ways and Means Committee and Senate Finance Committee members' first priorities next year should be a broad oversight bill to give Congress more say on tariffs.

He said renewing Trade Promotion Authority should be No. 2, with instructions on what countries it's important to conclude agreements with, and what should be covered. Hufbauer said the U.S. should consider inviting the United Kingdom to join USMCA, rather than trying to conclude a bilateral deal.

When asked if that would irritate the European Union, he said he didn't think so. He added, “I would love to see U.S.-EU relations restored,” but said he thinks it will take 18 months to two years to accomplish. Hufbauer also believes Congress should be more assertive in saying what reforms it wants for the appellate body. Hufbauer said he thinks the appellate body should have time limits on reaching decisions, and write decisions with a narrower scope. He also thinks the appellate body has interfered too much with antidumping and countervailing duty laws of members.