Lutnick Says Export Credit for Automakers Could Be in Reciprocal Deals
Two Republican senators on the Appropriations Committee whose states have major foreign automakers' factories asked Commerce Secretary Howard Lutnick if the administration would support an export credit for major auto exporters. Sen. Katie Britt, R-Ala., referred to the fact that about two-thirds of the Mercedes vehicles assembled in Alabama are exported, and asked if an export credit is still under discussion.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
There were no details of how this export credit might work in the hearing, but Handelsblatt, a German business publication, said the idea was that the value of exports could be deducted from the tariffs owed.
The current Section 232 action on autos forbids the use of drawback, which is a way of recouping tariffs paid with exports.
Sen. Lindsey Graham, R-S.C., said at the hearing, "This export credit makes sense to me," and Lutnick agreed. Graham said that of the BMWs assembled in South Carolina, 60% are exported.
However, Lutnick said an export credit for carmakers with U.S. plants would be offered only as part of a trade deal. He said if Japan and South Korean markets are not open to U.S. auto exports, there will be no export credit.
He asked: "If you’re not willing to open your market, why are we willing to give you anything?"
But Lutnick also said the U.S. is only willing to lower its own tariffs and tariff barriers for certain products, as there are products that the U.S. wants to manufacture domestically. "We don't want other people making them," he said.
Cars and pharmaceuticals were examples he gave of products the U.S. wants to reshore.
The limits of the U.S. openness to true reciprocity were elicited through skeptical questioning from Sen. John Kennedy, R-La.
Kennedy asked Lutnick, if Vietnam said that it would remove all its tariffs and all trade barriers, if the U.S. would do so, would the U.S. accept that offer?
"Absolutely not," Lutnick replied. He added: "That's a terrible deal!"
He said that Vietnam exported $125 billion in goods and only bought $12.5 billion in U.S. products. The actual 2024 figures were $136 billion and $13 billion.
He didn't suggest that was only because of trade cheating, though he complained that Vietnam imports goods from China, marks them up, and exports them to the U.S. He also noted the U.S.'s buying power is 10 times that of Vietnam. (The U.S. has 19 times the GDP per person that Vietnam does.)
Kennedy then asked incredulously, "Is reciprocity not one of your goals? What are you negotiating in these trade deals, then? You just said that if a country came to you and offered the ultimate reciprocity, no tariffs, no trade barriers, in return for us doing the same, you would reject that."
Lutnick said that even if Vietnam promised to stop buying Chinese inputs, the U.S. would only want to lower its tariffs and trade barriers to Vietnam on goods that Vietnam is good at making -- and that the U.S. doesn't want to produce.
Kennedy asked if Lutnick is advising the president that trade deficits are always bad. He said no, if another country invented a cure for cancer, and the U.S. didn't have the technology, it would be fine to run a trade deficit for that.
Kennedy said in a brief hallway interview that he didn't feel he got clarity about the administration's trade goals through his questioning.
Subcommittee President Jerry Moran, R-Kan., said that the aerospace industry, which is Kansas' second-largest manufacturing sector, has a strong trade surplus. He asked Lutnick if zero-for-zero tariff deals on aerospace parts will be maintained after the Commerce Department makes its recommendations from a Section 232 report. "I wonder how the department will protect the surplus," he said.
Lutnick said that, like with the U.K., the administration is open to keeping zero tariffs on aerospace components and engines "provided they buy our aircraft."
He said the department will probably have recommendations for the president on how to proceed on protecting domestic aerospace parts manufacturing by the end of the month.
Britt also noted the Section 232 aerospace investigation, and reminded Lutnick that Airbus builds planes in Mobile, Ala., and she wants the administration to advocate for both Airbus and Boeing planes built in the U.S. as it shapes its actions. Lutnick said they would.
Sen. Jeanne Shaheen, D-N.H., told Lutnick that she's hearing from constituent businesses and believes the Section 232 tariffs on steel are not helping to bolster national security. While she said she supports the idea that the U.S. needs healthy steel and aluminum production for its national security, "I don't agree on the way it's being done because we're not going to have the steel that we need immediately to provide the supplies that we need immediately."
She told him a company that needs steel for ball bearings used to import from the Indo-Pacific and Canada, and had one domestic supplier. She said now, that company is finding the lead time for the metal it needs has gone from 20 weeks to 2.5 years.
Lutnick said that's illogical, adding that the price could go up, but there can't be shortages, as there's no sanctions on foreign steel. Lutnick said he'd be happy to meet with her later and explain how the steel market works with the tariffs.
With irritation, Shaheen replied that the company is telling her there's a problem with lead times. "They don't need you to explain it to them," she said. "They know, because they've been in business for years."