Greer Says USMCA Rewrite Will Keep Tariffs on Mexico; Discusses Board of Trade

"The U.S. is gonna ... have tariffs" on Mexico. "As long as we have a giant trade deficit, we're going to do tariffs," he said.

He noted that the president is concerned about the trade deficit with Mexico, which has grown as the overall trade deficit sinks.

"We want to see that deficit go down. I think that over the course of these negotiations, we are going to be talking about rules of origin in a way that enhances U.S. content in these goods," he said.

You'd expect more imports from Mexico when you hike tariffs on Asian manufacturing powerhouses, since, until last year, goods that met USMCA rules of origin entered duty-free. Greer obliquely acknowledged that, in referring to a meme of a guy in a hot dog suit that says, "We're all trying to figure out who did this," when that was the man who crashed the hot dog car.

However, Greer said, if countries in the region agree on external tariffs, "it makes it easier to give preferential treatment to folks in the region." He said Mexico has already hiked tariffs on non-free-trade agreement partners, which includes China.

Froman, who now leads the Council on Foreign Relations, which hosted the Q&A, asked Greer to explain what the Board of Trade will do. Greer said there will be a Federal Register notice issued soon that will ask which products should be included in the $30 billion in imports the U.S. wants to import from China with lower tariffs.

He said most imports from China are subject to "quite high" tariffs, but this subset won't be.

Froman asked Greer what was accomplished in the president's trip to Beijing earlier in the month.

"Well, I get to keep tariffs on China, which is very awesome," Greer quipped, and he said China is continuing to send critical minerals and magnets made with rare earths to U.S. buyers.

Froman asked if other countries will be at a disadvantage when the U.S. lowers tariffs on some Chinese goods, but Greer brushed it off, saying all the reciprocal trade agreements include carve-outs.

He didn't give a number that he expects the Chinese broad tariff to be, though he said the U.S. sets tariffs at a level that "we kind of know they can tolerate" when negotiating with all partners.

"My sense is that there will always be a higher average tariff coming out of China, because that's part of the source of some of our largest problems over capacity and our trade deficit," he said.

Froman asked if the core inflation rate of 2.8% is a reason to roll back tariffs on products we don't need to manufacture in the U.S. He asked: "We don’t have to make pencils and T-shirts do we?"

"Well, I mean, someone has to," Greer responded. He then said he's happy to buy T-shirts from trusted partners as long as the U.S. doesn't have a $1 trillion global trade deficit.

He said when people argue to him that certain manufacturing inputs aren't available in the U.S., he says they would be made here if whole ecosystems hadn't been offshored.

Greer said that some of the Section 301 investigations would be completed in coming months, and that USTR will put out a Federal Register notice on its recommendations.

If tariffs or quotas are part of those recommendations, they won't take effect immediately, because the administration will seek comments.

"We would expect and hope that the public puts in comments and says we see what your proposal is, whether it's tariffs or quotas, [and say]... 'I see what you're trying to do, you propose this, I disagree with you because of X,' or, 'I agree with you, please do that.'"

He said the president is not interested in exclusions to the new Section 301 tariffs, but what is tariffed could be shaped by the input ahead of the action.

With Greer's description of issuing recommendations in "coming months," that raises the possibility that the global 10% tariff levied under Section 122 could end before Section 301 tariffs replace it.

Froman asked Greer if the Section 122 tariffs could be renewed in late July.

"When you look at that statute, it says they expire," he replied, but it is silent on whether the executive can impose the tariffs a second time if the balance of payments was not solved within the six-month deadline. He said he couldn't venture an opinion on whether they could be brought back, but said the lack of guidance on re-issuing the tariffs was in "tension" with the explicit language making them temporary.

Froman asked him if the concept of a most favored nation rate -- that all exporters face the same rate unless there is a free-trade agreement that lowers or eliminates tariffs -- is over.

Greer said that for certain products, it will continue, but in agriculture and sensitive industrial sectors, it will end. "We should be able to treat countries in different circumstances differently," he said.