On Monday’s broadcast of CNBC’s “Squawk Box,” White House National Economic Council Director Kevin Hassett stated that most of the trade in Canada and Mexico has American parts and if there are “U.S. parts that get shipped over to Mexico, and then they assemble them into a car, then, if you put a tariff on that, then a lot of the tariff is on U.S. parts. That doesn’t make sense. And that’s why the exemptions are there.” And he believes that as tariffs are finalized “people are going to have lots of levers that they can pull as the final tariffs are visible, and one of them is having more U.S. content, if you have more U.S. content, that will be quite helpful.”
Hassett said, “[T]here’s a huge amount of trade, almost $1 trillion of imports between Canada and Mexico. And one of the things that we talked about from the beginning and then did after we saw some progress on fentanyl, is exclude the ‘USMCA stuff.’ The USMCA stuff is 50, 60% of all the trade in Canada and Mexico. And to get something qualified as a USMCA good, you just have to have U.S. content. So, if there [are] U.S. parts that get shipped over to Mexico, and then they assemble them into a car, then, if you put a tariff on that, then a lot of the tariff is on U.S. parts. That doesn’t make sense. And that’s why the exemptions are there.”
He continued, “And so, I would expect that one of the things that’s going to happen is that people are going to have lots of levers that they can pull as the final tariffs are visible, and one of them is having more U.S. content, if you have more U.S. content, that will be quite helpful.”
Hassett also said that “even if you take the high-end estimates of the tariff revenue, they’re going to be just a tiny fraction of the size of the tax cuts, which are almost surely going to be in place by the summer.”
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