EU takes on Trump's 'illegal' sanctions on Iran Presented by Semiconductor Industry Association

With help from Doug Palmer, Megan Cassella, Adam Behsudi, Helena Bottemiller Evich and Maxime Schlee

EU TAKES ON TRUMP’S ‘ILLEGAL’ SANCTIONS ON IRAN: Senior European officials on Monday were quick to criticize President Donald Trump’s renewed sanctions on Iran as “illegal,” and vowed to intensify efforts to thwart the U.S. measures.


Trump promised tough enforcement of new sanctions and warned violators of “severe consequences.” But the EU and the three European architects of the Iran nuclear accord — France, Germany and the U.K. — are pushing back in an effort to preserve the nuclear deal. That puts the United States in direct crossfire with its largest and strongest NATO allies.

Trump’s spin: “The United States is fully committed to enforcing all of our sanctions, and we will work closely with nations conducting business with Iran to ensure complete compliance,” Trump said in a statement on Monday. “Individuals or entities that fail to wind down activities with Iran risk severe consequences.”

Tehran's reaction: Iranian President Hassan Rouhani accused Trump of hypocrisy by offering to meet with Iranian leaders to begin talks on a new nuclear deal. “What's the meaning of negotiations when you impose sanctions at the same time? It's like someone pulling a knife to stab a rival or an enemy in the arm while at the same time claiming we should be talking and negotiating,” Rouhani said.

Brussels says the law is on its side: EU diplomats argue the Joint Comprehensive Plan of Action reached between Iran, the United States, Russia, China and leading European powers in 2015 has the strength of international law because it is part of U.N. Security Council Resolution 2231.

To underscore its intention to protect JCPOA, an EU “blocking statute” will take effect early this morning to shield European companies that continue doing business with Iran from U.S. secondary sanctions. It would allow EU companies to recover any damages, including legal costs, from entities — including U.S. banks and businesses — acting to enforce the U.S. sanctions.

However, senior Trump administration officials on Monday said they weren't worried the blocking statute would significantly weaken the impact of the United States reimposing sanctions on Iran. “We're very pleased that nearly 100 international firms have announced their intent to leave the Iranian market, particularly in the energy and the finance sectors,” a U.S. official told reporters during a conference call.

Prepare for November: Some U.S. sanctions against Tehran “snapped back” into effect at midnight Monday, but the most direct conflicts likely won’t come until November. U.S. sanctions intended to cripple Iran’s oil industry — the lifeblood of its economy — will come back into effect then.

China has already said it will continue buying oil from Iran. European officials also said they will look for ways to keep Iran’s oil business alive. POLITICO Europe’s David M. Herszenhorn has more.

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FORD, GM, FCA RANK HIGHEST ON ‘MADE IN AMERICA’ INDEX: U.S. brand automakers scored highest on American University’s annual “Made in America Auto Index,” which ranks 544 U.S. and foreign-brand cars based on seven criteria, including whether the vehicle is assembled in the United States and whether the engine and transmission are made in the U.S. It also considers where the company is headquartered and where it does its research and development.

“Our members have 10 of the Top 10 vehicles, 17 of the Top 20, and 19 of the Top 25,” Matt Blunt, president of the American Automotive Policy Council, which represents Ford, GM and Fiat-Chrysler, said in a statement touting the latest findings. “We have the top two trucks, top five SUVs, and top 10 cars. The U.S. auto industry is critical to our economy, and American automakers are driving more growth and jobs in the auto manufacturing sector.”

The latest findings come as Trump is threatening to impose tariffs on imported autos and auto parts to encourage more domestic production, and as USTR is pushing for stricter rules-of-origin in NAFTA to achieve the same objective. The index shows 181 car models, many made by foreign brand automakers, that have at least 50 percent U.S. content based on the seven criteria. However, more than 250 of the models have less than 10 percent domestic content and more than 300 have less than 30 percent domestic content, the index showed.

The index is compiled annually by Frank Dubois, an associate professor of international business at the Kogod School of Business at American University. Dubois said he is agnostic about the nationality of vehicles and notes that some consumers use the index to identify the most Japanese, Korean or German car they can buy. He also said Trump’s idea of imposing a 20 percent or 25 percent tariff on auto imports is “a terrible idea” that would lead to higher car prices, fewer new car purchases and ultimately fewer cars being manufactured in the United States.

GRAHAM TALKS TRUMP’S TRADE ‘END GAME’: Sen. Lindsey Graham, one of Trump’s closest allies in the Senate, says that when it comes to trade, the president is focused first on wrapping up NAFTA talks, then on reaching a deal with the European Union, and then on working with those allies to combat the larger problem of China.

Graham, speaking to reporters in his home state while the Senate is on recess this week, said Monday that he believes the U.S. can wrap up NAFTA negotiations “by September” and then will “eventually” get a deal with Europe that allows for better U.S. market access and leads to the removal of tariffs.

“Then we focus on China,” Graham said a day after he played golf with the president. “The goal of President Trump is to unite the world against Chinese business practices that are outside the norm.”

The South Carolina Republican said he believes tariffs “are not the best way to deal with this, but it’s the only way on the table right now.” Trump also understands that “there’s some pain involved” for farmers, manufacturers and others, Graham said, but he indicated that pain in the short term will be worth it for a long-term solution.

“It’s gonna take a while,” Graham said. “You’re going to see some increase in prices. The supply chain is going to become more costly and you’ll pay more in the short term, but here’s the way I look at China: Pay now or pay later. They cheat us too much, and I’m glad Trump is finally standing up to them.”

EU REQUESTS MORE WTO INPUT OVER AIRBUS DISPUTE: The European Union has requested a second compliance panel to certify its assertion that it has fully complied with World Trade Organization rulings involving government support for Airbus. The EU’s request marks the latest in an almost 14-year-old dispute over government supports from the EU for Airbus and the U.S. for Boeing.

Stopping U.S. retaliation: If the WTO says the EU has complied with its earlier ruling, it could prevent the Trump administration from potentially retaliating on billions of dollars of European goods.

The EU on July 31 formally asked for the establishment of the panel under Article 21.5 of the Dispute Settlement Understanding and Article 7.4 of the Subsidies and Countervailing Measures Agreement.

The EU also asked for consultations in June, even though WTO members had adopted a decision stating that the EU had not complied with previous rulings the month before. But those consultations, which were held in late June, “did not result in the resolution of the disagreement,” the EU said in its WTO request.

TRUMP, KENYAN PRESIDENT TO TALK TRADE: Trump will host Kenyan President Uhuru Kenyatta on Aug. 27 to “explore ways to bolster trade and investment between the two countries, while strengthening security cooperation,” the White House said Monday.

The meeting comes as USTR has been searching for a country in Africa that is ready to begin trade talks with the United States. Kenya is the ninth-largest economy in Africa and one of the largest in the sub-Saharan Africa region that receives unilateral U.S. trade benefits under the African Growth and Opportunity Act program.

Lighthizer’s bilateral vision: "We believe that there are countries in Africa that are ready to move from AGOA beneficiary to U.S. free trade agreement partner,” U.S. Trade Representative Robert Lighthizer said at the annual AGOA Forum meeting last month. “We hope we can work with a willing partner to create an agreement that can serve as a template for additional deals on the continent."

Last month, Commerce Secretary Wilbur Ross and Commerce Undersecretary for International Trade Gilbert Kaplan did a four-nation visit through Africa, which included stops in Kenya, Ethiopia, Côte D’Ivoire and Ghana. Kaplan signed a cooperative agreement with Kenya that identified projects to help strengthen U.S. private-sector participation and development in the country.

Bilateral problem: Still, there could be obstacles to selecting Kenya as an FTA partner, since it is a member of the East African Community, a regional economic bloc that also includes Burundi, Rwanda, South Sudan, Tanzania and Uganda. The entire African continent also is moving toward regional economic integration under the African Continental Free Trade Area.

TRUMP ADMINISTRATION OPENS MOROCCAN MARKET FOR U.S. POULTRY: The Trump administration will today announce that Morocco has agreed to import U.S. poultry meat and products for the first time.

It’s a new market that is welcome news for industry amid a torrent of new tariffs, but the Moroccan market is also relatively small. Initial estimates suggest Morocco could be a $10 million market “with additional growth over time,” according to an announcement from the USDA and USTR.

IMF WARNS GERMANY ON TRADE SURPLUS: The chief economist of the International Monetary Fund said Germany’s reluctance to diminish its trade surplus is contributing to trade tensions and could undermine financial stability on a global level.

“In [current account] surplus countries such as Germany, there are timid attempts at best to counteract those surpluses,” Maurice Obstfeld wrote in an op-ed published by German newspaper Die Welt on Monday.

He noted that current imbalances do not pose an “immediate threat,” but they point to the likelihood of growing disparities in the future and therefore pose “a medium-term threat to global financial stability,” Obstfeld wrote.

Germany is facing increasing criticism over its trade surplus, and not just from the U.S. The European Commission and the IMF have repeatedly called for the country to lift wages and increase investments to counteract the export surplus and increase domestic demand.

WOOD, GAS, COPPER TOP CHINA’S PROPOSED TARIFFS: Beijing’s latest tariff retaliation list will target U.S. exports China will be able to easily source elsewhere in the world, with wood, liquefied natural gas and mineral ores topping the list, according to an analysis by Panjiva S&P Global Market Intelligence.

China announced last week that it would consider slapping tariffs ranging from 5 percent to 25 percent on a list of U.S. exports valued at $60 billion. The move was in response to the Trump administration’s decision to consider upping its proposed tariffs on a list of $200 billion worth of Chinese imports from 10 percent to 25 percent.

By the numbers: The analysis shows that the new Chinese duties would affect 85 percent of electrical machinery the U.S. exports to China and 75 percent of total U.S. electronics exports to China.

The most valued single U.S. export that would get hit with duties would be the $1.83 billion worth of U.S. wood products exported to China over a yearlong period, followed by $778 million worth of mineral ores and $675 million worth of LNG. U.S.-manufactured items that will get hit the worst include the $647 million worth of computer accessory exports and $578 million worth of IT network equipment, according to the analysis.

POLL FINDS SMALL BUSINESSES WORRY ABOUT TRADE: Two out of 3 small-business owners worry that tariffs on China will mean higher prices on consumer items, according to a new poll commissioned by FedEx and conducted by Morning Consult.

The survey of more than 1,000 small-business owners and executives also found that 3 out of 5 of those polled believe the impact of the tariffs on business will be negative. The nationwide survey also found that 82 percent see trade as beneficial to the overall economy and 2 out of 3 say the U.S. risks falling behind without striking new trade deals.

INTERNATIONAL OVERNIGHT

— Oil shocks changed the auto industry; tariffs could change it again, The Wall Street Journal reports.

— U.S.-China trade war drives South Korea to look for new export markets, Bloomberg reports.

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