Trump’s auto tariff threat sparks unease with allies, carmakers

The Trump administration’s decision to launch an investigation into whether tariffs are needed on imports of vehicles and automotive parts into the United States was condemned by the European Union, Japan and China. 

President Donald Trump invoked a provision authorizing the president to restrict imports and impose unlimited tariffs on national security grounds. A person familiar with the discussions said the president has suggested seeking new tariffs up to 25 percent on automobile imports. The person spoke on condition of anonymity and was not authorized to speak about private deliberations.

Shares of major automakers declined in European trading, with both BMW and Daimler AG slipping more than 3 percent. 

The move is seen as an effort to gain a bargaining chip in stalled talks with Canada and Mexico over the North American Free Trade Agreement. Mexico is the top exporter of passenger vehicles and light trucks to the U.S followed by Japan, Canada, Germany and South Korea, according to the Department of Commerce.

Any U.S. plan to unilaterally raise tariffs on auto imports “obviously would be against” rules of the World Trade Organization, said European Commission Vice-President Jyrki Katainen. 

Japanese and European automakers did not issue individual comments but some referred to Global Automakers, based in Washington, an industry group of international automakers. Global Automakers Chief Executive John Bozzella said the move would merely hurt American consumers.

“The U.S. auto industry is thriving and growing. Thirteen, soon to be 14 companies, produced nearly 12 million cars and trucks in America last year. To our knowledge, no one is asking for this protection. This path leads inevitably to fewer choices and higher prices for cars and trucks in America,” he said in a statement.

Japanese officials also expressed unease about the move. Japan accounts for about 40 percent of U.S. vehicle imports. 

If such a measure is taken, “it would be an extremely far-reaching trade sanction that would put the global market into turmoil,” said Hiroshige Seko, Japan’s minister of Economy, Trade and Industry. “We are extremely concerned.”

Seko said Japan will continue to remind U.S. officials that any trade measures must conform to the rules of the World Trade Organization.

China: “Close attention”

In Beijing, Commerce Ministry spokesman Gao Feng told reporters that abusing national security provisions would “undermine the multilateral trade system and disrupt the order of international trade.”

“China will pay close attention to the progress of the U.S. investigation, conduct a comprehensive assessment of the possible impact and firmly defend our legitimate rights and interests,” Gao told reporters at a news conference.

Last week Japan went to the World Trade Organization to warn of possible retaliation for tariffs on steel and aluminum, which Trump imposed in March. Japan is the only major U.S. ally that was not granted a temporary exemption from the tariffs. Japan estimates they will cost it about 50 billion yen ($450 million) a year.

China is a relatively minor player in the U.S. auto import market, ranked 10th in dollar terms, but its massive car industry is eager to expand abroad. In auto parts exports to the U.S., China was ranked second last year.

Critics fear other countries will retaliate with trade sanctions of their own and question whether the move would ever be effective given the lengthy review required and legal challenges ahead.

EU imports

The European Commission’s Katainen said Thursday the EU was still studying reports that President Trump asked Commerce Secretary Wilbur Ross to consider whether auto and auto parts imports threaten U.S. national security. A little-used U.S. law authorizes the president to restrict imports and impose unlimited tariffs on national security grounds.

Regarding EU car imports into the United States, Kaitainen said it “is very difficult to imagine it to create any sort of threat the national security.”

The United States will decide by June 1 whether to impose steel and aluminum tariffs on EU imports, something which has moved trans-Atlantic relations to the brink of a trade war. Katainen said any imposition of higher car tariffs were still far off and said “we don’t expect this to further complicate the solution” to the overall trade issues between Washington and Brussels.

Germany: A “nasty blow”

The head of the Association of German Chambers of Commerce and Industry says the U.S. intention to raise auto tariffs is “another nasty blow to our economic relations” with the United States.

Eric Schweitzer said in a statement Thursday: “We should almost regard this as a provocation.”

Some see President Donald Trump’s proposal for tariffs as an attempt to gain leverage in trade talks with neighbors: nearly half of vehicles sold in the U.S. are imported, many coming from assembly plants in Mexico and Canada. Europe is also a big exporter to the U.S.

Schweitzer said that the tariffs would cost another 6 billion euros a year.

He said: “I’m increasingly getting the impression that the United States don’t believe in competition for ideas and customers anymore, but only in the law of the jungle. It fills me with great concern that the United States is moving steadily further away from free and fair world trade.”

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