Washington: President Donald Trump’s administration has started an investigation into whether car and truck imports threaten national security, a move that could lead to new US tariffs on foreign vehicles.
“Core industries such as automobiles and automotive parts are critical to our strength as a nation," Trump said in a statement late Wednesday.
An investigation would unfold under the same law the US invoked for global tariffs on imported steel and aluminium. An additional tariff on vehicles of up to 25% is also under consideration, according to a person familiar with the matter who asked not to be identified.
The announcement comes as Republican lawmakers prepare for midterm elections in November that will determine whether the party retains its majority in both the House of Representatives and Senate. Imposing new duties on automobile imports would further inflame tensions with America’s biggest trading partners, adding to a series of US threats that have roiled financial markets and upset traditional allies.
Japan, which joined Europe, China and India in striking back against US steel and aluminium tariffs, warned against targeting autos.
“Imposing broad, comprehensive restrictions on such a large industry could cause confusion in world markets, and could lead to the breakdown of the multilateral trade system based on WTO rules," said Japanese Trade Minister Hiroshige Seko.
Trump has made protecting American manufacturing workers—and the iconic auto industry, in particular—a keystone of his administration. Wins in manufacturing states such as Michigan and Ohio were key to his victory in 2016.
The auto-import probe was panned by open trade supporters.
“I fear that they’ve now crossed the Rubicon into wholesale protectionism.," said Rufus Yerxa, president of the National Foreign Trade Council, a trade policy group representing US companies. “Lots of countries have resorted to protectionism when their economies were doing badly. It almost never works. But Trump may be the first leader ever to do it when the economy is booming. He’s trying to fix a problem that ain’t broke. The auto industry is healthy."
The American International Auto Dealers Association said that to “treat auto imports like a national security threat would be a self-inflicted economic disaster for American consumers, dealers, and dealership employees." The association represents almost 10,000 dealers that sell non-American branded cars, according to its website.
The commerce department, which is leading the probe, said in a statement that automobile manufacturing “has long been a significant source of American technological innovation."
The investigation “will consider whether the decline of domestic automobile and automotive parts production threatens to weaken the internal economy of the United States, including by potentially reducing" everything from research and development to skilled jobs, and more advanced manufacturing processes like electric motors and autonomous vehicles, according to the commerce department.
The department added it will publish a notice soon announcing a hearing date and inviting comment from businesses and the public.
Mexico exports the most passenger cars to the US, followed by Canada, Japan, Germany and South Korea, according to US data. Industry observers saw this latest move as a US tactic to pressure Mexico and Canada to move quickly to agree to an overhaul the North American Free Trade Agreement. Rules for regional content in cars have been one of the major sticking points in the Nafta discussions.
Almost a quarter of autos sold in the US are imported, according to government figures. The US levies a 2.5% duty on imported passenger cars and a 25% tariff on pickup trucks from countries that are not parties to free trade agreements.
The Trump administration is already embroiled in trade disputes on a number of fronts.
The US is in talks with China on a deal to avoid tit-for-tat tariffs between the world’s two biggest economies. In a tweet Wednesday morning, the president said a trade agreement with China may be “too hard to get done" and probably will require a “different structure." Trump’s remarks damped expectations that the two sides may have reached a truce, after Treasury secretary Steven Mnuchin said the US had put its tariff plans “on hold."
China announced on Tuesday that it will cut the duty on passenger cars to 15%, from the current 25%, as of 1 July.
The president signalled earlier Wednesday on Twitter that an important announcement was imminent to help the US car-manufacturing industry. “There will be big news coming soon for our great American Autoworkers. After many decades of losing your jobs to other countries, you have waited long enough!" Trump said in the tweet.
Section 232 of the Trade Expansion Act gives the US president the power to impose tariffs on imports that imperil national security. It has been used sparingly by previous administrations. It’s separate from the Section 301 investigation into China’s intellectual property practices, a clause in a 1974 trade law meant to protect US industries from unfair competition.
Since the 2016 election campaign, Trump has repeatedly threatened to slap new tariffs on imported cars.
He revisited the possibility again on May 11, when he floated the idea of a 20% tariff on imported autos during a White House meeting with senior executives of 10 major automakers, a person familiar with the meeting said. He also suggested that imports should have to achieve tougher emissions standards than vehicles assembled in the US, the person said.
But it may be tougher for the US to make a national security case with a consumer product such as cars, than it did with steel and aluminium, two materials used in military equipment.