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Automakers on Edge Over Possibility of New Tariffs

Commerce Dept. findings key to Trump administration's plans.

by on Nov.14, 2018

Commerce Secretary Wilbur Ross is leading the Section 232 investigation into whether or not imported automobiles and parts represent a threat to the United States.

While the U.S. midterm elections have passed, carmakers are waiting on a final decision from the Trump administration on the Section 232 investigation. Section 232 of the Trade Expansion Act of 1962 allows the White House to use national security grounds to impose tariffs on vehicles and auto parts imported into the U.S.

The industry’s lobbyists have said they were expecting the U.S. Department of Commerce, which is responsible for the investigation, to issue its ruling soon, perhaps this week well ahead of the February deadline fixed by the statute. The general assumption is the report will offer Trump a chance to impose new tariffs on autos and auto parts made in Europe and Asia.

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The 232 query has become a major issue for the Japanese government of Shinzo Abe, which has spent weeks trying to defuse the administration’s threat to impose tariffs that could have a major impact on the Japanese auto industry.

The Commerce Department’s investigation began last spring and requires Presidential action by February 2019 under the statute giving the President power to impose tariffs on national security ground, which dates back to 1962 — the height of the Cold War.

(Automakers warn Trump administration about tariff impact. Click Here for the story.)

Meanwhile, American, Asian and European automakers have criticized the threat of 232 tariffs.

Japan Prime Minister Shinzo Abe is facing a potentially massive problem with possible new Trump tariffs.

The American Automotive Policy Council, on behalf of members General Motors, Ford and Fiat Chrysler, has said any increase in U.S. tariffs on cars, trucks and parts will undermine the companies’ economic contributions to the country. It also has estimated a 25% levy would be an $83 billion tax burden for the U.S. auto industry and consumers.

Toyota noted a 25% tariff on imported vehicles and parts would raise the price even of the Kentucky-built Camry sedan – the top-selling car in America – by about $1,800 to $2,000. “We’re convinced it would hurt consumers and hurt the economy,” said Toyota spokesman Scott Vazin.

(Click Here for more about the auto industry uniting to challenge Trump tariffs.)

Nissan, which has invested $11.8 billion in U.S. manufacturing, employs 22,000 people directly and has the country’s biggest vehicle production facility in Smyrna, Tennessee, also has criticized the 232 investigation.

“Given the breadth and health of our operations here in the United States, we could easily meet the U.S. military’s requirements without the need to restrict importation of either automobiles or auto parts,” Nissan said.

BMW, which has invested almost $9 billion in its South Carolina plant and is also the only manufacturer that produces more cars than it sells in the U.S., said higher tariffs on imported parts will increase costs of building cars in the U.S., potentially leading to “strongly reduced” export volumes, a negative effect on investment and employment.

(To see more about China locking down American-made Mercedes SUVs, Click Here.)

Higher tariffs have already hurt BMW’s exports from South Carolina to China and could have contributed to the loss of at least one Congressional seat. The South Carolina seat that switched from Republican to Democrat and the tariffs could have been one of the factors that contributed to the Republican defeat in a district around Charleston that has become more dependent on trade.

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