May 29, 2018

White House Threatens To Place Tariffs On U.S. Auto Imports

After Chinese officials said they might lower tariffs on imports of autos into their country from 25 percent to 15 percent, in an unexpected announcement on the evening of May 25, President Donald Trump asked U.S. Commerce Secretary Wilbur Ross to begin a Section 232 investigation on auto imports into the United States. The goal of the investigation is to determine whether these imports “threaten to impair the national security” of the United States.

The action starts a Commerce Department investigation, with input from the U.S. Department of Defense, that can take up to 270 days. On Monday in the Federal Register, the Commerce Department issued its formal launch of the investigation. Key dates are as follows:

  • June 22: Written comments due and request to participate in hearing due;
  • July 6: Rebuttal comments due; and
  • July 19 to July 20: Public hearing in Washington, D.C.

In a statement, Secretary Ross emphasized that the imports of passenger vehicle imports as a percentage of total sales in the United States increased from 32 percent to 48 percent over the last 20 years and that employment in the sector declined by 22 percent between 1990 to 2017. Data from the auto industry, however, indicates that overall passenger vehicle production in the United States has more than doubled from 5.6 million vehicles in 2009 to 12.2 million vehicles in 2016 and that more than one million more cars are manufactured in the United States now than in 1993. According to several news reports, the president is contemplating 20 to 25 percent tariffs on imported vehicles and auto parts.

U.S. trading partners and lawmakers on Capitol Hill, including Senate Finance Committee Chairman Orrin Hatch (R-Utah), reacted negatively to the president’s announcement.

A spokesperson for China’s Commerce Ministry said, “China opposes the U.S.’s abuse of trade policy in the name of national security … This will severely undermine the global trading system and disrupt the multilateral trade order.”

According to Reuters, Canadian Prime Minister Justin Trudeau raised “strong objections” the idea in a phone call on Friday with President Trump. The tariffs, if imposed, could have a serious negative effect on Canadian manufacturing. The CBC explained manufacturers “could respond by moving production to the U.S., avoiding all tariffs. Or they could respond by building new plants in Asia, hoping to absorb the tariff by moving production to a low-cost environment.”