The Trump administration is holding off on auto tariffs for now. But pressure on the industry has been increased.
The U.S. Commerce Department has been studying whether to levy tariffs on imported vehicles and parts. On May 17, the White House issued what it called a proclamation. It said the auto industry is, indeed, vital to U.S. national security. That’s part of the routine in implementing tariffs.
Commerce Secretary Wilbur Ross “concluded that the present quantities and circumstances of automobile and certain automobile parts imports threaten to impair the national security,” according to the document issued in Trump’s name.
“I concur in the Secretary’s finding that automobiles and certain automobile parts are being imported into the United States in such quantities and under such circumstances as to threaten to impair the national security of the United States,” the statement reads.
However, rather than go for tariffs immediately, Trump started the clock ticking on a new deadline.
The administration will seek an auto agreement with the European Union, Japan ” and any other country” deemed “appropriate” over the next 180 days. If there’s no agreement, the president may take additional action.
The U.S. has a pending trade accord with Mexico and Canada. But it has yet to approved by Congress. The administration also reached a trade deal with South Korea.
Efforts to Protect
Historically, the U.S. has had difficulty trying to protect the American auto industry from international competition.
In the 1980s, Japan agreed to so-called “voluntary” export limits to the U.S. The idea was if Japanese automakers sold in this country, they should make vehicles here.
Be careful what you wish for, as the saying goes. Toyota Motor Corp., Honda Motor Co., Nissan Motor Co. and Subaru, among others, opened U.S. manufacturing operations. Many of their suppliers in Japan did likewise. Later, the likes of Mercedes-Benz and BMW also opened U.S. factories. All of those moves increased competitive pressure on U.S.-based automakers.
There’s also the question of how “American” some American automakers are. Chrysler was taken over by Italy’s Fiat as part of a 2009 U.S.-backed bailout. Fiat Chrysler Automobiles has headquarters in London and Amsterdam, although it gets a huge chunk of its profit from trucks sold in the United States.
Finally, the auto industry generally has developed a multi-national supply chain. Components are shipped back and forth across borders in North America.
Last year, auto industry trade groups told the Commerce Department they opposed a proposed 25 percent tariff on vehicles and parts. Tariffs are paid by companies importing goods and the cost usually is passed onto customers. One country doesn’t pay tariffs to another.
For now, the industry has avoided tariffs. But tariffs haven’t been eliminated as a possibility. Meanwhile, the U.S. is waging a trade war with China and tariffs may be expanded on virtually all Chinese-made goods.
The auto industry wanted to be exempted from the trade war. It may yet be dragged into one. That will depend on what happens in the next 180 days.