Trade War Watch: Trump Launches National Security Investigation On Auto Imports

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President Donald Trump issued a tweet promising car manufacturers good tidings on Wednesday. “There will be big news coming soon for our great American Autoworkers,” he said. “After many decades of losing your jobs to other countries, you have waited long enough!”

Later that same day, the administration announced it had launched a national security investigation into car and truck imports under Section 232 of the Trade Expansion Act of 1962. The Commerce Department explained that the probe would investigate whether imported vehicles and parts threaten the domestic industry’s wellbeing, taking into account its ability to develop new technologies and the impact of tariffs.

“There is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry,” Commerce Secretary Wilbur Ross said.

While Ross assures a “thorough, fair and transparent investigation,” opposition to the probe has already begun to emerge. “China opposes the abuse of national security clauses, which will seriously damage multilateral trade systems and disrupt normal international trade order,” Gao Feng, spokesman for the Chinese Ministry of Commerce, said at a news briefing on Thursday.

China recently agreed to cut its tariffs on imported automobiles in a bid to open its market to foreign automakers. This occurred after the U.S. announced new import taxes on steel and aluminum. Meanwhile, America recently worked out a deal with South Korea that involved a tentative promise to open its own market a bit if the western nation agreed to give it a break on steel tariffs.

No such deal exists with Japan. Curious, since it’s one of the United States’ closest security allies and imposes no tariffs on vehicles.

According to Reuters, Germany’s DIHK Chambers of Industries and Commerce said Trump completely ignored the fact that German companies invest heavily in the U.S. and create manufacturing jobs there — a claim that could be similarly made for Japan and South Korea.

“To cite aspects of national security as justification is totally constructed and far-fetched. We almost have to take this as a provocation,” DIHK President Eric Schweitzer said. “I gain more and more the impression that the United States no longer believes in competition for ideas and customers, but only in the right of the supposedly stronger.”

“It fills me with great concern that the U.S. is moving away from a free and fair world trade order,” he added.

The Commerce Department’s claim that the probe is intended to determine if lost domestic production has affected the U.S. economy seems clear cut enough, but analyzing if automakers lost the ability to research advanced technologies is somewhat perplexing. While the United States isn’t the global leader in every category that qualifies as advanced tech, it’s the way in the field of autonomous driving and remains competitive just about everywhere else as far as development is concerned.

A Trump administration official said prior to the probe’s announcement that the expected strategy would be involve pressuring Canada and Mexico to make concessions on NAFTA. Considering how poorly and slowly those talks have progressed, threatening research that could result in higher import fees could be a way to convince them to play ball. The investigation could have a similar goal in regard to other countries that ship a lot of cars to the United States, too.

In a meeting with automakers earlier this month, Trump speculated that tariffs on imported automobiles and parts may be increased. Sources claimed the president said 20 percent or 25 percent on some vehicles, which would represent a massive increase. While trucks have been subject to U.S. import duties of 25 percent for decades, imported cars sit at a only 2.5 percent.

For the sake of comparison, Europe imposes a relatively flat 10 percent import tariff on vehicles. China has said it will reduce its 25 percent fee on automobiles to 15 percent starting this July. However, trucks are expected to stay at 20 percent.