US considers tariff on imported cars

May 24, 2018

In a move that analysts say is designed to put pressure on Mexico as NAFTA talks ramp up, U.S. Commerce Secretary Wilbur Ross said Wednesday that President Donald Trump has ordered an investigation into car imports to determine if a protectionist measure such as an import duty should be invoked.

"There is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry," Ross said in a statement that goes well beyond hints of a trade war with Europe that emerged in March.

The Wall Street Journal reported Wednesday that Trump cited national security interests in urging Ross to consider tariffs as high as 25 percent on new cars imported into the U.S. The president used the same justification to institute tariffs on imported steel and aluminum in March.

The raw material tariffs came after the Commerce Department launched a Section 232 investigation—a provision of a 1962 trade law that grants the president the ability to restrict imports that could "impair the national security."

Negotiations continue with major exporters of steel and aluminum such as Mexico, Canada, and the European Union.

Automakers responded negatively to the tariffs, noting that even cars assembled in the U.S. use imported steel and that the tariffs would raise prices for  domestically produced cars too.

The U.S. imported $192 billion in new cars last year, with nearly 90 percent of that coming from Canada, Japan, Mexico, Germany, and South Korea. No major automaker exclusively builds cars in the U.S.

A trade group that represents franchised new car dealers that sell foreign-brand vehicles signaled its opposition to the investigation.

"To treat auto imports like a national security threat would be a self-inflicted economic disaster for American consumers, dealers, and dealership employees," the American International Automobile Dealers Association said in a statement.

Thanks to NAFTA, Mexico has emerged as a major producer of new cars. Automakers build everything from budget cars such as the Nissan Sentra in Mexico to luxury crossovers including the Audi Q5.

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