Trade Cases

Section 232 Auto Report Causes Furor Before It's Even Disclosed

February 19, 2019

President Trump has received the long-awaited report from the Commerce Department on whether imports of automobiles and auto parts pose a threat to national security and now has 90 days to consider whether to place a 25 percent tariff on automotive imports under Section 232. Details of the Commerce findings were not disclosed but the submission brought immediate backlash from across the globe.

The Trump administration has used the threat of auto tariffs to pry concessions from Japan and the European Union in bilateral trade discussions. As long as talks remained productive, promised administration officials, no tariffs would be issued.

The EU says it has prepared retaliatory tariffs on $23 billion of U.S. goods should the president renege on that promise. A joint statement in July between Trump and European Commission President Jean-Claude Juncker called for working toward “zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods.”

Commission spokesperson Margaritis Schinas said, “President Juncker trusts President Trump’s word. The European Union will stick to its word as long as the U.S. does the same.” Schinas added that any Section 232 measures against the EU will be met in “a swift and adequate manner.”

German Chancellor Angela Merkel called the idea that imports of German cars somehow threaten the United States “shocking,” while noting that BMW’s largest factory is in South Carolina. “Look, we’re proud of our cars. We’re allowed to be,” Merkel said Saturday in Munich. “And these cars are built in the United States of America. If these cars–which are no less a threat than those built in Bavaria–are suddenly a national security threat to the U.S., then that’s a shock to us.”

The IFO Institute’s Center for International Economics estimates that German car exports to the U.S. would fall by almost 50 percent if the 25 percent tariffs were imposed.

U.S. automakers have warned that tariffs on imports of vehicles and parts will increase prices for consumers and potentially cause massive job losses across the economy. The Center for Automotive Research estimates 366,000 jobs could be lost and U.S. auto sales would be reduced by 1.3 million vehicles a year.

“These tariffs, if applied, could move the development and implementation of new automotive technologies offshore, leaving America behind,” said the Motor and Equipment Manufacturers Association. “Not a single company in the domestic auto industry requested this investigation.”

The industry is already struggling with tariffs on steel and aluminum imports and Section 301 trade restraints with China.

“New tariffs on vehicles, parts or materials would send shock waves through the economy,” said Charlie Chesbrough, chief economist for Cox Automotive per the Detroit Free Press.