United States probe into vehicle imports might lead to new tariffs

Trump administration launches vehicle import probe

Washington reignited fears of a bitter transatlantic trade war on Wednesday after it announced that it has launched a national security investigation into vehicle and truck imports that could lead to similar USA tariffs to the ones imposed on imported steel and aluminium in March.

The president's latest gambit is a threat of major tariffs against foreign vehicle manufacturers, after he directed Commerce Secretary Wilbur Ross Wednesday to conduct a Section 232 investigation into whether foreign competition in the auto sector represents a threat to national security risk.

In a separate statement, President Donald Trump said: "Core industries such as automobiles and automotive parts are critical to our strength as a Nation". Under the US's Trade Expansion Act of 1962, such a scenario could allow Trump to raise import tariffs to protect national interests.

"There is evidence suggesting that, for decades, imports from overseas have eroded our domestic auto industry", the secretary wrote.

The aim of the probe, it said, is to determine whether imports of automobiles to the United States are damaging the economy and pose a threat to the country's national security.

If investigators can prove that foreign vehicle makers are harming the prospects of United States auto makers, it could provide the legal basis to impose tariffs on vehicle imports.

Trump has railed against European auto imports and tariffs on Twitter before.

Initial reaction to the idea of an import tax on cars based on national security needswas unfriendly, with one veteran trade lawyer saying it would prompt "pant-wetting laughter - followed by retaliation" among US trading partners.

"From Canada's side, higher tariffs mean higher prices and also less demand", she said. The state engages in trade worth about $7 billion between Mexico and Canada.

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A vehicles tariff also would hurt USA automakers with operations in Mexico and Canada.and other places The United States imported $192 billion in passenger vehicles previous year, with Mexico the leading source, followed by Canada, Japan and Germany.

The threat of tariffs could also be a useful bargaining chip, as the US tries to negotiate new trade agreements with Japan, Mexico, Canada, and the European Union. "However taxing it with trade tariffs is a threat to the economic security of millions of hardworking American families".

Last year, the USA imported $43B worth of cars from Canada, $39B from Japan, $30B from Mexico, $21B from Germany, $16B from South Korea.

Although a large portion of the US's most popular auto models, including those from foreign brands (such as the upcoming BMW X7), are already manufactured within its borders, many are imported from other countries.

Automakers think Trump might target the European Union and potentially Canada, Mexico and Japan. About 95 per cent of Canadian-made vehicles are exported to the United States.

"China and Germany are on the path of promoting multilateralism and bolstering free trade", Merkel said in Beijing.

Mexico in the past has threatened to retaliate against US trade actions by curtailing purchases of American farm products.

That visit follows on the heels of last week's trek by the Canada-U.S. Axios reports that the even the president's aids worry Trump is a "one trick pony" in negotiations, who will "threaten the outrageous, ratchet up the tension, amplify it with tweets and taunts, and then compromise on fairly conventional middle ground".

According to government statistics, in 2017 the United States imported 8.3 million vehicles worth $192bn (£144bn), and exported nearly 2 million vehicles worth $57bn (£43bn).

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