Business World

Sunday 18 August 2019

Trump puts brakes on auto tariffs on Europe and Japan for 180 days

 

US President Donald Trump delayed the tariffs. Photo: Anna Moneymaker/Bloomberg
US President Donald Trump delayed the tariffs. Photo: Anna Moneymaker/Bloomberg

Jenny Leonard and Shawn Donnan

US President Donald Trump has announced a delay in imposing tariffs on imported vehicles and parts from the European Union, Japan and other nations for 180 days to pursue negotiations, avoiding opening another front in his tariff battle with some of America's key allies.

The Commerce Department submitted its findings in February to the president after conducting a probe into whether car imports pose a national-security threat. Trump had until yesterday to decide how to respond, including whether to impose tariffs or defer any action.

In a proclamation released in Washington, Trump said he agreed with the conclusion by the department that imports of cars and certain auto parts harm national security. The order, however, softened language contained in an earlier draft seen by Bloomberg, which had sought to reach "agreements that limit or restrict" exports of autos and auto parts from the EU, Japan and other nations - suggesting the US could seek to impose quotas. Instead, the White House order had less pointed wording, directing the US trade representative Robert Lighthizer to pursue negotiations of agreements "to address the threatened impairment of the national security".

"Domestic conditions of competition must be improved by reducing imports," the proclamation stated.

Volkswagen AG, BMW AG and Mercedes-Benz maker Daimler AG pared declines in Frankfurt following Trump's proclamation. General Motors Co, Ford Motor Co and Fiat Chrysler Automobiles NV opened lower in New York trading.

The order indicated that Canada, Mexico and South Korea would not face any tariffs because they had already negotiated deals with the Trump administration. "I have also considered the renegotiated United States-Korea Agreement and the recently signed USMCA, which, when implemented, could help to address the threatened impairment of national security," it said.

Canada and Mexico negotiated side letters to the US-Mexico-Canada Agreement that spare them from new US duties on cars, subject to a cap. The US renegotiated a trade deal with South Korea last year, which included a provision to double the number of cars US automakers can sell in the Asian nation without restrictions from local safety standards. The EU and Japan have rejected the idea of quotas, even those that allow for some growth like the arrangements that Mexico and Canada negotiated with the US in the Nafta talks.

The investigation started last year under Section 232 of a 1960s trade law, the same provision the administration used to slap tariffs on steel and aluminium. The car probe covered imports of vehicles including SUVs, vans and light trucks, as well as auto parts.

The delay may avoid a major escalation of tensions with US allies as the administration faces a deepening trade war with China, which is disrupting supply chains and casting a cloud over the global economy.

Bloomberg

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