New Delhi, December 25, 2018: President Donald Trump has “a lot of flexibility” in deciding whether and how to impose automotive tariffs, says commerce secretary Wilbur Ross, suggesting all options are on the table as the US weighs the controversial trade policy.
The commerce department is finalising a report, due by February 17, on whether imported cars and car parts represent a threat to US national security. Mr Trump will then have 90 days to take action and move ahead with levies. In a telephone interview with the Financial Times, Mr Ross said the report was still a “work in progress” but the US was intent on correcting a trade imbalance in cars that was a relic of the postwar years.
“After world war two it was a deliberate US policy to help rebuild Europe and Asia with direct aid like the Marshall Plan and trade concessions, but the mistake we made was not time-limiting them,” Mr Ross said. “We are stuck now with concessions that were totally appropriate in 1950.” The president had “a lot of flexibility” and “complete discretion” in making a final decision in response to the report, he said.
As the Trump administration enters crucial talks with Beijing to try to avoid a new escalation in their trade war with a deal by March 1, the deadline on car tariffs is also looming large as another major faultline between Washington and its key trading partners. International carmakers with factories in the US have already suffered a double blow because of Mr Trump’s trade policies this year.
Steel and aluminium tariffs imposed by his administration have raised the cost of key materials. Meanwhile, the revision to Nafta — the trade deal binding the US with Mexico and Canada — imposed stricter regional content and wage requirements on car production, which is forcing them to adjust. But all that would pale in comparison to the impact of sweeping US tariffs on imported cars and car parts. Not only would many producers have to contend with the higher price of parts from their home countries, but those who use the US as an export hub — such as Daimler and BMW — would face retaliatory levies when they try to sell abroad according to ft.com.
“The scale is significantly larger,” said Marianne Petsinger, a geoeconomics fellow at Chatham House, the London-based think-tank. She said that US metals tariffs affected about €6.4bn of EU exports, while car tariffs would hit about €50bn of exports. The concern among German carmakers became so acute that they visited the White House this month to emphasise their investments and contributions to the US economy.
EU officials have already vowed to retaliate if Mr Trump imposes the car levies and have warned that budding trade talks — launched by Jean-Claude Juncker, the European Commission president, and Mr Trump in July to remove regulatory obstacles and reduce tariffs on other industrial goods — would be halted in their tracks.
There have been some signs of hesitation at the White House. In November, the Trump administration was on the verge of releasing the commerce department report, but backed away as some cabinet members balked. The car tariffs could deliver an economic blow at a time of growing fears about a slowdown in the US economy and jitters in financial markets. But they could also undercut the Trump administration’s efforts to forge some semblance of diplomatic unity with the EU and Japan in its economic confrontation with China.
Meanwhile, there are few if any domestic constituencies that are heavily in favour of the car tariffs, with US carmakers voicing their opposition and the United Auto Workers union treading cautiously. Yet there are no guarantees that Mr Trump will take them off the table, so executives and lobbyists are bracing for the impact. “Despite the pushback there’s still a very good chance that President Trump will act on the report — and even further than what the commerce report would recommend,” said one industry source.