Automotive tariffs on European imports not likely

Departments - Regulations

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August 21, 2018
European Commission President Jean-Claude Juncker (left) and President Donald Trump (right) discuss a trade agreement that would prevent the U.S. from applying tariffs to European cars or car parts.

President Donald Trump and European Commission President Jean-Claude Juncker agreed to trade agreements that would prevent Trump from placing proposed 25% tariffs on cars and car parts from Europe, but the threat of trade actions remain for automakers from other countries.

“As long as we are negotiating, unless one party would stop the negotiations, we will hold off future tariffs,” Juncker said following talks with Trump. He added that the U.S. and E.U. would work toward eliminating tariffs on steel and aluminum imported from Europe.

Trump added, “We decided to set up, immediately, an executive working group of very intelligent people on both sides. They’ll be our closest advisors, and they’re going to carry out this joint agenda. In addition, it will identify short-term measures to facilitate commercial exchanges and assess exiting tariff measures.”

The proposed automotive tariffs are wildly unpopular for automakers based in the U.S. and abroad. During hearings to discuss the proposals, dozens of organizations spoke of the toll increased duties could take on the automotive industry, and only one organization – the United Auto Workers (UAW) union – spoke in favor. And even the UAW’s support was conditional, arguing that tariffs on Canadian cars and parts could be detrimental to U.S. production.

General Motors, for example, argued that tariffs would force the company to become smaller in the U.S. BMW officials noted that its South Carolina plant exports more cars to Europe and Asia than it imports to the U.S. from Germany. Officials added that trade tensions with China have already forced it to raise prices on those vehicles, potentially lowering demand and weakening job prospects for U.S. workers.

U.S.-based automakers that had lobbied against earlier tariffs on steel and aluminum say those trade actions are hurting profits. Increased material costs led Ford and GM to lower full-year earnings outlooks.

Officials with the U.S. Department of Commerce, following the hearings but before Trump’s meeting with Juncker, said they would consider testimony and determine whether global trade has hurt the auto industry in a way that threatens national security.

If the department determines that automotive trade does threaten national security, it could impose tariffs on cars imported from Asia (GM and Volvo import from China; Ford imports from India; Toyota, Nissan, Honda, and others import from Japan) without violating the European agreement. Commerce officials have not yet released their findings. www.commerce.gov; www.whitehouse.gov