In case the Trump administration in the United States places new tariffs on foreign cars and vehicle parts, there will be retaliatory action as threatened by the EU, Mexico and Canada.
The threat was delivered by the countries to a body in the US that has been tasked with determination of whether there is threat to national security because of import of vehicles into the US and whether to recommend for the tariffs.
An investigation on the move was ordered to be conducted by the Commerce Department by the US President Donald Trump in May.
There has also been widespread opposition in the US to the idea.
The inquiry drew over 2,000 comments comprising of comments submitted by major US car-makers such as General Motors in addition to comments made by ordinary car enthusiasts who have expressed their concerns that a 25% tariff could significantly increase the cost of vehicles in the country as well as for parts for antique cars.
“This is insane,” one man from Arizona said.
There was no threat to security from the imports, said Mexican Ambassador Geronimo Gutierrez Fernandez at the hearing on the matter.
“We will remain vigilant for any unjustified trade restriction and will exercise our rights to ensure that the Mexican automotive industry is not adversely affected,” he said.
Over three dozen representatives have been called in to testify in the matter and it is believed that most are against the imposition of tariffs. This measure is amongst the most sweeping of measures that have been proposed by Trump.
Counter measures are being prepared by Canada and the EU which would be an addition to the retaliatory tariff also ready imposed by them on US goods in response to the US tariffs on steel and aluminum.
Over the past two decades, there has been significant job losses in the US car industry, noted Jennifer Kelly, research director for the United Auto Workers union. She however said that the US should consider “targeted measures”.
“We caution that any rash actions could have unforeseen consequences, including mass layoffs for American workers, but that does not mean we should do nothing,” she said.
Ion 2017, foreign cars and trucks worth more than $200bn had been imported by the US about 80% of those were manufactured in either Mexico, Canada, Japan or Germany.
The biggest employers in the US auto industry include foreign car companies such as BMW and Toyota. And every year, about $100bn worth in auto imports get into the country.
There would be an average increase in price of about $6,000 for imported cars due to a tariff that is being pegged at 25 per cent compared to an increase of price by about $2000 for a car made in the US, say car companies.
Less investment in the US and job cuts would also be the result of the tariffs.
There can be job losses of about 195,000 in the US because of the tariff even if there is no retaliatory tariff imposed, warned the Peterson Institute for International Economics.
(Adapted form BBC.com)