Global automakers brace for potential tariffs on autos and car parts

The U.S. Commerce Department is slated to send a confidential report to U.S. President Donald Trump clearing the way for him to potentially impose tariffs on imported autos and auto parts on the grounds that they threaten U.S. national security.

According to auto industry sources, the U.S. Commerce Department is scheduled to send a confidential report to U.S. President Donald Trump on Sunday. The report is expected to clear the way for Trump to threaten to impose tariffs on imported autos and auto parts by designating such imports as a threat to national security.

The Recommendations in the report could potentially be a nightmare for the auto industry since U.S. tariffs could potentially be imposed on millions of imported cars and carparts. These will add thousands of dollars in cost to the vehicles and could cost hundreds of thousands of jobs across the U.S. economy.

The report and its contents is likely to be classified until Trump moves ahead with its recommendations.

Major car exporters, including the European Union, South Korea and Japan, could face the consequences of the recommendations in the report.

As per auto industry officials, the report is likely to recommend at least some tariffs so that the administration can use the findings of the probe as negotiating leverage during negotiations this year with Japan and the EU.

The report is the result of an investigation started by the Commerce Department in May 2018 at Trump’s request. Known as a Section 232 investigation, the probe’s purpose is to determine the effects of imports on national security.

The final version will be sent to the White House on Sunday to meet a statutory deadline, said a source within the Trump administration.

Confidential draft versions of the recommendations have been circulated to the White House and other government agencies for review since November 2018.

Automakers and parts suppliers anticipate the recommendation to include broad tariffs in the range of 20%-25% on assembled cars and car parts; narrower tariffs could also be aimed at components and technologies related to new energy cars, autonomous, internet-connected and shared vehicles.

“Nobody I’ve talked to in the industry thinks the report won’t recommend tariffs” said an automotive official speaking on the condition of anonymity. “And there’s not much chance that Trump decides not to impose them.”

As per a report from the Center for Automotive Research in Ann Arbor, Michigan, in the worst-case scenario of imposition of tariffs of 25%, it would cost the United States, 366,900 in jobs in the auto and related industries.

In 2018, automaker groups have stated, if the U.S. were to impose such high tariffs, the cumulative impact would be $83 billion in annual price increase; major automakers have also argued that there is no evidence to suggest that auto imports pose a threat to U.S. national security.

According to Senator Rob Portman, an Ohio Republican, “There is no way that minivans from Canada are a national security threat”.

Trump has 90 days to consider the report and act on its recommendations.

On Friday, Trump had said, tariffs protect the industry and also help win trade agreements.

“I love tariffs, but I also love them to negotiate,” said Trump.

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