push to impose painful tariffs on auto imports has put close U.S. allies in the crosshairs of a global trade row that is riling stock markets and creating uncertainty among auto makers, investors and governments.
Shares of some of the biggest international auto makers including
, which have big exposure to the U.S., fell Thursday, a day after the U.S. Commerce Department launched a probe into whether it could raise tariffs to up to 25% on auto imports on the basis of national security.
The probe adds to a battle over steel tariffs and, again, pitches the U.S. against three of its closest military allies—Japan, South Korea and Germany. All are major car exporters.
“If it comes into effect, it would cause very broad restrictions on trade and create disarray in global markets. It is very regrettable,” said Tokyo’s trade minister,
The Commerce Department said Wednesday that the Trump administration might invoke national-security grounds to impose tariffs on car and auto-parts imports. Mr. Trump said on Twitter on Wednesday, “There will be big News coming soon for our great American Autoworkers.”
The Trump administration recently reached a revised free-trade deal with South Korea. It is negotiating with China and European allies on trade issues while planning to do the same with Japan. The threat of car tariffs could affect those talks.
The move appears targeted especially at Germany, which Mr. Trump has criticized repeatedly over its car exports, large purchases of Russian gas and military spending.
Officials in Germany, which is home to dozens of U.S. military bases, insist the barrage won’t push the country to seek new allies. Yet when German Chancellor
met with Chinese President
in Beijing on Thursday, the two leaders embraced free trade and made a point of rejecting U.S. attacks on global trading rules.
“China and Germany are committed to multilateralism, and we are committed to free and fair trade,” Ms. Merkel told reporters in Beijing.
“China’s door is open,” Mr. Li said. “You can say it will open even wider.”
In contrast with the U.S. initiative, China said this week import levies on vehicles would fall to 15% from 25% starting July 1, while auto-parts tariffs will fall to 6% from between 8% and 25%.
According to the Center for Automotive Research, an Ann Arbor, Mich., think tank, 56% of the vehicles sold in the U.S. last year were American-made, while Canada and Mexico accounted for an additional 22%.
Outside of Canada and Mexico, which have a free-trade agreement with the U.S., Japan is the biggest exporter of cars to America. Japanese auto makers, including Toyota and
, exported 1.7 million vehicles worth about $41 billion to the U.S. last year, or about 11% of light vehicles sold there that year, and the figure is rising.
One reason for that trend is American buyers’ preference for sport-utility vehicles and trucks. Japanese companies have historically relied on sedan sales and produce most of those in the U.S., but they must depend on Japanese factories to meet the demand for SUVs.
Toyota’s most popular vehicle in the U.S. is the RAV4 SUV, which isn’t made at any of its U.S. factories. More than half are sent from Japan and the rest come from Canada. RAV4 sales are up 9% this year.
Nissan’s best-seller in the U.S. is the Rogue SUV. More than half sold in the U.S. are imported from Japan and South Korea.
Auto makers in the European Union exported 1.2 million cars worth $43 billion to the U.S., with German manufacturers Volkswagen, Audi, Porsche, BMW and Mercedes-Benz accounting for about half the European total.
The European Union has a 10% tariff on cars imported from the U.S., while Japan has no tariff on cars imported from the U.S.
Both Japanese and German auto makers have invested billions of dollars since the 1980s to increase production in the U.S. and Mexico. Models built in the U.S. wouldn’t be subject to tariffs, but the future of Mexican production depends on the outcome of talks to revise the North American Free Trade Agreement. Despite investment in North American factories, exports still account for a big percentage of sales at companies such as Toyota, Nissan and Volkswagen.
Mr. Trump, a critic of Japan’s trade practices for decades, has already put the U.S. ally in his crosshairs with a 25% tariff on steel. His administration gave temporary or permanent exemptions from that tariff to many allies, but not Japan, prompting a threat by Tokyo to retaliate at the World Trade Organization.
“The Section 232 investigation is intended to cover threats to national security,” Toyota said in a statement. “Given the global nature of the automobile industry, and the fact that last year nearly 12 million vehicles were manufactured in the U.S., such a determination seems implausible.”
referred to an industry group’s statement that the move, if carried out, would lead to fewer choices and higher prices for American consumers.
“To our knowledge no one is asking for this protection,” said
president of Global Automakers, in statement. He said the tariffs would “undermine the health and competitiveness of the U.S. auto industry and invite retaliation by our trading partners.”
German auto makers Volkswagen, BMW and Daimler stressed that they had built up substantial production facilities in the U.S. and provided tens of thousands of jobs to American workers. German auto exports to the U.S. have fallen 25% since 2013 as a result.
“Experience shows that in the long-term unilateral protectionism has never helped anyone,” Volkswagen said in a statement.
The head of the German Chambers of Industry and Commerce said the tariffs could add as much as $7 billion in annual costs to German auto makers’ exports to the U.S.
“We have to see this almost as a provocation,” said Eric Schweizer, president of the chamber, adding that he was “increasingly concerned that the U.S. is distancing itself ever further from free and fair trade.”
“We believe that there is no justification for the U.S. to impose tariffs on steel and aluminum on grounds of national security,” said a spokesman for the European Commission. “Invoking national security would be even more farfetched in the case of the car industry.”
——Megumi Fujikawa in Tokyo, Kwanwoo Jun in SEOul, Yoko Kubota in Beijing, Emre Peker in Brussels and Adrienne Roberts in Detroit contributed to this article.
Source : WSJ