Trump Delays Auto Tariffs Amid Other Trade Fights

Trump Delays Auto Tariffs Amid Other Trade Fights

President Trump on Friday stepped back from opening another front in his global trade war, delaying for six months a decision on whether to impose tariffs on foreign cars and auto parts.

The delay gives a temporary reprieve to global automakers and their suppliers, which had been bracing for punishing tariffs on cars sent into the United States. The decision, which will primarily benefit car exporters like Germany and Japan, comes as the White House struggles to resolve an escalating trade fight with China.

Still, the move does not signal a final cease-fire in the trade war. The president has seized on tariffs as a source of leverage in negotiations with trading partners like Japan and the European Union, and he is likely to hold out the possibility of tariffs as he pushes for trade pacts that benefit the United States.

Friday morning’s announcement said that conditions for the American industry must be improved by reducing imports and that the United States Trade Representative would pursue negotiations to address the situation with the European Union, Japan and potentially other countries.

The delay gives the administration until November to determine whether to impose the tariffs, which could be as high as 25 percent.

A decision to impose auto tariffs would have been Mr. Trump’s most aggressive trade measure yet. His administration has already imposed stiff levies on steel and aluminum and $250 billion worth of Chinese goods. But a tariff on cars and car parts was seen as an economically damaging escalation in the president’s quest to revise trade terms to benefit the United States.

While Mr. Trump has promised to rewrite trade deals in America’s favor, the administration has struggled to make good on that promise. Lawmakers have resisted ratifying the new United States Mexico Canada Agreement, with both Democrats and Republicans raising concerns about the pact. Lawmakers have insisted the White House remove metal tariffs on Canada and Mexico as part of the deal, arguing that the levies, while aimed abroad, are hurting American farmers, businesses and consumers.

To help get the new Nafta through, the White House was preparing to announce agreements with Canada and Mexico, perhaps as early as Friday, that would adjust the tariffs the Trump administration imposed on steel and aluminum, people familiar with the matter said.

The president has described his threat to impose tariffs on foreign cars and car parts as a necessary measure to protect the United States car industry and a negotiating tool to extract concessions from foreign governments.

The announcement Friday said that an investigation by the Department of Commerce had found that imports of automobiles and certain automobile parts threatened to impair the national security of the United States. “United States defense and military superiority depend on the competitiveness of our automobile industry and the research and development that industry generates,” the White House proclamation said.

But many outside the administration have criticized the linkage of cars with national security, saying that the bulk of American auto imports come from the country’s closest allies. Mexico, Japan, Canada, Germany and South Korea were together responsible for more than 85 percent of American automotive imports in 2018.

“The idea that U.S. automakers are threatened by automotive imports is fundamentally flawed and ill conceived,” said John Bozzella, the president of Global Automakers, which represents foreign car brands. “No automaker or auto parts supplier asked for this ‘protection.’”

Economists and industry analysts have argued that the tariffs would raise the cost of American cars and weigh on the United States economy. The Center for Automotive Research, a research group partly funded by the industry, estimated the measures could increase the price of a new vehicle by $455 to $6,875, depending on the specific policy taken.

At a hearing last July on the tariffs, every witness present, including representatives of foreign governments, car companies, parts makers and dealerships, testified in opposition to the measure. The only exception was the United Automobile Workers union.

Jennifer Kelly, the union’s research director, said that the tariffs could address real problems with American automotive factories moving offshore, but that “rash actions” might also have “unforeseen consequences, including mass layoffs of American workers.”

Mr. Trump has repeatedly criticized Europe for flooding the American market with cars while limiting imports of United States vehicles and has called for revised trade terms that makes the relationship more fair.

American and European negotiators have been in talks for nearly a year in an attempt to relaunch trade negotiations between the governments. European officials have been eager to evade tariffs on automobiles, which would hit Germany especially hard. But talks have proceeded slowly, with the two sides sparring over whether to include agriculture in the deal.

Europe insists that the issue is not on the table, while American negotiators say a deal that does not open European markets to American farmers is unlikely to pass Congress.

Reaching a deal with Europe in six months could be difficult, especially after elections for the European Parliament next week that are expected to strengthen protectionist parties on both the left and the right. Leaders of the Green coalition in Parliament say they will not sign trade agreements with countries that have not ratified the Paris climate change accord, which Mr. Trump has pulled out of.

Shares of BMW and Daimler, the two companies that would be hit hardest by tariffs, rose following reports Wednesday that auto tariffs would be postponed. But otherwise the reaction in Europe was muted, partly because officials and executives were waiting for official confirmation, and partly because they worried that the president could change his mind.

“Joy is premature,” Germany publication Der Spiegel said in an editorial Thursday. “The decisions of this U.S. president are unpredictable, erratic, and absolutist.”

The United States and Japan have also been discussing a bilateral trade deal that could give American farmers more access to Japan’s market, following President Trump’s decision two years ago to withdraw from the Trans-Pacific Partnership, a trade deal the Obama administration negotiated with Japan and 10 other Pacific nations. But negotiations are also in early stages.

Toshimitsu Motegi, minister for economic and fiscal policy and Japan’s chief trade negotiator, said he directly asked Robert Lighthizer whether the Trump administration would impose import controls on Japanese automakers.

Speaking to reporters on Friday in Tokyo, he said he told Mr. Lighthizer that Japan would object to such import controls. “Japan has repeatedly told the U.S. side that it opposes such measure to distort open and fair trade,” Mr. Motegi said.

Mr. Motegi said that Mr. Lighthizer assured him the U.S. would not restrict the volume of cars that Japan exports to the U.S. “I confirmed with the U.S. side that they wouldn’t seek such a measure,” he said.

Japanese officials say that they are counting on the close relationship between Mr. Trump and Prime Minister Shinzo Abe to keep trade negotiations from souring between the two countries. Mr. Trump is scheduled to visit Japan next week and his hosts are planning a full slate of high-level hospitality, including a state dinner with the new emperor and empress, rounds of golf, and a visit to a sumo wrestling championship, where Mr. Trump will award the winner’s trophy.

 

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