Automakers already have enough of a headache with the current administration in the white house, but news that broke today is only going to make it even worse.
Wilbur Ross, the U.S. Secretary of Commerce has announced that President Donald ordered an investigation under Section 232 of the Trade Expansion Act of 1962 to determine "whether imports of automobiles, including SUVs, vans and light trucks, and automotive parts into the United States threaten to impair the national security."
"There is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry. The Department of Commerce will conduct a thorough, fair and transparent investigation into whether such imports are weakening our internal economy," said Ross in a statement.
There's also this interesting bit in the statement,
QuoteDuring the past 20 years, imports of passenger vehicles have grown from 32 percent of cars sold in the United States to 48 percent. From 1990 to 2017, employment in motor vehicle production declined by 22 percent, even though Americans are continuing to purchase automobiles at record levels. Now, American owned vehicle manufacturers in the United States account for only 20 percent of global research and development in the automobile sector, and American auto part manufacturers account for only 7 percent in that industry.
The Wall Street Journal reported yesterday that tariffs as high as 25 percent could be slapped on new cars. Currently, the tariff on imported vehicles is at 2.5 percent. Imported trucks are already hit with a 25 percent tariff via the chicken tax.
There are a couple likely reasons for this investigation,
- Mid-term elections are coming up and this is seen as a way to court voters in the heartland with the promise of bringing back jobs to the U.S.
- Possibly being used as leverage in negotiations with Canada and Mexico over the North American Free Trade Agreement (NAFTA); the European Union, and China.
This investigation could hurt Mexico the most as they are the largest source of U.S. auto imports - delivering just under $50 billion of imports last year. As for automakers, Bloomberg reports that Jaguar Land Rover, Mazda, and Mitsubishi would be the most affected as all of their vehicles are imported. The news sent the stock prices of foreign automakers downward. Shares in Mazda dropped 5.2 percent at the close of trade in Japan, while Daimler and BMW saw their stock price drop more than two percent.
This announcement has gotten condemnation from various governments, trade groups, analysts, and automakers. Here are just a few.
"China opposes the abuse of national security clauses, which will seriously damage multilateral trade systems and disrupt normal international trade order," said Gao Feng, spokesman at the Ministry of Commerce in China during a regular press briefing.
"We will closely monitor the situation under the U.S. probe and fully evaluate the possible impact and resolutely defend our own legitimate interests."
“We have to consider this as something of a provocation. I have the growing impression that the U.S. no longer believes in the competition of ideas, but only the law of power. It fills me with grave concern,” said Eric Schweitzer, president of the Association of German Chambers of Commerce and Industry.
“The U.S. auto industry is thriving and growing. To our knowledge, no one is asking for this protection. This path leads inevitably to fewer choices and higher prices for cars and trucks in America,” said John Bozzella, CEO of the Association of Global Automakers, a trade group that represents Hyundai, Nissan, Toyota, and others.
Source: Automotive News (Subscription Required), Bloomberg, Reuters, Wall Street Journal (Subscription Required), U.S. Department of Commerce
U.S. Department of Commerce Initiates Section 232 Investigation into Auto Imports
Today, following a conversation with President Donald J. Trump, U.S. Secretary of Commerce Wilbur Ross initiated an investigation under Section 232 of the Trade Expansion Act of 1962, as amended. The investigation will determine whether imports of automobiles, including SUVs, vans and light trucks, and automotive parts into the United States threaten to impair the national security as defined in Section 232. Secretary Ross sent a letter to Secretary of Defense James Mattis informing him of the investigation.
“There is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry,” said Secretary Ross. “The Department of Commerce will conduct a thorough, fair, and transparent investigation into whether such imports are weakening our internal economy and may impair the national security.”
During the past 20 years, imports of passenger vehicles have grown from 32 percent of cars sold in the United States to 48 percent. From 1990 to 2017, employment in motor vehicle production declined by 22 percent, even though Americans are continuing to purchase automobiles at record levels. Now, American owned vehicle manufacturers in the United States account for only 20 percent of global research and development in the automobile sector, and American auto part manufacturers account for only 7 percent in that industry.
Automobile manufacturing has long been a significant source of American technological innovation. This investigation will consider whether the decline of domestic automobile and automotive parts production threatens to weaken the internal economy of the United States, including by potentially reducing research, development, and jobs for skilled workers in connected vehicle systems, autonomous vehicles, fuel cells, electric motors and storage, advanced manufacturing processes, and other cutting-edge technologies.
Following today’s announcement, the Department of Commerce will investigate these and other issues to determine whether imports of automobiles and automotive parts threaten to impair the national security. A notice will be published shortly in the Federal Register announcing a hearing date and inviting comment from industry and the public to assist in the investigation.
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