Commentary

EU Autos Likely To Evade Tariffs, At Least For Now

President Donald Trump is widely expected to announce he is putting off a decision due Wednesday about whether to impose tariffs of up to 25% on European automobiles and parts.

“That would avoid a new bruising dispute with one of the United States’ biggest trading partners, just as Trump is trying to put out another trade fire by striking an initial deal with China. But it would also set the stage for Trump to revisit the controversial trade issue in the throes of next year’s presidential campaign,” write  Politico’s Ben White and Doug Palmer in breaking the story.

“In May, Trump said the Commerce Department had determined that imports of autos and auto parts were a threat to national security. He instructed U.S. Trade Representative Robert Lighthizer to negotiate deals with both the EU and Japan to address the impairment and report back to him within 180 days on the progress. That deadline is on Wednesday,” they add.

advertisement

advertisement

Last month, the U.S. and Japan signed a limited trade agreement that was “intended to boost markets for American farmers and give Tokyo assurances, for now, that President Donald Trump won’t impose tariffs on auto imports,” Automotive News reports

Tariffs on European autos would have a dramatic impact on the market.

“According to the Center for Automotive Research, tariffs of 25% would increase the price of import cars by about $6,875. But increases would not be limited to foreign cars, as the likes of Ford and GM would likely see prices rise by about $4,400, CAR said, since domestic manufacturers rely on global supply chains to manufacture automobiles,” Fox Business Network reports.

"Meanwhile, the EU carmakers are well represented in the U.S. with lines of vehicles made here. German automaker Volkswagen AG has a factory in Chattanooga, Tenn., BMW AG has a large factory in South Carolina and Mercedes-Benz recently invested $1 billion in a plant in Tuscaloosa, Ala.,” Fox adds.

“Commerce Secretary Wilbur Ross, in an interview with Bloomberg TV earlier this month, signaled that a postponement was likely,” report  Bloomberg’s Jenny Leonard and Shawn Donnan in Automotive News Europe.

“‘Our hope is that the negotiations we’ve been having with individual companies about their capital investment plans will bear enough fruit that it may not be necessary to put the 232 fully into effect, may not even be necessary to put it partly in effect,’ said Ross, referring to the national-security investigation under Section 232 of a 1962 trade law,” they continue.

“The president could bring up the issue of car tariffs in a speech he is delivering on Tuesday at the Economic Club of New York. A White House spokesman would only say Trump would focus his speech on how his tax and trade policies have supported a strong economic recovery,” report  Reuters’ David Lawder and Andrea Shalal.

“EU officials said while a further six-month delay was likely, Trump’s actions were unpredictable and he would likely keep the threat of car tariffs hanging over them as the United States and European Union pursue trade negotiations in the coming year,” they add.

“Meanwhile, the EU carmakers are well represented in the U.S. with lines of vehicles made here. German automaker Volkswagen AG has a factory in Chattanooga, Tenn., BMW AG has a large factory in South Carolina and Mercedes-Benz recently invested $1 billion in a plant in Tuscaloosa, Ala.,” Jack Ewing and Ana Swanson write  for The New York Times.

“To allay Mr. Trump’s concerns, the German car industry is promising to create 25,000 jobs at factories in the United States, according to a senior American official who spoke on condition of anonymity. The companies will point to investments they have already made that in effect lock them into their promises.

“A senior executive in the German car industry and a high-ranking European official, both of whom also insisted on anonymity, confirmed the broad outlines of the understanding. Daimler, BMW and Volkswagen declined to comment on any talks,” Ewing and Swanson report.

“European stocks higher amid hopes U.S. will delay EU auto tariffs,” reads a CNBC headline this morning -- but only “slightly,” the story tells us.

“Meanwhile, stocks in Asia were mixed on Tuesday afternoon as concerns over the state of U.S.-China trade discussions and an escalation of violence in Hong Kong weighed on markets. Investors continue to await direction on trade talks between Washington and Beijing after President Trump on Friday denied claims by the Chinese Commerce Ministry that the two sides had agreed to roll back existing tariffs on each other’s goods,” CNBC’s Elliot Smith writes.

Next story loading loading..