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Trump Decision Due on Foreign Car Tariffs

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11/01/2019 | 08:27am EST

By Josh Zumbrun and Natalie Andrews

WASHINGTON -- Politics and the prospect of impeachment are emerging as potential roadblocks to threatened Trump administration tariffs on European and Asian auto imports.

The White House has until Nov. 13 to decide whether to impose the levies, which President Trump first proposed last year in the event the U.S. can't reach an accord with major trading partners including the European Union.

Business groups and some of Mr. Trump's fellow Republicans are warning that the tariffs -- which are opposed by both foreign and domestic auto makers -- couldn't come at a worse time.

As the 2020 election season begins, the 25% tariffs would jack up the price of import cars by about $6,875, according to the Center for Automotive Research. Average prices overall would rise by $4,400, the group said, since even domestic manufacturers rely on global supply chains.

Besides angering car-buyers, the higher prices could dent sales, further straining auto makers that are already cutting jobs.

"We all know it's important to go into an election season with a strong economy," said Ann Wilson, senior vice president of government affairs at the Motor & Equipment Manufacturers Association. "We believe very strongly that if you impose tariffs on a wide-scale on imported autos or parts it would cause an economic downturn in this country."

Foreign auto makers have invested heavily in U.S. factories, especially in Southern states that are Republican strongholds.

Japan's Toyota Motor Corp. has factories in Kentucky, Texas and Mississippi. Among German auto makers, Volkswagen AG has a factory in Chattanooga, Tenn., and BMW AG has a major factory in South Carolina. Sweden's Volvo Group, which is Chinese-owned, also has a plant in South Carolina.

Other foreign auto makers including Daimler AG's Mercedes-Benz division and Kia Motors Corp. have U.S. plants in the Republican South.

Tariffs would also hit car dealers that sell imports, as well as parts factories that supply the foreign-car plants.

"There's not a Senate office that isn't well aware of the impact this is going to have on suppliers in their state," said Ms. Wilson.

Senate Republicans have long opposed the president on car tariffs, but impeachment could give them a louder voice. A House vote to impeach the president would lead to a trial in the GOP-controlled Senate.

"Many GOP senators have urged Trump for months to avoid further tariffs, " said Jeffrey Wright, an analyst at the Eurasia Group, which tracks political risk. "So their prominence in an impeachment trial likely makes those arguments more persuasive."

Sen. Pat Toomey (R., Pa.) sees fallout from the tariffs extending beyond possible job losses in states with foreign factories.

"The Europeans are not going to just sit by idly and just say 'OK, we'll just sell fewer cars,'" he said. "They will retaliate."

Employment in motor vehicles and parts factories has been declining since October of last year with over 10,000 jobs lost across the industry in the 12 months through September, according to Labor Department data.

The fear of tariffs was one factor that motivated Japan and the U.S. to reach a limited trade deal in September, with the Japanese saying they hope it insulates them from car tariffs.

European officials have made less progress. The EU has taken some measures to boost its importing of U.S. soybeans, beef and liquefied natural gas. But the two sides haven't neared a deal, and in October the Trump administration imposed tariffs on $7.5 billion in European goods under a World Trade Organization ruling on a separate trade dispute.

Still, EU officials have grown more confident in recent weeks that the Trump administration won't move forward with auto tariffs.

"I've seen that very few people in the U.S. actually want these tariffs, " said Cecilia Malmstrom, the EU's trade commissioner, in an interview Oct. 14, adding that it would be "stupid for the U.S. to do it."

Brussels has prepared a list covering EUR35 billion worth of U.S. exports to Europe, about $39 billion in dollar terms, that would be targeted if Mr. Trump goes ahead with car tariffs. U.S. tariffs would affect some $60 billion of annual EU auto and car-parts exports to the U.S.

The U.S. has the authority to impose tariffs after the Commerce Department determined that auto imports pose a threat to national security.

Under Section 232 of the Trade Expansion Act of 1962, the president has the power to impose tariffs, and wide discretion as to the tariff rate and which countries and products would face duties. The law gives the president six months from delivery of the Commerce Department finding in May to announce his course of action, setting up the Nov. 13 deadline.

Republicans -- including Sen. Chuck Grassley of Iowa, chairman of the Senate Finance Committee -- have discussed legislation to reassert congressional authority over the levying of tariffs for national-security grounds, aiming to curb the president's tariff-by-tweet policy-making that has added uncertainty to markets and stressed U.S. businesses.

That legislation, which would rebuke the president while reclaiming congressional trade authority, is unlikely to get a vote because many Republicans are loath to challenge the president. Instead, they are leaning on the White House to not enact the tariffs.

"They should and I believe they will be postponed," Mr. Grassley said.

--Emre Peker contributed to this article.

Write to Josh Zumbrun at Josh.Zumbrun@wsj.com and Natalie Andrews at Natalie.Andrews@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
DAIMLER AG 0.40% 49.455 Delayed Quote.7.72%
PORSCHE AUTOMOBIL HOLDING SE 0.57% 67.48 Delayed Quote.30.67%
SOYBEAN MEAL FUTURES (ZM) - CBE (ELECTRONIC)/C1 -0.70% 297.4 End-of-day quote.-4.47%
TOYOTA INDUSTRIES CORPORATION -0.16% 6440 End-of-day quote.30.89%
TOYOTA MOTOR CORPORATION -0.54% 7727 End-of-day quote.25.03%
VOLKSWAGEN AG 0.95% 176.6 Delayed Quote.27.12%
VOLVO 0.69% 145.5 Delayed Quote.24.62%
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