U.S. launches auto import probe, China says will defend
interests
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[May 24, 2018]
By David Shepardson and Jeff Mason
WASHINGTON (Reuters) - The Trump
administration has launched a national security investigation into car
and truck imports that could lead to new U.S. tariffs similar to those
imposed on imported steel and aluminum in March.
The national security probe under Section 232 of the Trade Expansion Act
of 1962 would investigate whether vehicle and parts imports were
threatening the industry's health and ability to research and develop
new, advanced technologies, the Commerce Department said on Wednesday.
"There is evidence suggesting that, for decades, imports from abroad
have eroded our domestic auto industry," Commerce Secretary Wilbur Ross
said in a statement, promising a "thorough, fair and transparent
investigation."

Higher tariffs could be particularly painful for Asian automakers
including Toyota Motor Corp <7203.T>, Nissan Motor Co <7201.T>, Honda
Motor Co <7267.T> and Hyundai Motor Co <005380.KS>, which count the
United States as a key market, and the announcement sparked a broad
sell-off in automakers' shares across the region. [MKTS/GLOB]
The governments of Japan, China and South Korea said they would monitor
the situation, while Beijing, which is increasingly eyeing the United
States as a potential market for its cars, added that it would defend
its interests.
"China opposes the abuse of national security clauses, which will
seriously damage multilateral trade systems and disrupt normal
international trade order," Gao Feng, spokesman at the Ministry of
Commerce, said at a regular news briefing on Thursday which focused
largely on whether Beijing and Washington are making any progress in
their growing trade dispute.
"We will closely monitor the situation under the U.S. probe and fully
evaluate the possible impact and resolutely defend our own legitimate
interests."
COURTING VOTERS
The probe comes as Trump courts voters in the U.S. industrial heartland
ahead of mid-term elections later this year, and opens a new front in
his "America First" trade agenda aimed at clawing back manufacturing
jobs lost to overseas competitors.
It could raise the costs for overseas automakers to export vehicles and
parts to the world's second-largest auto market.

Growing trade tensions over cars and car parts, particularly with China,
could raise risks for U.S. companies expanding their presence in the
country, signs of which are already emerging.
Earlier this month, Reuters reported that Ford Motor Co's <F.N> imported
vehicles were being held up at Chinese ports, adding to a growing list
of U.S. products facing issues at China's borders.
The majority of vehicles sold in the United States by Japanese and South
Korean automakers are produced there, but most firms also export to the
U.S. from plants in Asia, Mexico, Canada and other countries.
Roughly one-third of all U.S. vehicle imports last year were from Asia.
In addition to recently imposed 25 percent tariffs on steel and 10
percent tariffs on aluminum imports, the administration has threatened
tariffs on $50 billion worth of Chinese goods over intellectual property
complaints, and Beijing has vowed to respond.
The administration is also trying to renegotiate the North American Free
Trade Agreement to return more auto production to the United States.
Commerce said the new probe would determine whether lost domestic
production had weakened the U.S. "internal economy" and its ability to
develop connected vehicle systems, autonomous vehicles, fuel cells,
electric motors and batteries, and advanced manufacturing processes.
In a separate statement, President Donald Trump said: "Core industries
such as automobiles and automotive parts are critical to our strength as
a Nation."
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U.S. President Donald Trump speaks at the Susan B. Anthony List 11th
Annual Campaign for Life Gala at the National Building Museum in
Washington, U.S., May 22, 2018. REUTERS/Al Drago

A Trump administration official said before the announcement that the expected
move was aimed partly at pressuring Canada and Mexico to make concessions in
talks to update the NAFTA that have languished in part over auto provisions, as
well as pressuring Japan and the European Union, which also export large numbers
of vehicles to the United States.
'FEWER CHOICES, HIGHER PRICES'
An ad hoc industry group representing the largest Japanese, German and other
foreign automakers called "Here for America," criticized the effort.
"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, chief executive of Global Automakers, a trade group
representing Toyota, Nissan Motor Co Ltd <7201.T>, Hyundai Motor Co <005380.KS>
and others.
A Toyota spokeswoman said that the company was monitoring the situation.
Chinese automaker Geely Holding Group urged free trade practices for the auto
industry, which is built on a complex supply chain under which vehicle
components for any given car often originates from numerous countries.

"As a global manufacturer, Geely Holding Group is in favor of free trade and
open markets. Free trade creates jobs, wealth and economic growth," a spokesman
said, adding that its plant in South Carolina to produce its Volvo brand cars
showed its commitment to the country.
Shares in Toyota, Honda and Hyundai each fell roughly 3 percent in local trade
following the announcement, while Mazda Motor Corp <7261.T>, which does not have
any U.S. production capacity at the moment, tumbled more than 5 percent.
Late last week, Japan's automakers' association urged its export partners to
keep tariffs on vehicles and components low and maintain free trade
relationships.
Roughly 12 million cars and trucks were produced in the United States last year,
while the country imported 8.3 million vehicles worth $192 billion. This
included 2.4 million from Mexico, 1.8 million from Canada, 1.7 million from
Japan, 930,000 from South Korea and 500,000 from Germany, according to U.S.
government statistics.
At the same time, the United States exported nearly 2 million vehicles worldwide
worth $57 billion.
German automakers Volkswagen AG <VOWG_p.DE>, Daimler AG <DAIGn.DE> and BMW AG <BMWG.DE>
all have large U.S. assembly plants. The United States is the second-biggest
export destination for German auto manufacturers after China, while vehicles and
car parts are Germany’s biggest source of export income.
Asked if the measures would hit Mexico and Canada, a Mexican source close to the
NAFTA talks said: “That probably is going to be the next battle."
(Reporting by David Shepardson and Jeff Mason; Additional reporting by James
Oliphant, Makini Brice and David Lawder in Washington, Anthony Esposito in
Mexico City; Naomi Tajitsu in Tokyo; Yawen Chen and Norihiko Shirouzu in
Beijing; Hyunjoo Jin in Seoul; Writing by David Lawder and David Shepardson;
Editing by Jonathan Oatis, Peter Cooney & Kim Coghill)
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