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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President Donald Trump talks with auto industry leaders, including
General Motors CEO Mary Barra (4th L) and United Auto Workers (UAW)
President Dennis Williams (4th R) at the American Center for
Mobility in Ypsilanti Township, Michigan, U.S. on March 15, 2017.
REUTERS/Jonathan Ernst/File Photo
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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