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U.S. Commerce Dept Sends Auto Tariff Report to the White House for Review

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【Summary】The U.S. Commerce Department sent its report on auto tariffs late Sunday evening to U.S. President Donald Trump, hours before the end of the 270-day deadline. The report’s recommendations can potentially lead to steeper tariffs on imported cars and auto parts.

FutureCar Staff    Feb 18, 2019 4:43 PM PT
U.S. Commerce Dept Sends Auto Tariff Report to the White House for Review
The Audi A5 coupe rolls down the assembly line at the company's Ingolstadt assembly plant in Germany.

WASHINGTON — In a move that could have wide implications across the U.S. auto industry, the U.S. Commerce Department sent its report on auto tariffs late Sunday evening to U.S. President Donald Trump, hours before the end of the 270-day deadline. The report's recommendations can potentially lead to steeper tariffs on imported cars and auto parts.

The report has already received sharp pushback from the auto industry even before its contents are made public, the agency confirmed.

According to Reuters, a department spokeswoman said it would not disclose any details of the "Section 232" national security report submitted to President Trump by Commerce Secretary Wilbur Ross Sunday night. The purpose of the report is to determine the effects of auto imports and related parts on national security.

President Trump has targeted auto imports, stating that they are unfair and are making it harder for U.S. automakers to compete in the global auto industry. Trump threatened tariffs as high at 25 percent on vehicles imported from the EU, which includes luxury models from Mercedes Benz, BMW and Audi.

The auto industry is expected to wage a massive lobbying campaign against any proposed tariffs.

The automotive industry has warned government officials that tariffs of up to 25 percent on millions of imported cars and parts would add thousands of dollars to vehicle costs and potentially lead to hundreds of thousands of job losses throughout the U.S. economy.

President Trump has 90 days to decide whether to act upon the recommendations, which auto industry officials expect to include at least some tariffs on fully assembled vehicles or technologies and components related to electric powertrains, autonomous driving and connected car technology.

According to the U.S. Dept of Commerce website, the President can concur or not with the Commerce Secretary's recommendations, and take action to "adjust the imports of an article and its derivatives" or other non-trade related actions as deemed necessary.

The Motor and Equipment Manufacturers Association, which represents more than 1,000 automotive parts suppliers, warned that tariffs will shrink investment in the United States at a time when the auto industry is already facing declining sales.

"These tariffs, if applied, could move the development and implementation of new automotive technologies offshore, leaving America behind," it said in a statement. "Not a single company in the domestic auto industry requested this investigation."

The Commerce Department started its investigation in May 2018 at the request of President Trump. Known as a Section 232 investigation, its purpose was to determine the effects of imports on national security and it had to be completed and submitted by Sunday, the last day of a 270 day deadline.

Automakers and parts suppliers are anticipating its recommendation options will include broad tariffs of up to 20 percent to 25 percent on assembled cars and parts, or smaller tariffs targeting components and technologies related new vehicles, including autonomous driving technology, internet-connected vehicle hardware.

The Commerce Department alluded to a focus on emerging vehicle technologies when it opened the investigation.

1290 X4 X3 approaching quality_2_4.jpg

BMW's X3 and X5 SUV's are built in the U.S. at the company's Spartanburg assembly plant and are not subjected to higher tariffs.

Trump administration officials have said tariff threats on autos are a way to win concessions from Japan and the EU. Last year, Trump agreed not to impose tariffs as long as talks with the two trading partners were proceeding in a productive manner. Japan is the home of Toyota, one of the most common nameplates on U.S. roads.

Trump said on Friday that tariffs protect industry and also help win trade agreements.

"I love tariffs, but I also love them to negotiate,"  Trump said Friday during a White House Rose Garden press conference.

Tariffs could raise auto prices by $2,750 on average

A report from the Center for Automotive Research in Ann Arbor, Michigan, published on Friday showed its worst-case scenario of a tariff of 25 percent would cost 366,900 U.S. jobs in the auto and related industries.

U.S. light duty vehicle prices would increase by $2,750 on average, including U.S.-built vehicles, reducing annual U.S. sales by 1.3 million units and forcing many consumers to the used car market, the think tank's report said.

Major automaker groups said last year the cumulative effect for the United States would be an $83 billion annual price increase and argued there was no evidence that auto imports posed any type of national security risk.

Canada and Mexico each won duty-free access to 2.6 million vehicles as part of a updated North American free trade deal even if the administration moves ahead with the tariffs.

General Motors chose Mexico for production of the redesigned 2019 Chevy Blazer SUV after duties were eliminated. However, GM's move to Mexico received criticism from the United Auto Workers Union (UAW).

The union has urged its members to boycott the Mexico-made Chevrolet Blazer in a scathing letter published to Facebook. A report on the letter from WardsAuto said the UAW continues to have "conflicts and disagreements" with GM.

The tariffs may be already hurting U.S. automakers.

Terry Dittes, director of the UAW's GM Department, said the automaker has doubled down on cheaper labor in Mexico and continues to use temporary workers at U.S. plants, which robs laid-off UAW members of jobs. GM announced around 14,000 layoffs and factory closures in November 2018, citing a "change in strategic direction", which includes building more electric models, and ending production of the slow-selling Chevy Cruze sedan.

Last year, General Motors and Ford sought tariff exemptions for models built in China and shipped to the U.S. Last summer, Ford cancelled plans to import the China-made Focus Active crossover model for the U.S. market because of the 25 percent tariff. GM sought a tariff exemption for the Buick Envision crossover, which is also built in China.

However, Trump's proposed tariffs, if implemented, might hurt German automakers the most. America is the largest export market for cars built in the EU. Luxury models from Mercedes Benz, Audi, BMW and Porsche built overseas have been a target of tariffs by President Trump.

German automakers Volkswagen AG and BMW met with Trump in December to urge him not to impose the tariffs.

The newly released report is designed to provide detailed information to help Trump make his decision.

resource from: Reuters

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