20 May 2019
Tariff Decision on Autos and Auto Parts Delayed Six Months
On 17 May, the White House issued a proclamation in response to the DOC’s report under Section 232 of the Trade Expansion Act of 1962 on automobiles, light trucks and automotive parts. The report had been submitted to the White House on 17 February and a decision in response to those findings was required by 17 May. Previous Section 232 actions have led to additional tariffs on U.S. imports of aluminium and steel and Section 232 investigations are on-going on uranium and titanium sponge.
The proclamation indicates that the DOC has found that the “rapid application of commercial breakthroughs in automobile technology is necessary for the United States to retain competitive military advantage” and that the U.S. defence industrial base “depends on the American-owned automotive sector for the development of technologies that are essential to maintaining our military superiority.” While many U.S. states have competed to lure Japanese and European automotive firms’ direct investment in assembly plants to provide high-paying jobs, the proclamation strongly appears to favour U.S. company ownership by repeatedly referring to “American-owned producers” and highlighting the importance of the “American-owned automotive sector for the development of technologies that are essential to maintaining our military superiority.”
The proclamation concludes that in light of these factors “domestic conditions of competition must be improved by reducing imports.” The Trump administration had been threatening to impose an additional 25 percent duty on all imports of autos, light trucks and auto parts, which had been opposed by many members of Congress as well as a number of economists and U.S. business associations. Instead, the proclamation directs USTR to use the next 180 days to negotiate agreements to address what it calls “the threatened impairment of the national security with respect to imported automobiles and certain automobile parts.” Negotiations will have to be conducted with the European Union, Japan and any other country USTR deems appropriate. Both the EU and Japan have held bi-lateral negotiating sessions with USTR but no agreements – or even negotiating parameters – have been reached to date. The president can still consider whether there is a need for further action under Section 232 in 180 days.
Several Republican members of the Senate Finance Committee have introduced competing bills to limit the president’s uni-lateral Section 232 authority and Chairman Grassley (Republican-Iowa) has said that his staff is developing a compromise bill that can withstand a potential veto from President Trump. Several countries have also challenged the U.S. imposition of Section 232 tariffs at the World Trade Organisation.