The Trump administration 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 late Wednesday, promising a "thorough, fair and transparent investigation."
Ross said Thursday the probe of car and truck imports is still in its early stages but that other countries' high, artificial barriers such as tariffs and other interventions have skewed the marketplace.
"Now it's very difficult to get back to a reciprocal arrangement," Ross said in an interview on CNBC, a day after announcing the investigation.
'Stupidity' and 'other games'
Ross said he did not blame other countries for the trade imbalance in light vehicles, saying they were doing what was best for themselves. In addition to tariffs, Ross cited other nontariff barriers such as standards, licensing and "all kinds of other games."
"The stupidity is that we let ourselves get into this box of extremely low rates," he told CNBC.
U.S. Senate Finance Committee Chairman Orrin Hatch, R-Utah, said the possible auto tariffs are "deeply misguided," and urged the administration "to remain focused on addressing China's trade practices."
Pointing to a mixed bag of effects on U.S. producers after the metals tariffs, analysts were cautious about predicting major gains for U.S. companies and workers from the process.
"Measures like this are ultimately about protecting American manufacturing jobs in states that voted for Trump rather than national security," Morningstar analyst David Whiston wrote in a note to investors.
"We don't see these tariffs (if proposed) lasting forever and we think (they) will ultimately cost American jobs."
Higher tariffs could be particularly painful for Asian automakers including Toyota Motor Corp., Nissan Motor Co., Honda Motor Co. and Hyundai Motor Co., which count the United States as a key market, and the announcement sparked a broad sell-off in automakers' shares across the region.
Toyota on Thursday warned that imposing tariffs on imported vehicles "could hurt American jobs" and boost consumer costs. Toyota noted in its statement on Twitter that it operates 10 U.S. plants and has 1,500 U.S. dealers.
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 that 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 midterm elections this year, and opens a new front in his "America First" trade agenda intended to claw 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.
This month, Reuters reported that Ford Motor Co.'s imported vehicles were being held up at Chinese ports, adding to a growing list of U.S. products facing problems at China's borders.
The majority of vehicles sold in the United States by Japanese and South Korean automakers are produced there, but most companies 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.
NAFTA redo
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, Trump said: "Core industries such as automobiles and automotive parts are critical to our strength as a Nation."
A Trump administration official said before the announcement that the expected move was intended partly to pressure Canada and Mexico to make concessions in talks to update NAFTA that have languished in part over auto provisions, as well as to pressure Japan and the European Union, which also export large numbers of vehicles to the United States.
