On Friday, US President Donald Trump released a presidential proclamation announcing a delay on the decision of whether to introduce new import tariffs on foreign cars and car parts.
The president, who originally stated he would make a decision on new tariffs by May 18, announced that the decision would be delayed for 180 days.
A Matter of National Security?
In February, the US Commerce Department presented the president with a report arguing that foreign automobile imports represented a threat to US national security. A White House press release on the president’s Friday proclamation made repeated mention of the issue of national security throughout.
Calling the president’s action “historic,” the statement made clear that US Trade Representative Robert Lighthizer will lead trade negotiations with foreign manufacturers and the president will “determine what further action needs to be taken” if an agreement cannot be reached within 180 days.
Inconsistent With WTO Rules
Germany’s minister for economic affairs, Peter Altmaier, reacted to the announcement by saying, “We regret the fact that the US side has now categorized automobile imports as a threat to national security.”
Altmaier said the US move was inconsistent with World Trade Organization (WTO) rules, suggesting talks on scrapping tariffs instead: “We in the EU are prepared to negotiate an industrial tariff agreement that would drop import tariffs on both sides of the Atlantic to zero.”
EU Trade Commissioner Cecelia Malström also took umbrage with US national security claims, tweeting, “we completely reject the notion that our car exports are a national security threat.” Like Altmaier, she signaled a willingness to negotiate an agreement including cars, “but not WTO-illegal managed trade.”
We note that US postpones decision on car tariffs for 180 days. But we completely reject the notion that our car exports are a national security threat. The EU is prepared to negotiate a limited trade agreement incl cars, but not WTO-illegal managed trade.
— Cecilia Malmström (@MalmstromEU) May 17, 2019
Double Bind for German Carmakers
The tariffs would hit Japanese and European automakers. German carmakers feel particularly threatened by the prospect of such tariffs. Although they import vehicles to the United States, many have major production facilities in the US as well.
From there, they export cars to China. Due to Chinese retaliatory tariffs on imports arising from the escalating trade war between the US and China, companies such as VW, Daimler, and BMW see themselves caught in a double bind.
‘Ripping Us Off’
Trump has argued that the EU is unfairly “ripping off” the US by charging higher tariffs on US automobiles than the US does on cars imported from the EU.
The WTO says that EU import tariffs on US cars average 5%, whereas the US average on EU cars is 3.4%.
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