Trump's Talk of U.S. Auto Tariffs Sends Carmakers' Stocks Tumbling

Donald Trump

Donald Trump Mexico and Canada ‘Very Spoiled’ with NAFTA AP

The US is mulling sweeping changes to vehicle imports after ordering a national security investigation which could see trade barriers erected. It has, though, driven the U.S.'s trade policy even further off-road.

"Contrary to the assumption underlying the investigation on import vehicles, the US auto industry is thriving", Bozella said.

It said German auto exports to the USA have been falling for many years, whereas German automakers have moved production for more of their vehicles to United States plants, where they are exported all over the world. "We are very dependent on the ability to bring in parts from other parts of the world for final production in the USA, and if that's no longer financially viable, the question becomes, is the production of vehicles in this country going to be financially viable?"

"If these reports are true, it's a bad day for American consumers", said John Bozzella, chief executive of Global Automakers, which represents several foreign carmakers. Almost half of the vehicles sold in the USA are imported, with numerous vehicles coming from assembly plants in Mexico and Canada.

If put in place, such tariffs would cause a substantial increase in the costs of the approximately 1.7 million vehicles and the more than $17-billion worth of parts shipped out of Canada to the United States annually.

Trump issued a cryptic Twitter post earlier on Wednesday that appeared to be a reference to the NAFTA talks, which have stalled in part because of major differences between the US and Mexico over the trade rules governing automotive manufacturing.

The investigation "will consider whether the decline of domestic automobile and automotive parts production threatens to weaken the internal economy of the United States", the Commerce Department said.

Earlier Thursday, Trump had blamed the United States neighbors to the north and south for being "difficult" in talks to renegotiate the pact.

According to Commerce Secretary Wilbur Ross, whose agency will lead the investigation, "there is evidence suggesting that, for decades, imports from overseas have eroded our domestic auto industry". Trump would have to launch a probe before he could impose the tariffs.

Earlier Wednesday, Trump, who has repeatedly pledged to revive American manufacturing, said that "big news" was coming that would be welcomed by US auto workers but he gave no details.

Trump said what Canada and Mexico are asking for in a renegotiated NAFTA is "not fair" and he called both countries "spoiled because nobody's done this" - presumably referring to previous American administrations that have not stood up to their NAFTA partners.

Critics fear that other countries will retaliate or use national security as a pretext to impose trade sanctions of their own.

Toyota Motor Corp. which is the largest vehicle assembler by volume in Canada, said the threat of tariffs has not changed its plans to invest $1.4-billion in assembly plants in Cambridge, Ont. and Woodstock, Ont.

"China opposes the abuse of national security clauses, which will seriously damage multilateral trade systems and disrupt normal global trade order", Gao Feng, a spokesperson for the Chinese Ministry of Commerce said.

With German carmakers set to be among those hit hardest the possible auto tariffs, the German Chambers of Commerce and Industry (DIHK) said the U.S. move "should nearly be seen as a provocation". "This path leads inevitably to fewer choices and higher prices for cars and trucks in America", he said in a statement.

However, US Commerce Secretary Wilbur Ross has announced an inquiry into auto imports under a Kennedy-era trade expansion act that protects national security.

'Crossing the border irregularly isn't a short cut into Canada, and there is a very high likelihood that if they are not actually fleeing the kinds of things that make you a refugee - which is war, persecution, terror, violence. then they are going to be sent back home, ' Trudeau said.

German officials have grown frustrated trying to convince Trump that Germans don't want to buy from American companies, which specialize in large sport-utility vehicles rather than smaller cars more suited to European lifestyles.

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