US weighs tariffs on auto imports: Update

Adds congressional reaction to trade investigation

The US Commerce Department today launched an investigation into whether imports of automobiles and auto parts could harm US national security, potentially setting the stage for a new set of tariffs.

The probe, which will include imports of SUVs, vans and light trucks, was initiated by commerce secretary Wilbur Ross following a conversation with US president Donald Trump.

Ross will consider whether or not the decline of US automobile and automotive parts production threatens to impair national security by weakening the US economy. The department will study the effect on research and development and related jobs for skilled workers in advanced vehicle technologies, including autonomous vehicles, fuel cells, electric motors, advanced manufacturing processes and other emerging technologies.

"There is evidence that, for decades, imports from abroad have eroded our domestic auto industry," Ross said.

US passenger vehicle imports have grown from 32pc of domestic vehicle sales to 48pc over the last 20 years, according to the Commerce Department. From 1990 to 2017, employment in motor vehicle production declined by 22pc even as US consumers purchased automobiles at record levels, the department said.

Mexico and Canada were the largest exporters of new passenger vehicles to the US in 2017, potentially heightening the effect of the probe on the ongoing renegotiation of the North American Free Trade Agreement (Nafta).

Japan, Germany and South Korea round out the top five largest vehicle exporters to the US.

The Commerce Department said it will announce a hearing date shortly and invite comments from industry and the public to assist in its investigation.

The department has 270 days from the initiation date to prepare a report providing recommendations for action based on the findings.

Commerce launched the investigation under Section 232 of the Trade Expansion Act of 1962, which authorizes the president to enact tariffs or quotas on products that impair or threaten to impair US national security. The imports may pose a direct threat to production capabilities needed for national defense or threaten more broadly the country's economic welfare.

Trump in March imposed Section 232 tariffs on imported steel and aluminum following a year-long investigation by the Commerce Department.

The choice of two major import categories is not accidental. The department says its analysis of the causes of the US trade deficit has identified steel and automobiles as key sectors in need of protectionist measures.

But the choice of the pretext for tariffs is already causing consternation among potential targets, which include long-time US allies. "It is absurd to even think that the EU could be a threat to the US," European Council president Donald Tusk said.

Administration officials say that US auto tariffs are significantly lower than those in the EU and China. Beijing already has promised to lower its tariffs on US auto imports, as part of ongoing trade discussions.

"We will see where this investigation leads, but as far as we can see, this is something that would be against WTO rules," EU trade commissioner Cecilia Malmstrom said today.

Leading US Republican senators criticized the proposal as well. Invoking the national security argument on auto imports is an abuse of trade authority, Senate Foreign Relations Committee chairman Bob Corker (R-Tennessee) said today. "To me it feels like it has more do with domestic politics, and I hope it will be abandoned," he said.

Senate Finance Committee chairman Orrin Hatch (R-Utah), who oversees trade issues, called the proposal misguided. "Taxing cars, trucks and auto parts coming into the country would directly hit American families," he said.