The White House administration launched an investigation related to national security into imports of cars and trucks that could lead to more tariffs by the U.S. similar to the ones it imposed on both imported aluminum and steel last March.
The national security investigation under the Trade Expansion Act of 1962’s Section 232 would investigate if imports of vehicles and parts were threatening the health and ability of the industry to research as well as develop new and advanced technologies, said the Department of Commerce on Wednesday.
Secretary of Commerce Wilbur Ross said the evidence suggested that for several decades, imports have eroded the domestic auto industry. He promised a fair transparent and thorough investigation.
Higher tariffs could cause great harm to Asian automakers such as Toyota, Nissan and Honda. In addition they would create havoc with Hyundai as well. The four automakers count on the U.S. as an important market, and this new announcement caused a broad sell off for automaker’s shares thorough the region.
The governments of China, Japan and South Korea all announced they would be monitoring the situation, while Beijing which increasing is eyeing the U.S. as a possible market for its vehicles added it would defend its interests.
A Ministry of Commerce spokesperson in China said the country opposes abuse of national security clauses that will damage the multilateral trade systems while disrupting the normal trade order.
The situation will be closely monitored and fully evaluate the potential impact and defend resolutely the legitimate interest it has.
This new probe comes during a time when Trump is courting voters across the industrial heartland of the U.S. ahead of upcoming mid-term elections this fall, and opened a new front for the trade agenda he has of America First that is aimed at winning back jobs in manufacturing lost to competitors overseas.
It represents a possible increase in costs for automakers overseas to export their vehicles as well as parts to the second largest auto market in the world.
The growing tensions in trade over vehicles and parts, particularly with China may raise the risks for companies in the U.S. expanding their presence, of which signs have already started to emerge.
Earlier in May, Ford Motor had its imported vehicles held up at a port in China, adding to a list that continues to grow of U.S. products that face issues at borders across China.
Most of the vehicles sold in the U.S. by automakers from Japan as well as South Korea are made there, but most companies also export vehicles to the U.S. from their plants in Asia, Canada, Mexico and other nations.
Close to one third of all vehicle imports into the U.S. in 2017 were from Asia.