Wednesday, October 2, 2019

Are European And Asian Cars Safe From US Tariffs?

How far will this trade war go?

For months now, the ongoing saga of US tariffs on foreign cars has been causing turmoil within the automotive industry. China has already been hit with tariffs (affecting GM cars including the Buick Envision and Cadillac CT6) and the European Union fears it may be next.

After having numerous discussions regarding trade, Bloomberg reports that the Trump administration will hold off on imposing new tariffs, at least for now. Two people familiar with the matter said President Trump met with his top trade advisors at the White House to draft a report on the impact of car imports. After reading the report, the administration said it wasn't ready to impose new tariffs, though the report will be subject to change.

The Commerce probe was prompted by section 232 of the Trade Expansion Act, which covers the importation of automobiles, SUVs, vans, light trucks, and auto parts. Commerce Secretary Wilbur Ross is currently working on the probe and has until February 2019 to deliver his results to the president, who will have final say over any tariffs. If President Trump does decide to impose tariffs, they could be as high as 25%.

Automakers, both foreign and domestic, have warned of what could happen if these news tariffs are imposed, with Volvo, for example, already claiming they have caused strain on the production of the US-built Volvo S60. According to the National Automobile Dealers Association, a 25% tariff could increase the price of US-built cars by up to $2,270 and foreign-built cars by up to $6,875.

As of now, any tariffs on the EU have been put on hold. Earlier this year, President Trump agreed not to impose tariffs on Europe until a deal was reached. "We are under the assumption that is still valid," said European Union Trade Commissioner, Cecilia Malmstrom, who is in Washington DC this week to speak to US Trade Representative, Robert Lighthizer. We hope the two sides can reach a deal to avoid potential price hikes across the automotive industry.

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