Trump delays auto tariffs for six months; however, uncertainty looms large on automakers and part makers

U.S. President Donald Trump declared last Friday, May 17 that he agreed to the Commerce Department’s decision that some imported vehicles and parts pose a national security threat to the U.S. However, the White House delayed the auto tariff decision for about six months to allow more time for trade negotiations with the European Union and Japan. The White House document also hinted that it would seek voluntary export quotas on autos from U.S. trading partners.

Such a designation to the imported vehicles has angered some of the U.S. allies who export vehicles and auto parts to the US market. U.S. automakers also strongly opposed the tariffs, saying they would hike prices and threaten U.S. jobs. There is also strong opposition in the U.S. Congress including many prominent members of Trump's Republican Party rejecting the tariff suggestions.

Toyota Motor Corp, which announced in March about US$13 billion investment in U.S. operations through 2021, called the designation “a major set-back for American consumers, workers and the auto industry.” It also added that such a designation indicates “our investments are not welcomed.”

European Trade Commissioner Cecilia Malmstroem said on Twitter that “we completely reject the notion that our car exports are a national security threat. The EU is prepared to negotiate a limited trade agreement (including) cars, but not WTO-illegal managed trade.”

That looming uncertainty is what local business leader Mary Buchzeiger grapples with daily.

The Trump administration's decision last week to lift tariffs on steel and aluminium from Canada and Mexico offered just a minor relief to the companies that import auto parts from China.

"That’s all fine and lovely that we’re lifting aluminum and steel tariffs, but it's still a situation of, 'You can’t make car parts anywhere else or we’re going to tariff the hell out of you,' " said Mary Buchzeiger, CEO of Lucerne International in Auburn Hills, which imports parts from China. "So we have one great thing happen, but it’s a nosedive for the other part of our industry," she added.

If carmakers and auto parts makers that import from China are hit with a 25% tariff, it will be a tough situation for them to survive in a market that is already in a stagnant stage.