U.S. automakers concerned over the possibility of tariff hike on imported aluminium and steel

The U.S. automakers and suppliers are concerned about a possible decision to impose steep tariffs on imported steel and aluminium predicated on national security reasons, leading to higher costs and sale loss to foreign competitors.

The Trump administration review on Section 232 of the Trade Expansion Act of 1962, which gives the president broad power to adjust imports if they pose a threat to national security has been creating concern in the manufacturing sector which imports aluminium and steel from other countries to use in their applications. The Commerce Department has to present its findings and recommendations within 270 days and Trump would have another 90 days to decide on a course of action.

Washington policy circles are expecting an impending decision, but trade analysts caution against trying to forecast the timing, or outcome, of any announcement considering the mixed reactions coming from different sections.

Commerce Secretary Wilbur Ross has projected that imports could be capped at current levels, above which tariffs would kick in. In that case, the impact on automakers would be minimal because U.S. auto production has already topped the graph.

The U.S. industry representatives say any blanket tariffs or other restrictions on steel and aluminium imports to the U.S. would only widen the existing price gap in steel and aluminium produced in the U.S. compared with other markets.

"This contraction could actually reduce the amount of U.S. steel consumed by U.S. automakers, jeopardizing the very industry the remedy was intended to assist," the American Automotive Policy Council said in its filing to the Commerce Department.

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The Association of Global Automakers, which represents international auto manufacturers with U.S. operations, recommended in its filing to the Commerce Department that Canada, the European Union and other countries, which haven't engaged in unfair trade practices in steel and aluminium, should be exempted from any punitive actions on the trading of these metals. It also argued that any such action may have an impact on the price and supply of aluminium in the domestic market. This would finally undercut U.S. environmental policies as automakers are slowly switching off to more aluminium to reduce vehicle weight and meet strict fuel economy standards set by the government.