“Today, Secretary of Commerce Wilbur Ross formally submitted to President Donald J. Trump the results of the Department of Commerce’s investigation into the effect of imports of automobiles and automobile parts on the national security of the United States.” — Department of Commerce, February 17, 2019
With this one sentence, the global automotive industry was put on high alert of a potential new US import tariff aimed directly at the products they sell.
On May 23, 2018, upon the request of the White House, the US Department of Commerce initiated an investigation on whether the import of vehicles and parts presents a national security risk to the U.S. economy. On February 17, 2019, within hours of its 270-day deadline, the Department concluded its analysis and formally sent its findings to the President.
By statute, the president will have ninety (90) days to make a decision: to agree to the report and decide on the actual tariff rate; to disagree with the report’s findings or ignore the report all together.
The decision could be made in a matter of days or at the last hour. But if the president decides a new tariff is necessary under Section 232 of the Trade Expansion Act of 1962, automotive executives will be facing new decisions and new calculations – from supplier, to producer to assembler. And making them in a very tight timeline.
If past is any indicator, the recent 232 tariffs on steel and aluminum imports could shed some light on what can be expected next and when.
In those cases, the president did not take the full 90 days to make his decision. The Commerce Secretary sent the investigation report on January 11, 2018, the President concurred in a Proclamation on March 8, 2018 and double-digit tariffs were imposed beginning March 23, 2018.
Equally notable is that similar to the approach the Commerce Department took on imports of steel and aluminum, the 232 report on automotive tariffs was not released immediately.
Decisions with very long range impact will have to be contemplated, for instance:
- Why the Department concluded that automotive imports pose a threat to the U.S. economy
- Which automotive products and from which countries
- What appropriate tariff rate(s) the Department recommended
- The Department’s recommendations could include broad tariffs on cars and parts or narrower targeting of tariffs based on specific components and technologies.
- When such tariff rates will be implemented
- Whether a product or country exclusion process should be contemplated as in the case of previous 232 tariffs.
Clearly, these are troubling times for the automotive industry. To that end, automotive executives need to know how their products, their plants, their customers, and their suppliers are vulnerable to this latest action as well as in the context of other fast-paced developments. These include the pending ratification of the USMCA, continuing 232 tariffs on steel and aluminum imports and US 301 tariffs on imports from China.