President Donald Trump today ordered a probe to determine if the import of vehicles, including trucks, and auto-parts was hurting the US' national security, a move that may lead to imposition of new tariffs on foreign manufactured automobiles in the world's second-largest auto market.
In March, the Trump Administration had used the same legal justification to slap steep tariffs of 25 per cent on steel and 10 per cent on aluminum imports. The administration had also threatened tariffs on Chinese goods over intellectual property complaints.
The investigation will determine whether imports of automobiles, including sports-utility vehicles (SUVs), vans and light trucks, and automotive parts into the US threaten to impair the national security.
"I instructed Secretary Ross to consider initiating a Section 232 investigation into imports of automobiles, including trucks, and automotive parts to determine their effects on America's national security," Trump said in a statement.
"Core industries such as automobiles and automotive parts are critical to our strength as a Nation," he said.
The move is likely to fuel new tensions with US trading partners like Canada, Mexico -- the major car exporters to America, as new tariffs could raise the costs for overseas automakers to export vehicles.
Canada, Mexico, China, Germany and Brazil are the biggest exporters of auto-parts to the US.
Reacting to the step, Chinese Commerce Ministry said it will "firmly defend" its rights and interests against what it called the Trump administration's abuse of national security provisions in trade.
Abusing national security provisions would "undermine the multilateral trade system and disrupt the order of international trade," Ministry spokesman Gao Feng told reporters in Beijing.
Gao said China would follow progress of the investigation, assess the possible impact and "firmly defend our legitimate rights and interests."
According to the US government figures, about 12 million cars and trucks were produced last year, and the country imported 8.3 million vehicles worth USD 192 billion.
Of the 12 million imported vehicles, 2.4 million were from Mexico and 1.8 million Canada. Both countries are part of the North American Free Trade Agreement (Nafta), which the Trump Administration wants to renegotiate in a bid to boost the US manufacturing sector.
The US is the second-biggest export destination for German auto manufacturers after China, while vehicles and car parts are Germany's biggest source of export income.
"There is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry," Ross said, adding that the Department of Commerce will conduct a thorough, fair, and transparent investigation into whether such imports are weakening US' internal economy and may impair the national security.
During the past 20 years, imports of passenger vehicles have grown from 32 per cent of cars sold in the US to 48 per cent. From 1990 to 2017, employment in motor vehicle production declined by 22 per cent, even though Americans are continuing to purchase automobiles at record levels, the Department of Commerce said.
Now, American-owned vehicle manufacturers in the US account for only 20 per cent of global research and development in the automobile sector, and American auto part manufacturers account for only seven per cent in that industry, it said.
Noting that the automobile manufacturing has long been a significant source of American technological innovation, the Department of Commerce said, this investigation will consider whether the decline of domestic automobile and automotive parts production threatens to weaken the internal economy of the US by potentially reducing research, development, and jobs for skilled workers in connected vehicle systems, autonomous vehicles, fuel cells, electric motors and storage, advanced manufacturing processes, and other cutting-edge technologies.
Following today's announcement, the Department of Commerce will investigate these and other issues to determine whether imports of automobiles and automotive parts threaten to impair the national security, the Department said.
A notice will be published shortly in the Federal Register announcing a hearing date and inviting comment from industry and the public to assist in the investigation, it added.
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