WASHINGTON — President Donald Trump on Friday said he would delay tariffs on imports of cars and car parts from allies like Europe and Japan for six months, essentially setting a tight deadline for the United States to reach trade deals that have so far proved elusive.
Trump said he had determined that imports of cars and car parts were causing harm to the U.S. automobile industry and that other countries had 180 days to address the problem through trade agreements with the United States. If no such agreements are reached, Trump said he would decide “whether and what further action needs to be taken,” a step that could include imposing 25% tariffs on foreign cars.
The decision offers a temporary reprieve to global automakers and auto suppliers, which had been bracing for punishing tariffs on cars sent into the United States. But it sets up a tense six-month period for the White House to reach trade deals that have already been complicated by disagreements. The United States has struggled to make headway in preliminary negotiations with the European Union, which has balked at Trump’s demands to allow more agricultural products into Europe. And talks with Japan have yet to move beyond the initial stages.
A decision to impose auto tariffs would have been Trump’s most aggressive trade measure yet. His administration has already imposed stiff levies on steel and aluminum and $250 billion worth of Chinese goods. But a tariff on cars and car parts was seen as an economically damaging escalation in the president’s quest to revise trade terms to benefit the United States.
While the prospect of a 25% tariff provoked an outcry from both industry and foreign governments, that opposition did not appear to be the primary reason behind the Trump administration’s decision.
Instead, U.S. officials believed it was not the right time to pursue the tariffs, given time-consuming trade negotiations in China, which have nearly collapsed, as well as a continuing effort to pass the revised North American trade agreement into law.
While Trump has promised to rewrite trade deals in America’s favor, the administration has struggled to make good on that promise. Lawmakers have resisted ratifying the new United States Mexico Canada Agreement, with both Democrats and Republicans raising concerns about the pact. Lawmakers have also insisted the White House remove metal tariffs on Canada and Mexico as part of the deal, arguing that the levies, while aimed abroad, are hurting American farmers, businesses and consumers.
To help get the deal through, the White House was preparing to announce agreements with Canada and Mexico, perhaps as early as Friday, that would adjust the tariffs the Trump administration imposed on steel and aluminum, people familiar with the matter said.
The president has described his threat to impose tariffs on foreign cars and car parts as a necessary measure to protect the U.S. car industry and a negotiating tool to extract concessions from foreign governments.
The announcement Friday said that an investigation by the Department of Commerce had found that imports of automobiles and certain automobile parts threatened to impair the national security of the United States. “United States defense and military superiority depend on the competitiveness of our automobile industry and the research and development that industry generates,” the White House proclamation said.
But many outside the administration have criticized the linkage of cars with national security, saying that the bulk of U.S. auto imports come from the country’s closest allies. Mexico, Japan, Canada, Germany and South Korea were together responsible for more than 85% of U.S. automotive imports in 2018.
Some industry groups said delaying the tariffs sows uncertainty in a critical U.S. industry.
“Delaying this decision is, in itself, a decision to allow ambiguity and insecurity to shadow auto retailers and hinder growth within the industry,” said Howard Hakes, the chairman of the American International Automobile Dealers Association.
“The idea that U.S. automakers are threatened by automotive imports is fundamentally flawed and ill conceived,” said John Bozzella, the president of Global Automakers, which represents foreign car brands. “No automaker or auto parts supplier asked for this ‘protection.’”
Economists and industry analysts have argued that the tariffs would raise the cost of American cars and weigh on the U.S. economy. The Center for Automotive Research, a research group partly funded by the industry, estimated the measures could increase the price of a new vehicle by $455 to $6,875, depending on the specific policy taken.
At a hearing last July on the tariffs, every witness present, including representatives of foreign governments, car companies, parts makers and dealerships, testified in opposition to the measure. The only exception was the United Automobile Workers union.
Jennifer Kelly, the union’s research director, said that the tariffs could address real problems with U.S. automotive factories moving offshore but that “rash actions” might also have “unforeseen consequences, including mass layoffs of American workers.”
American and European negotiators have been in talks for nearly a year in an attempt to relaunch trade negotiations between the governments. European officials have been eager to evade tariffs on automobiles, which would hit Germany especially hard. But talks have proceeded slowly, with the two sides sparring over whether to include agriculture in the deal.
Europe insists that the issue is not on the table, while U.S. negotiators say a deal that does not open European markets to American farmers is unlikely to pass Congress.
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Shares of BMW and Daimler, the two companies that would be hit hardest by tariffs, rose following reports Wednesday that auto tariffs would be postponed. But otherwise the reaction in Europe was muted, partly because officials and executives were waiting for official confirmation and partly because they worried that the president could change his mind.
“Joy is premature,” Germany publication Der Spiegel said in an editorial Thursday. “The decisions of this U.S. president are unpredictable, erratic, and absolutist.”
The United States and Japan have also been discussing a bilateral trade deal that could give American farmers more access to Japan’s market following Trump’s decision two years ago to withdraw from the Trans-Pacific Partnership, a trade deal the Obama administration negotiated with Japan and 10 other Pacific nations. But negotiations are also in early stages.
Toshimitsu Motegi, minister for economic and fiscal policy and Japan’s chief trade negotiator, said he directly asked Robert Lighthizer whether the Trump administration would impose import controls on Japanese automakers.
Speaking to reporters Friday in Tokyo, he said he told Lighthizer that Japan would object to such import controls. “Japan has repeatedly told the U.S. side that it opposes such measure to distort open and fair trade,” Motegi said.
Motegi said that Lighthizer assured him the United States would not restrict the volume of cars that Japan exports to America. “I confirmed with the U.S. side that they wouldn’t seek such a measure,” he said.
Japanese officials say that they are counting on the close relationship between Trump and Prime Minister Shinzo Abe to keep trade negotiations from souring between the two countries. Trump is scheduled to visit Japan next week, and his hosts are planning a full slate of high-level hospitality, including a state dinner with the new emperor and empress, rounds of golf, and a visit to a sumo wrestling championship, where Trump will award the winner’s trophy.