Trump likely to use 2019 trade probe to justify 25% auto import tariffs

Trump in February told reporters his administration could impose auto tariffs in the neighborhood of 25%, although he later agreed to exempt autos from Canadian and Mexican tariffs for 30 days

US President Donald Trump's administration is likely to use a trade investigation completed during his first term in office to justify auto tariffs that he plans to announce on Wednesday, industry experts and former US officials said. 

White House spokesperson Karoline Leavitt told reporters that Trump plans to hold a news conference at 4 p.m. EDT (2000 GMT) in the Oval Office "to announce tariffs on the auto industry." 

The US president has long promised higher duties on imported cars, and the announcement's timing suggests that they would coincide with his separate, April 2 plans for reciprocal tariffs aimed at the countries responsible for the bulk of the US trade deficit.

 

An auto import tariff of 25 per cent - the level floated by Trump in February - would send shockwaves through a global industry that is already reeling from uncertainty caused by Trump's rapid-fire tariff threats and occasional reversals. 

Tariffs could also drive up the cost of a car by thousands of dollars, hitting new vehicle sales and resulting in job losses, because of the US auto industry's heavy reliance on imported parts, according to the Center for Automotive Research. 

The US imported $474 billion worth of automotive products in 2024, including passenger cars worth $220 billion. Mexico, Japan, South Korea, Canada and Germany, all close US allies, were the biggest suppliers. 

Trump in February told reporters his administration could impose auto tariffs "in the neighborhood of 25 per cent," although he later agreed to exempt autos from Canadian and Mexican tariffs for 30 days under pressure from the three big US automakers. 

US Commerce Secretary Howard Lutnick last week told Fox Business there would be no exemptions for the auto tariffs, which could spark tensions with countries like Japan and South Korea, which have trade agreements with the US and charge no tariffs on US cars. 

Trump has long railed against what he calls the unfair treatment of US automotive exports in foreign markets, often singling out the European Union, which collects a 10 per cent duty on vehicle imports, four times the US passenger car tariff rate of 2.5 per cent. The US, though, collects a 25 per cent tariff on pickup trucks from countries other than Mexico and Canada, a tax that makes the vehicles highly profitable for Detroit automakers. 

GROUNDWORK LAID FOR QUICK ACTION 

The Commerce Department in 2019 completed an investigation of auto imports under Section 232 of the Trade Expansion Act of 1962 and found that "excessive" foreign auto imports weakened the domestic industrial base and could impair national security. 

It said the US defense industrial base is dependent on American-owned automakers for the development of high-tech products and capabilities for military vehicles, and that lost market share eroded investments in cutting-edge new technologies. 

That report proposed three possible remedies - negotiations with other countries, tariffs of up to 25 per cent on autos and certain components, and tariffs of up to 35 per cent on light utility vehicles. 

Trump at the time threatened 25 per cent car tariffs, but ultimately took no action, allowing the tariff authority from that probe to expire, but trade lawyers said the administration may argue its findings are still relevant. 

Ryan Majerus, a former Commerce Department official now with law firm King & Spalding, said the Trump administration could use the completed Section 232 autos investigation report with its recommendations to lay the groundwork for tariffs. 

"They're at a point where they could implement the report quickly and lean on the successful litigation history under Section 232 from the first term," he said, adding that Trump could launch a new investigation, conclude the key 2019 findings were the same, and reset the tariff authority. 

One industry executive said Trump could also dust off a 1930 trade law that allows the president to impose duties of up to 50 per cent against imports from countries that are found to discriminate against US commerce. 

Beth Baltzan, who served as a senior adviser to former US Trade Representative Katherine Tai during the Biden administration, said a higher tariff rate would encourage people making cars in North America to choose more US parts to benefit from the tariff-free US-Mexico-Canada trade agreement.

 

The current rate of 2.5 per cent was so low that producers simply paid it, while the higher 25 per cent tariff on trucks worked to keep parts sourced in North America, she said.  "That tariff wall is actually what drives the sourcing patterns in North America that the pro-American manufacturing crowd wants."  If Trump's goal was to have countries lower their tariffs on a reciprocal basis, that assumed the US would export more cars, a questionable assumption given current trade flows and "how lucrative the North American market is," she said.  (Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)