US Report Calls Car Imports National Security Threat

A US Commerce Department report has concluded that American auto imports threaten national security, setting the stage for possible tariffs by the White House, two people familiar with the matter said Thursday.

The investigation, ordered by President Donald Trump in May, is “positive” with respect to the central question of whether the imports “impair” US national security, said a European auto industry source. “It’s going to say that auto imports are a threat to national security,” said an official with another auto company. The report, which is expected to be delivered to the White House by a Sunday deadline, has been seen as a major risk for foreign automakers.

Trump has threatened to slap 25 percent duties on European autos, especially targeting Germany, which he says has harmed the American car industry. After receiving the report, the US president will have 90 days to decide whether to move ahead with tariffs. Trump in July reached a trade truce with European Commission President Jean-Claude Juncker, with the two pledging no new tariffs while the negotiations continued.

Daniel Rosario, a spokesman for the European Commission, said Thursday the July joint statement was “very clear on both sides restraining from taking any kind of action that could disrupt this process.” “Should the US take any kind of action, the EU will react.”

Brussels has already drawn up a list of 20 billion euros ($22.6 billion) in US exports for retaliatory tariffs should Washington press ahead, the commission’s Director-General for Trade Jean-Luc Demarty told the European Parliament last month.

But as with China, the Trump administration has used tariffs and tariff threats to try to extract broader trade deals. “The White House wants to have the tariffs in hand to deploy in case talks bog down or it decides EU and Japanese offers are not generous enough,” said a note this week from Eurasia Group. “Both Brussels and Tokyo remain incentivized at the moment, however thinly, to avoid another trade battle with Washington. But the uncertainty around these negotiations, with the promised tariff weapon hanging over them, will weigh on the automotive sector and perhaps broader market swathes in 2019.”

The White House has used the national security argument — saying that undermining the American manufacturing base impairs military readiness, among other claims — to impose steep tariffs on steel and aluminum imports, drawing instant retaliation from the EU, Canada, Mexico and China. Trading partners have sometimes reacted with outrage at the suggestion their exports posed a threat to American national security.

Leading German automakers visited the White House in December to seek reassurances on tariffs from Trump, who prodded the companies to boost investment at plants in the United States where they currently manufacture cars for the US market and for export. German automakers currently employ 118,000 people at US plants, where they built 750,000 vehicles in 2018, 56 percent of which were exported to China, the European Union and other destinations, according to the German carmakers’ federation VDA.  “If tariffs go up, it’s not good for the consumer, it’s not good for our dealer network it is not good for the economy in total,” Bernhard Kuhnt, CEO of BMW North America, told CNBC on Wednesday. “I’m not a politician but we’ll deal with the consequences,” he added.