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Reports: Trump putting 25% auto tariffs on hold for up to six months

Jamie L. LaReau, Detroit Free Press on

Published in Automotive News

Detroit and other automakers have been granted a reprieve in the tariff war.

CNBC and Bloomberg reported Wednesday that the Trump administration will delay auto tariffs that the Commerce Department says are justified by national security considerations by up to six months.

The White House had until May 18 to decide whether to slap tariffs as high as 25% on imported cars and auto parts. Lawmakers from both parties have urged Trump to not tack on the auto duties. U.S. automakers have also opposed the potential tariffs.

The Alliance of Automobile Manufacturers, which represents U.S. and foreign companies, said it remained "deeply concerned that the administration continues to consider imposing auto tariffs. By boosting car prices across the board and driving up car repair and maintenance costs, tariffs are essentially a massive tax on consumers."

"The higher prices would lower consumer demand and could lead to the loss of as many as 700,000 American jobs," the alliance said in a statement. "The tariffs would also roll back the benefits from the Trump tax cut and have widespread impact across manufacturers, suppliers, and dealers in all 50 states."

Industry experts say this reprieve offers little clarification for carmakers.

"For the auto industry this is a mixed blessing because they do not want these additional tariffs that will raise the costs of building vehicles in the United States," said Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research in Ann Arbor. "But this also extends a period of uncertainty, which makes it difficult for automakers to make investments and business decisions when you don't know what the rules of the game are going to be."

Legally, President Donald Trump has an additional 180 days to decide as long as he is negotiating with the United States counterparts, CNBC reported. While the tariffs could be a way to gain leverage over trading partners such as the European Union, Canada, Mexico and Japan during ongoing negotiations, Trump also risks igniting new global trade conflicts if he decides to raise car tariffs.

For example, the European Union has prepared a list of retaliatory tariffs it would implement if Trump targets autos.

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Some carmakers' stocks buoyed on the news of the administration's plans, which CNBC said were confirmed by a source briefed on the talks, an administration official and two foreign officials.

As of 11:55 AM EDT shares of GM stock rose 20 cents to $37.24, Ford stock was up 12 cents at $10.36 and Fiat Chrysler Automobiles shares rose 11 cents to $14.60.

This latest delay comes as the White House tries to reach a trade deal with China and quell an escalating conflict there. The United States and China, the two largest economies in the world, hiked tariffs on one another in recent days. The amplifying trade war unnerved financial markets amid a fear this could lead to a downturn in the global economy.

The president is contemplating using a national security justification to add tariffs on cars. In February, the Commerce Department said that Trump could justify the tariffs citing a national security threat. Trump used that rationale to add duties on steel and aluminum imports.

(c)2019 Detroit Free Press

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