White House to consider Commerce Department auto tariff recommendations

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By David Lawder and David Shepardson

WASHINGTON (Reuters) – The U.S. Commerce Department has submitted draft recommendations to the White House on its investigation into whether to impose tariffs of up to 25 percent on imported cars and parts on national security grounds, two administration officials said.

The “Section 232” recommendations on ensuring a healthy U.S. auto industry are undergoing an interagency review process and will be discussed on Tuesday at a regularly scheduled weekly meeting of the Trump administration’s top trade officials, the officials said.

The White House has pledged not to move forward with imposing tariffs on the European Union or Japan as long as it is making constructive progress in trade talks.

The EU’s trade commissioner, Cecilia Malmstrom, is due to meet with U.S. Trade Representative Robert Lighthizer in Washington on Wednesday for more preliminary talks to launch trade negotiations.

One of the officials, who was briefed on the matter, said the administration was sending a message that it is growing frustrated with the lack of progress on auto issues but did not expect immediate action on the recommendations on Tuesday.

The substance of the recommendations, such as which vehicles or parts could be subject to tariffs, and possible tariff rates, were not immediately known.

But having the Commerce report ready for action would underscore a consistent threat from President Donald Trump – that he would impose tariffs on autos and auto parts unless the EU and Japan make trade concessions including lowering the EU’s 10 percent tariff on imported vehicles and cutting non-tariff barriers.

Trump has repeatedly suggested he would move quickly to impose tariffs, even before the Commerce Department launched its investigation in May into whether imported autos and parts pose a national security risk. The study followed closely on the heels of the imposition of similar national security tariffs on steel and aluminum.

“We said if we don’t negotiate something fair, then we have tremendous retribution, which we don’t want to use, but we have tremendous powers,” Trump said on Wednesday. “We have to – including cars. Cars is the big one. And you know what we’re talking about with respect to cars and tariffs on cars.”

Last month, the administration said it would open formal trade talks with the EU and Japan in early 2019 after the 90-day required congressional notification period ends.

The prospect of tariffs of 25 percent on imported autos and parts has sent shockwaves through the auto industry, with both U.S. and foreign-brand producers lobbying against it.

A group representing major automakers told Commerce in July that imposing tariffs of 25 percent on imported cars and parts would raise the cumulative prices for U.S. vehicles by $83 billion annually and cost hundreds of thousands of jobs.

Automakers argue there is no evidence that auto imports pose a national security risk, and the tariffs could actually harm U.S. economic security.

The Alliance of Automobile Manufacturers, whose members include General Motors Co <GM.N>, Volkswagen AG <VOWG_p.DE> and Toyota Motor Corp <7203.T>, warned the price of an imported car would increase nearly $6,000, while the price of a U.S.-built car would increase by $2,000.

A study released by a U.S. auto dealer group warned the tariffs could cut U.S. auto sales by 2 million vehicles annually and cost more than 117,000 auto dealer jobs, or about 10 percent of the workforce.

(Reporting by David Lawder and David Shepardson; Editing by Chris Reese)