March 9, 2018 / 10:19 PM / 7 months ago

Automakers and their allies call for more breaks in Trump tariff plan

WASHINGTON, March 9 (Reuters) - Global automakers and vehicle suppliers are pressing the Trump administration and U.S. Congress to exempt the European Union and other allies from new steel and aluminum tariffs set to take effect later this month, industry officials said on Friday.

The proclamation President Donald Trump signed Thursday allows importers to seek exemptions for specific products and countries to avoid the tariffs, from which Trump has already exempted Canada and Mexico.

U.S. automakers, in particular, have much at stake as Trump makes decisions on issues such as the pending renegotiation of the North American Free Trade Agreement and a review of fuel economy requirements through 2025.

Trump’s tariffs, like his hardline NAFTA demands, have the potential to turn the globally integrated auto industry upside down.

Administration officials and others have said the impact of higher steel and aluminum prices on the price of a vehicle will be modest.

But a previously unreported Feb. 27 letter sent to Trump by the American Automotive Policy Council, representing General Motors Co, Ford Motor Co and Fiat Chrysler Automobiles NV, warned that the metals tariffs “will add significant additional costs to the U.S. auto industry each year.”

The industry letter, seen by Reuters, said additional price increases “could result from supply-related constraints, which could lead to an equally large increase in price” and ultimately lower vehicle sales, hurting steel and aluminum producers.

One big fear, according to some U.S. industry officials, is that Europe will counter Trump’s tariffs with its own tariffs on U.S. motorcycles, bourbon and jeans.

Trump could then follow through with a threatened new tariff on European-made vehicles. But ultimately, increased costs could make it unprofitable to build vehicles in the United States and production will shift elsewhere.

John Bozzella, who heads Global Automakers, a trade group representing Toyota Motor Corp, Hyundai Motor Co , Honda Motor Co and others, said the group is pushing to convince policymakers that the U.S. tariffs do not make sense.

Automakers export 2 million vehicles annually from the United States, including 250,000 vehicles annually to the Europe, Bozzella said.

“That’s like a whole plant’s worth of annual production that is at risk of becoming uncompetitive,” if Europe retaliates, he said Friday, adding that automakers could lose U.S. sales from higher prices as well as exports. “You have a lose-lose scenario for the auto industry.”

Ann Wilson, senior vice president for government affairs at the Motor & Equipment Manufacturers Association, told Reuters she expects hundreds of auto suppliers to seek exemptions from the tariffs, but companies must first wait to see the rules for applying.

The group that represents 1,000 auto suppliers called the tariffs “dangerous” and has pressed the administration to exclude more products before the tariffs take effect.

U.S. Treasury Secretary Steve Mnuchin told CNBC Friday the Commerce Department would be “publishing regulations very quickly” on how the exemption review process will work.

Congress plans to hold hearings on the issue and some Republicans plan to introduce legislation to nullify the tariffs. Some business groups are mulling court challenges, but experts say any challenge could be difficult because Trump is invoking a 1962 law that gives him sweeping authority to impose tariffs for national security reasons.

One issue to be addressed is whether the shipment of steel from Canada or Mexico that originated in another country will be expressly prohibited. Automakers say the tariffs will not apply to finished products that use foreign steel. (Reporting by David Shepardson Editing by Joseph White and Tom Brown)

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