Next Up in the Trade Wars: Autos



Jeffrey J. Schott | Peterson Institute for International Economics

The Trump administration has concluded a study to determine whether imports of autos and auto parts impair or threaten US national security. The findings (not yet released to the public) could potentially trigger restrictions on hundreds of billions of dollars of US imports and provoke another skirmish in its trade wars with key US allies in Europe and Asia.

The US trade deficit in autos and parts is about $200 billion, roughly one-quarter of the global US merchandise trade deficit. The Trump trade team seems to favor using tariffs to reduce trade deficits, as it is still doing against $250 billion in Chinese exports to the United States to coerce Chinese concessions in bilateral trade talks. Using tariffs in this way is bad economics and bad policy. And national security is a dubious rationale for new restrictions on autos and parts. But the Trump administration maintains that its actions are consistent with World Trade Organization (WTO) rules and the letter of US law—in particular, the authority to restrict imports for national security reasons under Section 232 of the Trade Expansion Act of 1962.

New Section 232 auto measures would primarily hit Japan and Europe (see table 1). South Korea is another potential target. Canada and Mexico bought exemptions via side letters to the United States–Mexico–Canada Trade Agreement (USMCA) to avoid a repeat of their bad experience with US steel and aluminum tariffs imposed under Section 232 authority in 2018.

[To read the original piece, click here.]