What's behind Trump's threat to put tariffs on cars?

Trump officials weigh 25% tariff on imported cars to force concessions in NAFTA talks

Trump directs government to investigate whether tariffs are needed on imports of autos, trucks

The Trump administration confirmed on Wednesday that it may slap tariffs on imported vehicles and automotive parts, pending the outcome of an investigation by the Department of Commerce.

Speaking at a political forum, the candidate for the right-left For Mexico in Front coalition made the statement within the context of ongoing NAFTA negotiations, charging that United States President Donald Trump's decision to undertake the probe is another example of the USA government's lack of respect for its Mexican counterpart.

John Bozzella, chief executive of Global Automakers, a trade group representing Toyota, Nissan, Hyundai and others, said tariffs on imported vehicles would hurt American consumers.

Section 232 investigations are used to determine the impact of imports on national security.

The Journal, citing sources in the auto industry, said the plan to retaliate likely would face significant opposition from trading partners and auto dealers that sell imports.

Last year, 13 domestic and worldwide automakers made almost 12 million vehicles in the United States, it said, and " the sector remains the leading exporter of manufactured goods in our country".

Section 232 is the same statute that was invoked to allow the administration's tariffs on steel and aluminium imports.

The threat to impose an import tax on cars was seen as an attempt to press Mexican officials to accept a US demand for a higher percentage of auto content to be made in American factories.

Rules of origin for auto contents and auto-sector wages have been contentious issues between the three countries, with the United States pushing for higher regional content in order for a vehicle to be given tariff-free status and higher hourly rates for employees in Mexican plants.

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Initial reaction to the idea of an import tax on cars based on national security needswas unfriendly, with one veteran trade lawyer saying it would prompt "pant-wetting laughter - followed by retaliation" among USA trading partners. "I am not happy with their requests", Trump said of the two countries.

Trump, who is reportedly considering steep tariffs of 25 percent on imported vehicles, promised auto workers the new deal would make them "extremely happy".

Talks over a replacement for the 1994 North American Free Trade Agreement among the United States, Mexico and Canada have made limitedprogress.

The biggest exporters of new passenger vehicles and light trucks to the United States a year ago were Mexico, Canada, Japan, Germany and South Korea, according to usa government figures.

Canadian Prime Minister Justin Trudeau said the US decision was based on flimsy logic and clearly linked to talks to modernize the North American Free Trade Agreement (NAFTA) between Canada, the United States and Mexico.

The impact may be muted for US automakers, which today export cars from the U.S.to China in limited volumes. As we have previously argued, trade deficits in an economy led by demand, such as in the United States, are simply the result of an economic system during years of expansion.

"It's clear we don't take anything lightly but it's certain that to try and understand what the links are between the national security of the USA and cars potentially made in Ontario, it's starting to become less and less pertinent or justified in any kind of rigorous or intellectually logical way". Negotiations over auto imports and manufacturing remain the biggest sticking point in the NAFTA talks. He has complained about the difficulties USA carmakers face selling their products overseas, raising the subject with Asian and European allies.

Although a large portion of the US's most popular vehicle models, including those from foreign brands (such as the upcoming BMW X7), are already manufactured within its borders, many are imported from other countries. At the same time, the United States exported almost 2 million vehicles worldwide worth $57 billion.

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