While the Japanese government has walked on eggshells when discussing trade issues that are transforming the globe into an angry beehive, the nation’s automakers have been more forthright. However, they’re both getting increasingly vocal as the situation escalates.

As the United States and Japan head into trade discussions scheduled for July, it’s beginning to look like everyone will come out swinging — especially when it comes to the automotive industry. Last month, the White House launched a national security investigation into car and truck imports that could lead to new tariffs on some of Japan’s biggest U.S.-bound exports.

Japanese Finance Minister Taro Aso was uncharacteristically negative toward the current U.S. trade policy during a Group of Seven finance leaders’ gathering held last week. “It’s deeply deplorable,” Aso said. “Inward-looking policies involving one-sided, protectionist measures benefit no country.” (Read More…)

Governance is one hell of a slippery fish. While you want your elected officials to assist in helping the nation evolve with an ever-changing society, you don’t want a deluge of contradictory and ill-planned laws mucking things up. That’s why the best progress is carefully measured and negotiated. But something has to happen eventually or you begin wondering what we (and the various lobbies) are paying these dingbats the big bucks for.

For example, the North American Free Trade Agreement looks like it’s about to be abandoned until sometime after 2019. After negotiations missed numerous self-imposed deadlines, U.S. House Speaker Paul Ryan said Congress needed a notice of intent to sign by roughly May 17th if anything was to be finalized for 2018. That date came and went. Now, everyone appears to have thrown their hands up, with practically every country on the planet currently considering retaliatory tariffs against the United States.  (Read More…)

There’s been quite a bit of the old “he said, she said” as the global trade war between developed nations coalesces. Germany has not covered U.S. President Donald Trump’s trade policy favorably, not that it has much reason to. His new tariffs on imported steel and aluminum has tested relationships with numerous countries and, while it isn’t the biggest exporter of metal to the United States, Germany has something to lose. Likewise, proposed duties on passenger vehicles have sincerely rubbed Deutschland the wrong way.

However, the issue was further complicated this week after a gossipy report surfaced claiming Trump told French President Emmanuel Macron in April that he would continue hampering the European auto manufacturers until there are no Mercedes-Benz vehicles driving in America.  (Read More…)

There was a mighty blowback against the Trump administration’s suggestion to elevate tariffs to as much as 25 percent on all foreign-built passenger vehicles.

Already reeling from fresh import fees on aluminum and steel, Europe expressed its collective distaste on new taxes while Japan vowed to plead a strong case for itself. Meanwhile, prominent politicians and two of the largest automotive trade groups in the country came forward to condemn the plan, stating it was “confident that vehicle imports do not pose a national security risk” to the United States.

While the administration has already launched its investigation to determine whether vehicle and auto part importers threaten the industry’s health and ability to develop advanced technologies, the government noted that a second opinion wouldn’t hurt. Announced on Tuesday in the Federal Register, the the Commerce Department will allot two days in July for public comments on the matter.  (Read More…)

President Trump announced a security investigation into auto imports last week, tasking Commerce Secretary Wilbur Ross with the job. His goal will be to determine what effects imported vehicles have on the national security of the United States under Section 232 of the Trade Expansion Act of 1962 — which sounds like a monumental and rather complex task.

Basically, Ross will examine whether or not the U.S. can get away with escalating automotive tariffs. That’s a touchy subject, considering how contentious global trade has become in recent months. Worse yet, the 80-year-old commerce secretary will have to continue promoting American businesses and industries outside its borders while deciding on an issue few trade partners will be happy with.

Automakers aren’t thrilled either. After Trump announced the investigation, the Association of Global Automakers and Alliance of Automobile Manufacturers both said they didn’t believe vehicle imports posed a national security risk. “To our knowledge, no one is asking for this protection. If these tariffs are imposed, consumers are going to take a big hit,” said John Bozella, President of Global Automakers, in a statement. “This course of action will undermine the health and competitiveness of the U.S. auto industry.” (Read More…)

President Donald Trump issued a tweet promising car manufacturers good tidings on Wednesday. “There will be big news coming soon for our great American Autoworkers,” he said. “After many decades of losing your jobs to other countries, you have waited long enough!”

Later that same day, the administration announced it had launched a national security investigation into car and truck imports under Section 232 of the Trade Expansion Act of 1962. The Commerce Department explained that the probe would investigate whether imported vehicles and parts threaten the domestic industry’s wellbeing, taking into account its ability to develop new technologies and the impact of tariffs.

“There is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry,” Commerce Secretary Wilbur Ross said. (Read More…)

May kicked off with a bundle of trade deals going into hibernation mode. After some legitimate — albeit quaint — progress, NAFTA decided to take a break this week. Currently, U.S. Trade Representative Robert Lighthizer is in China to circumvent that brewing trade war and is unable to commit himself to the North American Free Trade Agreement’s renegotiation.

That’s probably fine, because Mexico’s auto reps need time to cool off.

The United States’ most recent proposal for increasing NAFTA’s regional automotive content includes a four-year evolvement to meet a 75-percent regional value threshold. It also suggests new labor rules requiring “substantial work” to be set at wages of $16 an hour or more. The move is intended to help the U.S. and Canada bolster production and force Mexico to raise its own wages.

A significant portion of Mexican trade officials aren’t keen on either aspect, resulting in a mixed response overall.  (Read More…)

“Paramount Leader” and Chinese President Xi Jinping clearly hopes to defuse China’s trade situation with the United States after Donald Trump launched an aggressive tariff hike on metals last month. The People’s Republic has already filed a complaint with the World Trade Organization alleging Trump’s decision to impose additional duties of 25 percent on steel and 10 percent aluminum violate international trade rules.

It’s also requesting 60 days of consultations with the United States to resolve the dispute.

There’s also an olive branch on the table. Xi has promised to cut auto import taxes and improve intellectual property protections in a bid to bolster foreign exports and ease tensions before the U.S. and China enter into a full-blown trade war. Meanwhile, the White House is threatening to increase duties on $50 billion worth of Chinese goods in response to claims that China essentially bullies foreign companies to hand over technology in order to sell it inside the country.  (Read More…)

President Donald Trump amplified his earlier threat of a global trade war this weekend by suggesting he would impose a tax on European cars if the EU countered his proposed steel and aluminum tariffs. On Thursday, Trump called for a 25 precent import tariff for steel and a 10 percent fee on aluminum in the hopes it would bolster those industries domestically. Europe responded by threatening a tax on imported bourbon, blue jeans, and American motorcycles. Apple pie and baseball were not mentioned, but you get the idea.

European Union officials clearly wanted to send a message to the president to back down. Instead, he came back even harder in a tweet from Saturday. “If the E.U. wants to further increase their already massive tariffs and barriers on U.S. companies doing business there, we will simply apply a Tax on their Cars which freely pour into the U.S.,” he wrote. “They make it impossible for our cars (and more) to sell there. Big trade imbalance!” (Read More…)

Nice car you’ve got here

After newly elected President Barack Obama slapped a punitive tariff on made-in-China tires, China looked for a good tit-for-tat and quickly found one: The US imported $1.8b worth of Chinese tires in 2009, while China imported $1.1b worth of US-built cars in 2008. A retaliatory tariff was slapped on Escalades et al. Now, the same is about to happen to BMWs and Benzes coming from Europe.

“China is considering imposing import duties on high-end European cars following complaints over subsidies that enable EU carmakers to sell in China at a loss,” Reuters reports. That, of course, is only half of the story. The EU slapped a punitive tariff on made-in-China solar modules, despite opposition from a majority of EU countries, most notably Germany. Not surprisingly, China fights back. (Read More…)

President Barack Obama will carry a familiar gift to election rallies in Ohio today.

“The Obama administration will announce a trade complaint against China today as President Barack Obama campaigns in Ohio, alleging impermissible subsidies of auto- and auto-parts exports that encourage outsourcing to China from the U.S.” an administration official told Bloomberg.     (Read More…)

The United States will report China to the WTO tomorrow, Reuters says. The contention: China’s decision to impose extra duties on more than $3 billion worth of cars imported from the U.S. According to Reuters, “the complaint comes as President Barack Obama campaigns in Ohio, where auto plants have been affected by the duties.” The Prez goes on a “Betting on America” bus tour. (Read More…)

When we last checked in on the low-level trade war between China and the US, which was sparked by President Obama’s 35% tariff on Chinese tires, the Chinese government had ruled that American large cars and SUVs were being “dumped” on the Chinese market, but wasn’t doing anything about it. Now, Reuters reports that China is doing something about it, namely saying that it plans to impose tariffs of up to 22% on imports of American-built large cars and SUVs. And the “up to” is key: GM and Chrysler are being hit hardest (unsurprisingly), while American-made BMW, Mercedes and Acuras are receiving considerably lower tariffs.

Still, China only imports $1.1b worth of vehicles in this category, whereas the US imported some $1.8b worth of Chinese tires prior to the Obama tariffs.  Like most of the news around Chinese-American relations, this is more saber-rattling than substance. But with economic conditions still shaky in the US, and a Presidential election getting into full swing, small spats can escalate into larger confrontations. And with China surpassing the US as the largest market for cars in the world, it’s probably no coincidence that this simmering conflict largely involves cars and car-related products.

As you’ve read here many times, the drums against imports have been beating in Brasília for a long time. Now, the government is acting. It has opened up its little tragic bag of dirty tricks and is pulling the first, as it were, rabbit out. It also promises to dip into that bag again if this first rodent fails to bite. Moneyed (and not so moneyed Brazilian import buyers of Chinese cars) Brazilian consumers should run to the dealerships to get ’em while they can. They should also put some money aside as the measure will also affect parts makers and consequently prices. (Read More…)

Just over one week ago, a Detroit News piece pointed me towards a letter written by Senators Carl Levin and Debbie Stabenow, which took China to task for considering draft legislation that might possibly require more technology transfers to Chinese companies as a precondition to market access. Having chased down both the letter and the US National Trade Estimate it was based on, as well as several reports on the draft legislation itself, I wrote a lengthy piece about how Senators Levin and Stabenow were rattling the saber about what appeared to be a complete non-issue. In that piece, I not only debunked the senators’ concerns, but I also pointed out that China’s local consumer EV subsidies were the far more worrying potential trade barrier, as we have been hearing that they require that all qualifying EVs be built in China and sold with Chinese brands (a condition at odds with at least the 2004 version of China’s Auto Industry Development Plan, which stated “local governments should encourage fair competition among motor vehicles made by different places on the local market. They are not allowed to carry out any discriminative policy or measure which may lead to discrimination against non-locally manufactured automobile products.”). And it turns out that my 2,000+ words didn’t put everyone to sleep, as a new DetNews piece re-reports the Stabenow/Levin letter with the inclusion of a new motivation never mentioned in their actual letter, to wit:

For electric or plug-in vehicles to qualify for incentives under the proposed rules, they must be produced in China — by a Chinese carmaker or in a joint venture with a Chinese company

Ignoring for a moment that this wasn’t explicitly mentioned in the letter, there’s another issue here: subsidies aside, building any car in China requires a joint-venture. More importantly, China need not establish any barriers to the sale of imported plug-in or hybrid cars for the simple fact that the Toyota Prius’s epically weak sales there prove that imported NEVs can’t compete in the market. Of course subsidies may change that, but even more important is the issue of registration limits: if China requires EVs to be locally-made in order to waive Beijing’s registration restrictions, that could create more of a barrier than any cash subsidy. Meanwhile, neither Daimler nor Toyota nor VW nor BMW seems to have a problem with building EVs locally under a JV (cost and supply chain make Chinese production the logical choice anyway, necessitating a JV). The DetNews (and presumably Senators Levin and Stabenow) are getting closer to understanding the problems with China’s New Energy Vehicle Plan, but it seems they may yet have some more TTAC reading to do.