While the findings of the investigation report on car imports under section 232 are expected to be released in the United States in the coming days, a new battle is beginning between the European Union and Washington.
The publication of the report of the investigation under section 232 of the Trade Expansion Act to determine whether car imports pose a threat to the national security of the United States is imminent: the US Secretary of Commerce, Wilbur Ross, is expected to report his findings to the President no later than 19 February 2019 (see EUROPE 12026).
The investigation covered car imports, including SUVs, vans and light trucks, as well as automotive parts.
A 90-day period will then open, during which President Donald Trump will have to say whether he supports the findings of the investigation and, if so, decide on a solution to remedy it. This would enter into force 15 days later.
The EU is facing the worst
In Europe, pessimism prevails. Therefore, the EU response has already been validated: "Should the United States take any kind of actions [increase tariffs on car imports from the EU, editor's note], the President [Jean-Claude Juncker] and the Commissioner [Cecilia Malmström] made very clear that the EU would react in a proportionate way", a Commission spokesman said on Thursday 14 February. In January, Jean-Luc Demarty, the institution's Director General for Foreign Trade, announced the so-called "rebalancing" measures to MEPs on a draft list of imports from the United States worth €20 billion.
Headwinds across the Atlantic
However, in the United States, the tide is turning for Mr. Trump as well. The trade dispute sparked by his administration is increasingly under fire from critics, accused of being at the root of a slowdown in the American economy.
Moreover, while the steel industry had been largely in favour of a tariff increase on steel imports, this was not the case in the automotive sector.
An overview of the specialized press reveals much more opposition than support for this perspective. For example, the Atlanta-based trade media Automotive News notes that domestic producers "have not asked for any such help" and highlights the "potential economic damage" that tariffs would cause to the domestic automotive industry. In addition, it is already being severely penalized by the 25% increase in duties on steel and aluminium applied last June. Finally, with its complex value chains, the US automotive industry is highly dependent on billions of dollars on automotive parts importation.
Moving towards a new arm wrestling match
As it is the eve of the 2020 presidential elections, observers are betting that President Trump will avoid pressing the tariff trigger too quickly. Instead, they expect Washington to use the findings of the investigation to put pressure on trade negotiations with the United States' trading partners, including the EU.
The meetings of European Trade Commissioner Cecilia Malmström in Washington in January (see EUROPE 12169) and some measures of the new North American Trade Treaty 'USMCA' (see EUROPE 12155) give a fairly clear picture of what Washington's requirements would be: the inclusion of agriculture in transatlantic talks and the EU's commitment to voluntarily export restraint (VER) on its car exports to the United States - two options that are already prohibited by the EU (see EUROPE 12071).
In this scenario, the worst thing that could probably happen to President Trump is that his threat of sanctions would not be taken seriously by his trading partners.
A 'game of chicken' is therefore emerging between the EU and Washington. (Original version in French by Hermine Donceel)