U.S. launches auto import probe, China says will defend interests

WASHINGTON (Reuters) - The Trump administration has launched a national security investigation into car and truck imports that could lead to new U.S. tariffs similar to those imposed on imported steel and aluminum in March.

The national security probe under Section 232 of the Trade Expansion Act of 1962 would investigate whether vehicle and parts imports were threatening the industry’s health and ability to research and develop new, advanced technologies, the Commerce Department said on Wednesday.

“There is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry,” Commerce Secretary Wilbur Ross said in a statement, promising a “thorough, fair and transparent investigation.”

Higher tariffs could be particularly painful for Asian automakers including Toyota Motor Corp (7203.T), Nissan Motor Co (7201.T), Honda Motor Co (7267.T) and Hyundai Motor Co (005380.KS), which count the United States as a key market, and the announcement sparked a broad sell-off in automakers’ shares across the region. [MKTS/GLOB]

The governments of Japan, China and South Korea said they would monitor the situation, while Beijing, which is increasingly eyeing the United States as a potential market for its cars, added that it would defend its interests.

“China opposes the abuse of national security clauses, which will seriously damage multilateral trade systems and disrupt normal international trade order,” Gao Feng, spokesman at the Ministry of Commerce, said at a regular news briefing on Thursday which focused largely on whether Beijing and Washington are making any progress in their growing trade dispute.

“We will closely monitor the situation under the U.S. probe and fully evaluate the possible impact and resolutely defend our own legitimate interests.”

The probe comes as Trump courts voters in the U.S. industrial heartland ahead of mid-term elections later this year, and opens a new front in his “America First” trade agenda aimed at clawing back manufacturing jobs lost to overseas competitors.

It could raise the costs for overseas automakers to export vehicles and parts to the world’s second-largest auto market.

Growing trade tensions over cars and car parts, particularly with China, could raise risks for U.S. companies expanding their presence in the country, signs of which are already emerging.

Earlier this month, Reuters reported that Ford Motor Co’s (F.N) imported vehicles were being held up at Chinese ports, adding to a growing list of U.S. products facing issues at China’s borders.

The majority of vehicles sold in the United States by Japanese and South Korean automakers are produced there, but most firms also export to the U.S. from plants in Asia, Mexico, Canada and other countries.

Roughly one-third of all U.S. vehicle imports last year were from Asia.

In addition to recently imposed 25 percent tariffs on steel and 10 percent tariffs on aluminum imports, the administration has threatened tariffs on $50 billion worth of Chinese goods over intellectual property complaints, and Beijing has vowed to respond.

The administration is also trying to renegotiate the North American Free Trade Agreement to return more auto production to the United States.

Commerce said the new probe would determine whether lost domestic production had weakened the U.S. “internal economy” and its ability to develop connected vehicle systems, autonomous vehicles, fuel cells, electric motors and batteries, and advanced manufacturing processes.

In a separate statement, President Donald Trump said: “Core industries such as automobiles and automotive parts are critical to our strength as a Nation.”