The import curbs on automobiles being weighed by the U.S. administration of President Donald Trump threaten to have a far greater impact on global trade than the steel and aluminum import tariffs imposed by Washington in March over the same “national security” grounds. Shipments to the U.S. market account for 40 percent of Japan’s total car exports, and possible imposition of prohibitive tariffs will likely hit hard major vehicle exporters to the U.S. such as Japan. World Trade Organization rules accept unilateral import curbs for national security reasons only as an exception, and that must not be abused as an easy measure to protect domestic industries. The Japanese government should press the U.S. not to resort to such a measure and to resolve any trade problems under the framework of multinational free trade regime.
Trump ordered Commerce Secretary Wilbur Ross last week to probe whether increased vehicle imports to the U.S. pose a national security threat to the country. The Commerce Department said it launched an investigation under Section 232 of the Trade Expansion Act to determine whether vehicle and parts imports threaten the domestic industry’s health and ability to research and develop new, advanced technologies. Ross cited “evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry.” Trump said “core industries” like auto and auto parts “are critical” to the strength of the United States as a nation.
The Commerce Department will report the findings of its probe to the president within 270 days. A U.S. media report said a 25 percent tariff on car imports is being considered — a sharp increase from the 2.5 percent currently charged on car imports from such countries as Japan. Such a prohibitive tariff, if imposed, would turn the imported cars less competitive and no doubt impact their sales in the U.S. market.
The U.S. incurs deficits in its automobile trade with such countries as Japan, Germany, Mexico and South Korea, and the Trump administration has singled out the automobile sector and China as key to its bid to cut the U.S. trade deficit. The probe is deemed a part of Trump’s attempts to woo voters in the U.S. industrial heartland as he braces for midterm elections in November. There are also views that Trump would use the threat of punitive tariffs to win concessions in negotiations with U.S. trading partners. Trump, who since taking office has lashed out that the Japanese market is closed to U.S. vehicle exports, may use it as a tool to corner Japan into bilateral trade talks.
The 25 percent tariff on steel and aluminum imports to the U.S. was launched over the same “national security” concerns under Section 232 of the Trade Expansion Act. Given the large scale of the international vehicle trade, the impact of such a tariff on automobiles and automotive parts would be far greater. Possible retaliatory measures by U.S. trading partners might lead to a chain reaction that could result in shrinking international trade exerting downward pressure on the global economy.
The problem is that the U.S. administration is using vaguely defined national security grounds to justify measures to curb imports. Unilateral trade restrictions made on such shaky grounds can easily descend into protectionism and throw the free trade system into doubt. Given Trump’s penchant for protectionist policies under his “America First” agenda, the “national security” cause cannot be taken at face value. As Toyota Motor Corp. said in a statement, it is hardly believable that vehicle imports pose a national security threat to the U.S. when nearly 12 million vehicles are produced in that country a year. Attempts to make imports more expensive in an effort to protect domestic industries will also hurt American consumers. It seems only natural that opposition to the possible automobile import curbs is building within the U.S., including in the Congress.
If the U.S. sees a problem with trade in certain sectors or with certain nations, it should take such cases to the WTO to resolve the problems under the multilateral rules of free trade. As a major U.S. trading partner and its key ally, Japan should use its new channels of bilateral trade dialogue with the U.S. to tell the Trump administration to stand by international free trade rules on the automobile trade issue. It should not hesitate to take the case to the WTO in the event the Trump administration rushes forward with its threatened curbs on automobile imports. Japan should take steps to stop the Trump administration’s protectionist binge from posing further risks to the global economy and trade.