The Trump administration is mulling a plan to impose a fresh round of tariffs on imported vehicles over national security concerns.
Trump has instructed US Commerce Secretary Wilbur Ross to consider initiating an investigation under Section 232 of the 1962 Trade Expansion Act to find if tariffs or other restrictions were needed on imported cars, after he met him at the White House to discuss the current state of US automobile industry.
The US wants to increase the percentage of a auto that must be made in one of the NAFTA countries - the US, Mexico, and Canada - in order for the vehicle not to be subject to a duty when it corsses into another member country.
One U.S. industry source briefed on the administration's internal trade deliberations said the tariff plan has been under discussion for some time.
"Core industries such as automobiles and automotive parts are critical to our strength as a nation", Trump's statement said. When a auto is sent to China from the United States, there is a Tariff to be paid of 25%.
Trump has launched a series of trade actions, demanding China import more American goods, starting talks to renegotiate the North American Free Trade Agreement and imposing tariffs on steel and aluminium imports.
Daniel Ujczo, a trade lawyer with Dickinson Wright PLLC, said the tariff threat is likely meant to pressure Mexico into accepting US demands for NAFTA changes that would shift more auto production to the USA from Mexico.More news: New Arsenal manager Emery 'proud' to follow Wenger's legacy
One Canadian official, speaking on condition of anonymity, said they had heard nothing of the potential investigation before word leaked out of the White House and into the Wall Street Journal Wednesday afternoon, a few hours before the announcement.
The United States imported 8.3 million vehicles in 2017 worth $192 billion, including 2.4 million from Mexico, 1.8 million from Canada, 1.7 million from Japan, 930,000 from South Korea and 500,000 from Germany, according to USA government statistics.
The Detroit-based companies - as well as many offshore-based auto makers such as BMW AG and Volkswagen AG - also have large vehicle assembly operations in Mexico that would be subject to such a tariff.
Trade representatives from Canada, Mexico and the USA continue negotiating a revised NAFTA agreement.
At the same time, it exported almost 2 million vehicles worldwide worth $US57 billion. That was more than 20 per cent of total US sales.
Mr. Trump has repeatedly floated the idea of tariffs on auto imports in meetings. It came after he tweeted earlier in the day that there will be "big news coming soon" for auto workers. His trade chief, Robert Lighthizer, has demanded more stringent rules on auto content to ensure that more components in North American-made cars - particularly steel, aluminum and glass - are sourced from within the NAFTA zone.
Mexico has so far resisted USA attempts to get higher regional content rules in the auto industry and move production to higher-wage US and Canadian factories. "My suitcase is packed".