The U.S. trade group that represents General Motors, Ford Motor and Fiat Chrysler Automobiles hinted that automakers will seek to water down President Donald Trump's tariffs on steel and aluminum by carving out exceptions for imports from some countries.
U.S. automakers hope that there the is scope for workarounds for companies whose raw material costs will be impacted by a 25 per cent levy on steel and 10 per cent on aluminum announced by Trump.
Automakers purchase about 15 per cent of the steel and almost 40 per cent of aluminum consumed in the U.S.
Under the new rules, an importer can ask the Commerce Department for a waiver if there is a limited supply of the product in the U.S. or if national security is at stake. It is not clear how that will be interpreted, but aluminum can makers, pipeline builders and car companies are now building their cases for why the tariffs shouldn’t apply to them.
“The temporary exemption for our trading partners in Canada and Mexico is a step in the right direction,” said Matt Blunt, president of the American Automotive Policy Council.
“We fully understand the desire to take action against nations whose unfair trade practices have led to global overcapacities in steel and aluminum, and encourage the administration to adopt a targeted approach," Blunt said.
Trump excluded Mexico and Canada from the tariffs in his announcement Thursday, allowing for the possibility that other countries could be spared for national security reasons. The tariffs will take effect in 15 days.
The auto industry repeated its previous warning that the tariffs may harm U.S. economic growth, jobs and wallets.
"A tariff is a tax that will result in higher prices that consumers will ultimately bear. Exemptions will not address the fundamental problems tariffs will create for U.S. car and truck manufacturing," said John Bozzella, president of the Association of Global Automakers, which represents international brands in the U.S. "Increased costs will make our industry less competitive and harm American workers, consumers, and our economy."
Charlie Chesbrough, senior economist for Cox Automotive, said Thursday the tariff plan appears to lack a clear, long-term direction for trade strategy and poses "a big problem for the automotive industry."
Hyundai, Germany warnings
Hyundai said it will pay higher raw material costs due to the tariffs while Germany warned that the "punitive" duties would be a burden for companies in Europe's largest economy.
"Higher tariffs will increase costs of Hyundai and Kia, putting them at a disadvantage compared with their rivals in the United States," a senior Korean trade ministry official told reporters in a background briefing on Friday.
The official said the tariffs would impact the renegotiation of the bilateral free trade deal with the United States that is currently underway.
German Economy Minister Brigitte Zypries said the tariffs will increase consumer prices and making the work of German companies - both large and small - harder.
She said the tariffs were an affront to close partners of the United States such as the European Union and Germany. Germany would coordinate closely with the European Commission to react "calmly but clearly," Zypries said.
EU seeks exemption
European Union trade chief Cecilia Malmstrom vowed to press for an EU exemption from U.S. tariffs on foreign steel and aluminum when she meets her American counterpart in Brussels on Saturday.
"Europe is certainly not a threat to American internal security, so we expect to be excluded," Malmstrom told reporters in Brussels on Friday. "We are counting on being excluded."
In response to the steel measure, the EU is targeting 2.8 billion euros ($3.5 billion) of imports of U.S. goods including Harley-Davidson motorcycles, Levi jeans and bourbon whiskey. In addition to such iconic brands, the American products that would face a tit-for-tat EU tariff of 25 per cent range from steel bars and motor boats to t-shirts and orange juice.
Beyond imposing retaliatory tariffs on U.S. goods, the EU is prepared to file a case at the World Trade Organization against the Trump administration in cooperation with other countries and to introduce "safeguard" measures to prevent steel shipments from other parts of the world to America from being diverted to the European market and flooding it.
Eric Kulisch, Bloomberg and Reuters contributed to this report