Section 232

The Trump administration is investigating whether automotive imports are a threat to US national security. The probe is being carried out under Section 232 of the Trade Expansion Act of 1962. Earlier this year, President Trump imposed tariffs on US steel and aluminum imports after two separate Section 232 investigations found that steel and aluminum imports are a threat to US national security.

Why the US Auto Industry Isn’t Thrilled about Section 232

Higher costs

In their earnings calls, Ford (F) and Harley-Davidson (HOG) reported margin pressures, as US steel prices have risen sharply this year. Auto companies Tesla (TSLA) and General Motors (GM) could also see higher input costs.

Although the US steel industry overtly welcomed the Section 232 probe, the domestic automotive industry’s response is more nuanced. General Motors, in its comments to the Commerce Department, noted that “increased import tariffs could lead to a smaller GM, a reduced presence at home and abroad for this iconic American company, and risk less—not more—U.S. jobs.”

Let’s see why the US automotive industry isn’t excited over the Section 232 probe. While the US steel industry’s sales are domestically oriented, US auto giants like Ford and General Motors have significant international operations. Their international operations risk retaliation in response to Trump’s tariffs. Furthermore, the US automotive industry is integrated, and duties on imports of components could raise costs for US automakers (SPY).

Additional duties on autos and parts imports could raise vehicle prices in the United States, which could hurt car affordability and possibly dent overall automotive sales in the country.

In the next article, we’ll look at the steel industry’s outlook for the second half of the year.

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