Wilbur Ross hints again at auto tariffs

Earlier today, US Commerce Secretary Wilbur Ross once again hinted at President Donald Trump’s willingness to impose auto tariffs on Europe. While talking to CNBC, Ross said that he is positive about a US-Europe trade deal. However, he warned, if America doesn’t reach a deal with Europe, “the President is totally comfortable going the other direction,” an indication towards auto tariffs.

Auto tariffs continue to haunt automakers

In the last year, America’s trade relations with other countries, including China, Canada, Mexico, and other European nations, have deteriorated. However, today is not the first time that Ross has hinted at the possibility of President Trump imposing auto tariffs on Europe. He has made similar comments on multiple occasions since December 2018.

In May, the Trump administration decided to delay its decision on auto tariffs on Europe and Japan for 180 days. After the end of the 180-day period, the US is likely to take its final call on these auto tariffs if it doesn’t reach a trade deal with Europe and Japan.

Possible impact on the auto industry

The Trump administration’s potential decision to impose auto tariffs on Europe and Japan is likely to hurt the profitability of automakers including Volkswagen (VLKAY), BMW, Fiat Chrysler (FCAU), Toyota (TM), and Honda (HMC).

While most of these European and Japanese auto companies manufacture a large portion of their US-sold cars locally, they also partly import vehicles from their home country.

A full-blown trade war with Europe and Japan could also affect US auto companies such as Ford (F) and Tesla (TSLA), as these countries might impose retaliatory tariffs on the US if the Trump administration imposes auto tariffs on them.

While Ford’s direct competitor General Motors (GM) exited the European market in 2017, Ford and Tesla are still trying to expand their presence there. In the first quarter this year, Tesla started the first deliveries of its lower-priced electric sedan, the Model 3.

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