Shares of car makers slumped in the minutes before Monday's close following a Bloomberg headline hinting that the US investigation into possible national security tariffs on imported cars could soon materialize. However, it appears that the White House has decided to hold off on any auto tariffs - for now, at least.
According to Bloomberg, European auto stocks climbed after people familiar with the matter said the White House is planning to hold off on imposing new tariffs on imported cars as officials consider revising a preliminary report on the findings of an investigation into possible tariffs that was ordered by Trump in the spring.
Trump met with his top trade advisers on Tuesday at the White House to discuss a draft report on a Commerce Department investigation into the impact of car imports. After the meeting, the administration concluded it wasn’t ready to act on tariffs and that the report would be subject to further changes.
In recent months, companies and governments from Europe to Asia had warned Trump that tariffs on car imports would hurt the U.S. economy and disrupt the global auto industry.
An auto trade war would deal a blow to car-makers from General Motors Co. to Toyota Motor Corp., which have built their supply chains to take advantage of countries with low duties. The National Automobile Dealers Association estimates that the tariffs would add as much as $2,270 to the cost of U.S.-built cars and $6,875 to the cost of imported cars and trucks.
Officials present for Tuesday’s meeting at the White House included Ross, Treasury Secretary Steven Mnuchin, U.S. Trade Representative Robert Lighthizer, National Economic Council Director Larry Kudlow and Senior Adviser Jared Kushner.
European Union Trade Commissioner Cecilia Malmstrom said Tuesday that Europe expects to be exempted from any new U.S. automobile tariffs, at least temporarily. "We are under the assumption that is still valid," Malmstrom said, referring to a pledge made by the U.S. and EU in July not to impose new tariffs on each other. She is in Washington this week to meet with Lighthizer.
Following the report, shares of Japanese carmakers such as Toyota and Honda rallied in Tokyo trading Wednesday: Toyota jumped as much as 2% while Honda rose 2.6%, Subaru rallied 4.1%, while Mazda gained 2$ and Nissan 1.9%. In Europe, the Stoxx 600 Automobile & Parts Index was the best-performing component of the Stoxx 600, climbing 0.4% while the broader benchmark fell 1.2%. Some of the best performers included: Valeo (+2.1%), BMW (+1.3%), Volkswagen (+0.7%) and Renault (+0.7%).