Shrugging off Steven Mnuchin's alarmingly unprompted reassurances that liquidity in the US banking system remains strong - which sent a ripple of unease across European markets during Monday's holiday-shortened session - US stock futures have amazingly rebounded following one of the worst weeks for stocks since the financial crisis. But apparently, Trump Administration officials just can't seem to get out of their own way. Case in point: As if the market needed one more thing to worry about, Commerce Secretary Wilbur Ross reminded investors during an interview with the Financial Times published Monday that there's still "a lot of flexibility" in deciding what form President Trump's planned tariffs on cars, trucks and car parts entering the US might take. Indeed, all options are on the table, Ross said.
Back in the spring, Trump ordered the Commerce Department to launch an investigation into the national security implications of foreign car imports under Section 301 of the Trade Act of 1974 - the same statute used by the administration to justify tariffs on aluminum and steel. Last month, reports that the Commerce Department was preparing an early release of its final report (they have until Feb. 17), potentially opening the door to immediately slapping tariffs on all cars and parts entering the US except from Canada and Mexico, rattled markets - though European officials quickly stepped in to assure investors that no meetings between EU trade officials and the US to discuss such tariffs had taken place. Though the US ultimately backed off the early release of the report.
And after the US-China trade truce, China decided to roll back its retaliatory tariff hikes on foreign autos as a gesture of good will (though given the fact that the overwhelming majority of cars sold in China are made in China, analysts quickly pointed out that this was ultimately a symbolic gesture).
Ross told the FT that the Trump auto tariffs would be designed to correct a lingering "imbalance" in the autos trade between the US, Europe and Japan that arose during the post-World War II years during the days of the Marshall Plan.
"After world war two it was a deliberate US policy to help rebuild Europe and Asia with direct aid like the Marshall Plan and trade concessions, but the mistake we made was not time-limiting them," Mr Ross said. "We are stuck now with concessions that were totally appropriate in 1950."
The president had "a lot of flexibility" and "complete discretion" in making a final decision in response to the report, he said.
With the March 1 deadline for an enduring trade truce between the US and China following shortly after the report's deadline, the FT pointed out that the auto tariff issue could further complicate talks with China.
International car companies who build in the US have already suffered a double blow. International carmakers with factories in the US have already suffered a double blow because of Mr Trump’s trade policies this year. Steel and aluminium tariffs imposed by his administration have raised the cost of key materials. Meanwhile, the revision to Nafta - the trade deal binding the US with Mexico and Canada - imposed stricter regional content and wage requirements on car production, which is forcing them to adjust.
But all that would pale in comparison to the impact of sweeping US tariffs on imported cars and car parts. Not only would many producers have to contend with the higher price of parts from their home countries, but those who use the US as an export hub - such as Daimler and BMW - would face retaliatory levies when they try to sell abroad.
"The scale is significantly larger," said Marianne Petsinger, a geoeconomics fellow at Chatham House, the London-based think-tank. She said that US metals tariffs affected about €6.4bn of EU exports, while car tariffs would hit about €50bn of exports.
And despite opposition from both domestic and international car makers (German auto CEOs met with Trump at the White House last month to discuss the prospect of tariffs), one source who spoke with the FT said it's extremely likely that the president follows through with whatever is recommended by the report.
Despite the pushback there’s still a very good chance that President Trump will act on the report - and even further than what the commerce report would recommend, said one industry source. The biggest risk for Trump would be if tariffs harm auto workers in states like Alabama that supported Trump during the 2016 vote. In other words, for these workers, their own job security trumps Trump's national security narrative.
Mr Ross has defended Mr Trump’s use of tariffs as a way to force change. "The whole purpose of the president’s tariffs is to create a situation where it is more painful for other countries to continue their predatory practices than to reduce them, it’s the only tool we have," he said.
But the risk for Mr Trump is that auto tariffs would hit US workers employed by foreign car companies - and many other parts of the American economy - hard. In western and central Alabama, there is a Daimler plant in Tuscaloosa, a Hyundai plant in Montgomery and a Honda plant in Lincoln - all would be damaged if the president followed through on his threat to impose tariffs.
"It would be disastrous," said Terri Sewell, a Democratic lawmaker whose district includes the Daimler and Hyundai plants, and is close to the Honda facility. Ms Sewell is leading a bipartisan push to oppose the tariffs in the US House of Representatives.
"There must be a better way for the Trump administration to help workers," she said.
She said people in her Alabama district just "don’t see it" as a national security issue. "That narrative doesn’t play well. The tariffs would hit working families hardest, and these are well-paying jobs," she said.
The big question moving forward will be whether European carmakers can work out an exemption in exchange for quotas or some other concession. But until the dust settles, the next step in the US trade war - coming at a time when global car sales are already slowing - will represent another looming threat to the market.