Krishen Rangasamy, analyst at National Bank Financial, points out that in the US, the Trump administration is once again contemplating using Section 232 of the U.S. Trade Expansion Act to impose tariffs on grounds of national security.
“While last June such legal arguments were made to impose import tariffs of 25% on steel and 10% on aluminum, this time Washington is targeting auto imports which totalled more than US$350 billion last year.”
“Mexico and Canada are the most exposed although the USMCA trade deal, if approved by the U.S. Congress later this year, will largely shield those economies from such tariffs. With no such protection, Japan and Germany would be the most exposed considering they account for 15% and 8% respectively of the U.S. auto market.”
“Their exposures are even higher for passenger cars which are more likely to be targeted by Section 232. Both Japan and Germany could have done without those additional uncertainties given that their factories are already in contraction mode according to Markit’s purchasing managers indices.”