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article imageFord Focus may not be the last casualty of Trump trade war

By Karen Graham     Sep 2, 2018 in Business
Ford has announced that it’s abandoning plans to sell the Focus Active — which the company makes in China — in the United States because of tariffs imposed by the Trump administration.
The Focus Active, a small crossover, was one of two models Ford planned to sell in the U.S. as it shifts its lineup to be almost exclusively SUVs and trucks. With this latest decision, the only car Ford will be selling in the U.S. is the Mustang.
Trump's decision in July to slap an additional 25 percent tariff on vehicles made in China and imported into the United States undermined the profitability of the Focus Active said Kumar Galhotra, president of Ford North America Operations in a conference call, reports Industry Week.
The move will actually make little difference on Ford's profits because the company was expecting to sell fewer than 50,000 of the vehicles in the U.S, anyway. “Our viewpoint on Focus Active was that, given the tariffs, obviously our costs would be substantially higher,” Galhotra said. “Our resources could be better deployed.”
Ford Focus Active
Ford Focus Active
Ford Motors
National Security behind tariffs
However, Bloomberg notes Ford's move may very well just be the tip of the iceberg. Other autos may also be "aborted as a result of duties that render them unaffordable for consumers or unprofitable for manufacturers."
The major risk is still the U.S. Commerce Department's investigation started in May on whether imported cars and components pose a threat to national security. At issue is Section 232 of the Trade Expansion Act of 1962 that allows the president to adjust imports without a vote by Congress should the Department of Commerce find evidence of a national security threat from foreign shipments.
Trump used the Cold-War era law to impose tariffs on steel and aluminum, and on May 23, instructed the Commerce Department to investigate the national-security implications of importing automobiles. But with all the hoop-la about national security, it was Trump's campaign promise to "stop unfair trade practices" and bring "millions of jobs back to America" that was the basis for the use of Section 232.
Trump's tariffs on steel and aluminium have sparked fears of a global trade war
Trump's tariffs on steel and aluminium have sparked fears of a global trade war
ALEX WONG, GETTY IMAGES NORTH AMERICA/AFP/File
Trump's trade war with China and the increased tension with Canada and the European Union is putting automakers in a tough position. Most of the leading automakers operate on a global scale and it only makes sense that production plants are located where costs can be kept low.
General Motors, which also imports Chinese-built cars has also warned that it might stop importing the Buick Envision SUV if the company is not granted an exemption to the tariff. And because of retaliatory tariffs from other nations, Daimler AG cut its profit outlook for this year in June, citing Beijing’s retaliatory tariffs on U.S. auto imports.
And the same thing happened with Harley-Davidson. They are shifting some production overseas to feed markets in the European Union, which put tariffs on its bikes as a reprisal for Trump’s steel and aluminum levies.
US President Donald Trump and European Commission President Jean-Claude Juncker (L) address the medi...
US President Donald Trump and European Commission President Jean-Claude Juncker (L) address the media after their trade talks
SAUL LOEB, AFP
Trump blows it with the European Union
In July, the European Union’s Jean-Claude Juncker reached an agreement with Trump that both sides would refrain from new tariffs as long they are negotiating a trade accord. But after Trump's interview with Bloomberg News this week, the longevity of that deal is now in question.
On Thursday, the EU's trade chief said the Bloc would be willing to drop its car tariffs to zero if the U.S. does the same. “It’s not good enough,” Trump said of the offer from Brussels during an Oval Office interview with Bloomberg News. “Their consumer habits are to buy their cars, not to buy our cars.”
Trump compared the EU to China, saying, “The European Union is almost as bad as China, just smaller."
“The Trump Administration seems very intent on imposing the 232 tariffs,” said Kristin Dziczek, vice president of industry, labor, and economics at the Center for Automotive Research. “That would mean that a lot of models would be withdrawn from the U.S. market.”
More about Trade war, China, profitability, European union, Tariffs
 
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