Yen’s broad based rally extends today as Nikkei dives over -1% as led by selloff in car makers shares.
Sentiments are hurt by news that the US is considering to impose as much as 25% tariffs on import cars. Similar to steel and aluminium tariffs, national security is used as the excuse for the investigation under Section 232 of the Trade Expansion Act of 1962.
Commerce Secretary Wilbur Ross said in a statement that “there is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry.” And, the department will “conduct a thorough, fair, and transparent investigation into whether such imports are weakening our internal economy and may impair the national security.”
In a separate statement, US President Donald Trump said: “core industries such as automobiles and automotive parts are critical to our strength as a Nation.”
Some see the the car tariffs as a threat to force concessions in NAFTA talks, which has been in deadlock. This could also be an act to address pressure to EU, in particular on Germany for trade talks. But Japan could be the hardest hit if the tariffs are implemented. Japan is one of the few top 10 steel importers to the US who’s not even granted a temporary exemption.
In 2017, US imported 8.3m vehicles, including 2.4 million from Mexico, 1.8 million from Canada, 1.7 million from Japan, 0.9m from South Korea and 0.5m from Germany.