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Another delay expected in U.S. car tariffs decision: analysts

13:42 November 11, 2019

By Choi Kyong-ae

SEOUL, Nov. 11 (Yonhap) -- The United States appears set to postpone a final decision this week on whether to impose tariffs on automobile and auto part imports due to domestic political reasons, analysts said Monday.

The U.S. government has until Nov. 13 (local time) to decide whether to slap 25 percent tariffs on autos and parts produced by major trading partners including South Korea, Japan and the European Union.

Previously, it put off the final decision in May for six months, after both foreign and domestic carmakers opposed the heavy tariff plan due to an expected impact on global supply chains.

As the 2020 presidential election season begins, U.S. President Donald Trump is expected to delay the decision once again to focus on the trade negotiations with China, analysts said.

Another delay expected in U.S. car tariffs decision: analysts - 1

"For Trump, it's important to go into an election season with a strong economy. If he imposes tariffs on imported autos and parts, it could lead to an economic slowdown. So no imposition is likely this time as well," Lee Kyoung-min, an analyst at Mirae Asset Daewoo, said over the phone.

The steep tariffs would jack up the price of imported cars and parts, and higher prices anger U.S. car buyers, dent sales in the world's largest economy and further strain U.S. automakers that are already cutting jobs, he said.

U.S. Commerce Secretary Wilbur Ross hinted at a delay. He recently said that the tariffs might not be necessary, citing "very good conversations" with Korean, Japanese and European trading counterparts.

"A postponed decision on car tariffs would provide a relief to the financial markets in the short term, though the issue will still remain an uncertainty for the markets," Kiwoom Securities Co. analyst Suh Sang-young said.

Trump has repeatedly warned he could slap tariffs on foreign autos and parts following a report from the Commerce Department about the national security risks of vehicle imports in February. The report concluded U.S. auto manufacturing and R&D are "vital to national security."

The 25 percent tariffs on Korean-made vehicles and auto parts, if imposed, will be a major blow to the country's two biggest carmakers such as Hyundai Motor Co. and Kia Motors Corp., in particular.

Hyundai and Kia sold a combined 984,863 vehicles in the U.S. in the January-September period, up 3.3 percent from 953,743 units a year earlier, helped by robust sales of Hyundai's Palisade and Kia's Telluride sport utility vehicles.

The carmakers need to further boost U.S. sales to offset a slump in China. Their sales in the world's biggest automobile market plunged 20 percent to 642,995 units in the first nine months from 803,532 a year ago.

On the front of U.S.-China trade talks, officials from the world's two biggest superpowers said on Thursday (local time) that the two sides had agreed to gradually roll back tariffs imposed on each others' goods as part of the first phase of a trade deal.

But on Friday, Trump said he had not agreed to a tariff rollback, sending global stocks lower.

The Korea Composite Stock Price Index (KOSPI) ended lower on Friday, snapping its six-day winning streak largely buttressed by hopes of a partial U.S.-China trade deal this month.

The KOSPI closed down 7.1 percent to 2,137.23 after rising 3.1 percent in the past six sessions.

kyongae.choi@yna.co.kr
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