U.S. stocks traded higher Wednesday, reversing sharp earlier declines, following a report that President Donald Trump may delay a decision to apply tariffs on automobiles imported into the United States for up to six months.
Bloomberg News first reported the delay, citing U.S. officials, sending the Dow into positive territory and paring declines for the S&P 500. European auto stocks were also on the move, with the Stoxx Europe 600 Automobiles and Parts index rising 2.1% into the close of trading, while the auto-heavy DAX performance index turned positive lead by gains for Volkswagen AG (VLKAY) , Daimler AG (DMLRY) and BMW AG (BMWYY) .
Trump had been expected to make a decision on the tariffs this weekend, following a report U.S. Commerce Department he received on February 17 that studied whether imported cars and other automotive parts pose a threat to national security under section 232 of the Trade Expansion Act.
Normally, the President would have 90 days to act upon the report, but he also has the ability to delay a decision if he is deemed to be in ongoing trade negotiations with the country or region upon whom the tariffs would apply.
European carmakers had been under pressure from comments made during President Donald Trump’s State of the Union Speech to Congress earlier this year, when he urged lawmakers to pass the United States Reciprocal Trade Act, “so that if another country places an unfair tariff on an American product, we can charge them the exact same tariff on the exact same product that they sell to us.”
The remarks were seen as a direct broadside to Europe, which applies a 10% levy to U.S.-made cars against the 2.5% level put in place by Washington.
The EU exported around 1.155 million cars to the U.S. market last year, according to the European Automobile Manufacturing Association, with total value of just over €37.3 billion ($41.8 billion). The U.S, in contrast, moved only 267,653 cars in the other direction, a value of just €5.5 billion but still nearly 20% of the sector’s entire international export base.
Last year, the President threatened to apply a 20% tariff on all cars coming into the United States from the European Union on the same day that the EU imposed its own retaliatory tariffs on $3.4 billion worth of U.S. goods in response to the Trump administration’s levies on non-American steel and aluminium products.
Cars imported into the United States from countries that don’t have existing pacts with Washington are subject to a 12.5% levy, while pickup trucks are subject to a 25% tariff.
That said, some of the largest production facilities of Europe’s biggest carmarkers are located in the United States, with plants in Vance, Al. and Spartanburg, S.C. and Chattanooga, Tn., that assemble around a third of the German cars sold domestically.