The U.S. Department of Commerce has begun an investigation to determine if automobile imports “threaten” to undermine the national security of the United States. This was announced in a Wednesday evening local time statement.
The announcement is surprising at a moment when tensions are increasing over trade between the United States, including with close allies. Tariffs, threats of duties, and complaints to the World Trade Organization are flying around.
The new U.S. investigation will be conducted under section 232 of the Trade Expansion Act of 1961. This section of the law allows the secretary of Commerce the authority to determine the “effects of imports of any articles on the national security of the United States.”
The United States has a busy automobile trade with countries that are traditionally friendly, such as Japan, Germany, and South Korea.
Automakers and auto part manufacturers in the United States also manufacture their products in Mexico or Canada and then import these into the United States.
John Woods told CNBC’s Bernie Lo, “I wonder what this has to do with Mexico and Canada.” “I suspect that there’s some leverage” being used to increase pressure on these countries when they try to renegotiate their North American Free Trade Agreement (NAFTA) with the United States.
Shares of Japanese and Korean companies are down.
New York traded shares of Toyota Motor. The stock price fell in extended trading after the announcement.
The Japanese automakers who had been under pressure by the firmer yen Toyota Motor and Honda Motor Both were lower than their home markets by over 2 percent.
Mitsubishi Motors You can also find out more about the following: Mazda Motor Both fell more than 4 percent.
Stocks of South Korean automakers Traded broadly lower on Thursday in Seoul With a Hyundai Motor. You can also find out more about Kia Motors sliding.
Weakening the internal economy
Commerce Sec. Wilbur Ross stated in a press release that “there is evidence to suggest that imports from overseas have been eroding our domestic automotive industry for decades.”
The Commerce Department announced that the investigation would “consider whether the decline in domestic automobile and auto parts production threatens the internal economy of United States by potentially reducing jobs and research and development for skilled workers, such as those working on connected vehicle systems and autonomous vehicles, as well fuel cells, electric motors, storage and motors, advanced manufacturing processes and other cutting edge technologies.”
In a statement, the department claims that imported passenger cars now account for 48 percent of all passenger vehicles sold in America, up from just 32 percent 20 years ago. Meanwhile, “employment in motor vehicle manufacturing has declined by 22percent.”
Minutes before the announcement, the White House issued a press release stating that Donald Trump had asked Ross to conduct the investigation.
The White House said that “core industries like automobiles and auto parts are crucial to our strength as Nation”.
Commerce Secretary Ross informed the U.S. Secretary of Defense, James Mattis, of the investigation.
On Thursday, a group of investors who were hoping to save the shuttered trucking company Yellow (formerly YRC) were dealt a blow when executives of the bankrupt company rejected a bid worth a billion dollars that would have taken over much of what remained. The group of investors, led by trucking executive Sarah Riggs Amico, vowed to keep going and hoped that the courts and Treasury Department would allow them to win.
Amico’s request for a restructure a CARES Act $700 million loan repayment has become a sticking point. This helped keep Amico afloat throughout the pandemic. The U.S. Department of Treasury claims that their hands are tied.
The loan was given during the previous administration, and Treasury is among the creditors involved in the bankruptcy proceedings. We will continue our efforts to ensure that taxpayers and workers impacted by the bankruptcy are treated fairly. Ashley Schapitl is Treasury’s spokesperson, she told CNBC.
Treasury officials from other departments have stated that the loan could not be modified due to Yellow’s bankruptcy. They also said a new Congressional authorization would be required for a new loan since the CARES Act authority had expired. Yellow’s potential rescuers dispute Treasury’s legal opinion.
Eight senators from both parties, including Sen. Josh Hawley (R-Mo) and Elizabeth Warren (D-Ma), have publicly supported efforts to save Yellow and its 30,000 jobs and pressed the Treasury to restructure this loan.
What drove the iconic freight company near the edge?
Yellow, formerly YRC Worldwide, was an iconic presence along America’s highways until its sudden closure in July. After six months and a Chapter 11 bankruptcy, it is clear that Yellow comes in many different shades. Others see the vibrant Yellow of an upcoming new beginning, while some see the yellowish hue of a sunset that is fading. Yet, other entities like the government or creditors are also caught in the middle.
Yellow closed its doors in 2008, leaving 12,000 trucks and 35,000 trailers idle. These vehicles could be used to start a new company. The Yellow Taxi Service, which began in Oklahoma in the 1920s, is the origin of the company.
Yellow has grown over the years into a giant freight carrier that touches almost every part of the American economy. It will be one of the ten largest freight carriers in America, with a gross of more than $6 billion by 2022.
A series of corporate incidents, ranging from mismanagement and malfeasance to corruption, brought the company to its knees. Yellow was able to receive the $700,000,000 lifeline loan from the CARES Act when COVID-19 brought the country’s supply chain to a halt. But even that wasn’t sufficient.
Many of the dire predictions about a snarled-up supply chain and increased freight prices due to Yellow’s absence are yet to come true, say experts.
Michael Belzer is a professor of Economics at Wayne State University. He said: “There are many implications for individuals, but I don’t think there is anything significant to the industry or industry segment.” Belzer worked as an OTR truck driver for 12 years before entering the academic world.
Belzer explained that “in a macro sense, when one company fails, others rise up to take its freight.”
The impact of truckers on the lives of other people
On Thursday, December 31, 2009, drivers walk to their trucks at YRC Worldwide Inc. Carlstadt, New Jersey. YRC Worldwide Inc. bondholders swapped their debts for equity in the United States’ largest trucker. This allowed the company to avoid a possible bankruptcy filing, which could have led to liquidation. Bloomberg
Investors who hope to revive Yellow claim that the market has still not recovered and that the union jobs Yellow truckers held have created a void within the economy.
Nathan Skobodas, who worked as an operations manager for YRC at a terminal in Grand Rapids for five years, says that former coworkers are having difficulties.
Skobodas stated that “some coworkers who I’ve kept in touch haven’t found similar placements and have had to take pay decreases.”
