Tariffs 'will double car prices'

Rupert Cornwell and David Usborne report from the US that the Pacific car wars are ready to escalate

The world's two biggest economies moved closer than ever to a trade war last night after American Trade representative Mickey Kantor said the US proposed to double the tariff on 13 models of Japanese luxury cars if Tokyo failed to open its market to American cars by the end of June.

The sheer scale of the punitive tariffs to be imposed - affecting imports worth $5.9 billion a year - is unprecedented. So too is the target - not some relatively obscure electronic item or part, but luxury cars driven by hundreds of thousands of Americans, many of them household names across the country. If the 100 per cent tariffs outlined by Mr Kantor do take effect, perhaps as soon as July, then Toyota, Honda, Nissan, Mazda and Mitsubishi will find their most profitable cars priced out of the US market.

Japan last year exported some 200,000 luxury cars to the US. Under the new regime, the cost of a $30,000 vehicle would double to $60,000. The biggest beneficiaries could well be European competitors at the top end of the market - BMW, Mercedes, Saab, and Volvo.

The hit list has been tailored to avoid Japanese cars manufactured in the US and any threat to the jobs of American factory workers. But there will be domestic labour market repercussions felt by the thousands of people working in dealerships handling Japanese imports - around 700 nationwide for the Toyota Lexus, the Nissan Infiniti and the Honda Acura alone, according to the industry.

Above all, the US is signalling that after two years of fruitless negotiations to broaden access to the Japanese car and car component markets, it has lost patience. Mr Kantor made clear that mere resumption of negotiations would not be enough for Washington to lift the threat. "We can't sweep this under the rug any longer," added President Clinton. "We have to go forward and we are going to do that."

The stage is thus set for several weeks of brinkmanship, presenting the new World Trade Organisation in Geneva the highest possible profile test case to its authority, and one it would doubtless have preferred to avoid. Within 45 days, the US will lodge a broad complaint against Japan's trade practices. Long before that, Tokyo will appeal to the WTO against yesterday's move in Washington, and perhaps impose retaliatory sanctions of its own.

The conventional wisdom is that a deal will be struck, at or shortly after the G-7 summit in Canada between 15-17 June, and both sides never fail to underline the risks of a trade war. But there is no guarantee of settlement.

Whatever the specific rights and wrongs of the case, politics in both countries play a powerful part. An already weak Government in Tokyo can hardly fold its tent now. Even less able to cave in is Mr Clinton, who 24 hours earlier had raised the stakes by warning that if unresolved, trade tensions could undermine the defence and security agreements between the two countries. By getting tough on Japan, he will please organised labour here, a key Democratic constituency in US Presidential elections.

While the Clinton administration has taken care not to target cars manufactured by Japanese plants in the United States, it can do nothing to protect dealerships around the country selling luxury Japanese cars. Liable to be caught in the cross-fire, they are facing disaster if the tariffs go through.

"I would expect sales to be virtually non-existent if the tariffs are applied," commented Bruce Schulman, manager of an Infiniti dealership in Greenwich, Connecticut, that has 25 employees, all of whom face at least temporary lay-off. "This would be extremely unfortunate. Our middle- class employees are going to have to be put of work".

Mr Schulman gloomily predicts that customers will instantly discard the Infiniti, the luxury arm of Nissan, and the other Japanese brands in favour of competing European cars. "They should be dancing in the streets of Bonn today. For those folks, this is just marvellous news", he added.

At Bay Ridge Lexus in the Bronx, in New York City, sales manager Tom Macrum is equally despondent. "It does not take a rocket scientist to see what it will do to us," he said yesterday. His is the only exclusive dealership of Lexus within the city. Mr Macrum is still hoping the tariffs can be avoided, however. "We hope there is going to be a negotiated settlement."

Start your day with The Independent, sign up for daily news emails
England's women celebrate after their 3rd place play-off win against Germany
Women's World CupFara Williams converts penalty to secure victory and bronze medals
Arts and Entertainment
Ricardo by Edward Sutcliffe, 2014
artPortraits of LA cricketers from notorious suburb go on display
newsHillary Clinton comments on viral Humans of New York photo of gay teenager
Arts and Entertainment
The gang rape scene in the Royal Opera’s production of Gioachino Rossini’s Guillaume Tell has caused huge controversy
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy
Number of young homeless in Britain 'more than three times the official figures'

'Everything changed when I went to the hostel'

Number of young homeless people in Britain is 'more than three times the official figures'
Compton Cricket Club

Compton Cricket Club

Portraits of LA cricketers from notorious suburb to be displayed in London
London now the global money-laundering centre for the drug trade, says crime expert

Wlecome to London, drug money-laundering centre for the world

'Mexico is its heart and London is its head'
The Buddhist temple minutes from Centre Court that helps a winner keep on winning

The Buddhist temple minutes from Centre Court

It helps a winner keep on winning
Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'