By Josh Zumbrun and Ben Foldy in Washington and Emre Peker in Brussels 

President Trump's decision to let a deadline to impose tariffs on foreign auto imports lapse without taking action has left the auto industry puzzled over the White House's next move -- which could include restarting the clock with a new levy action.

The president had until Nov. 13 to decide whether to apply the tariffs following a Commerce Department finding that imported vehicles could pose a risk to national security. The White House hasn't announced a decision.

Experts on trade law say Mr. Trump might still seek to impose the tariffs despite the missed deadline, but such an action would be vulnerable to a strong legal challenge for not complying with Section 232 of the Trade Expansion Act of 1962.

"There's a very good challenge that could be brought if they now decide to impose tariffs" under Section 232, said Jennifer Hillman, a senior fellow at the Council on Foreign Relations and a former U.S.-appointed World Trade Organization judge.

Alternatively, Mr. Trump could decide to abandon the Section 232 action and pursue tariffs under Section 301 of the Trade Act of 1974, which is the same mechanism the president used to impose tariffs on Chinese imports.

Under Section 301, the U.S. would first have to determine that a foreign country pursued unfair trade practices. If that finding is made, Mr. Trump would have a wide berth to impose tariffs if he determines negotiations with the offending party are unsuccessful. The tariffs might also be more defensible on unfair trade grounds than if they were imposed as a matter of national security.

Several people in the auto industry said they considered a Section 301 action to be a genuine threat. But without any clear signals from the White House, industry executives acknowledge it is a guessing game.

One U.S.-based executive for a Japanese auto maker said the Nov. 13 deadline's passing was a positive signal, but the threat of tariffs remains.

"We feel better but we'd never tell Japan that we're good," the executive said. "The administration is too unpredictable."

Importers of auto parts, which would also be subject to tariffs, are also taking nothing for granted.

"I don't think anything is off the table," said Ann Wilson, vice president of governmental affairs at the Motor and Equipment Manufacturers Association, a trade group for automotive suppliers.

European Union officials are taking a wait-and-see view on the matter.

"At the moment we're in a bit of a quiet patch," a European diplomat said Wednesday. "If, at some point, the U.S. takes a decision on tariffs, it has been made abundantly clear by the EU what the response will be. So, we have little to say about this; it's certainly not something we are negotiating. This is a U.S. domestic process."

The EU would strike back at U.S. auto tariffs by immediately levying duties on American exports worth EUR35 billion ($38.8 billion) annually, the bloc's trade chief, Cecilia Malmström, told lawmakers at the European Parliament in July.

The White House, the Office of the U.S. Trade Representative and the Commerce Department didn't respond to requests for comment.

White House officials have sent signals for months that imported-car tariffs are a low priority. Automobile tariffs would risk alienating the president's allies in Congress, especially southern Republicans who represent states with foreign-owned auto factories.

U.S. auto makers, which source foreign-made parts that come from global supply chains, also oppose the tariffs.

Pushing forward with tariffs could also weaken the administration's ability to get Congress to pass the U.S.-Mexico-Canada Agreement that the president negotiated last year.

"Many of the president's advisers recognize the best way to achieve his goal of increasing auto investment in the United States is to pass USMCA, " said Clete Willems, who used to work on trade issues in the Trump administration and is now a partner at law firm Akin Gump.

Canada and Mexico won protections from the tariffs in negotiating the USMCA. But were the tariffs to go into effect against the EU or Japan, they would have a marked impact.

Combined automotive imports from Japan and the EU accounted for nearly $120 billion of goods last year, or roughly a third of total U.S. auto imports, according to Commerce Department data.

Tariffs on imported vehicles and parts that aren't from Mexico, Canada and South Korea would increase the estimated average cost of a new vehicle by about $2,500, according to the latest analysis by the Center for Automotive Research.

Write to Josh Zumbrun at Josh.Zumbrun@wsj.com, Ben Foldy at Ben.Foldy@wsj.com and Emre Peker at emre.peker@wsj.com

(END) Dow Jones Newswires

November 21, 2019 07:35 ET (12:35 GMT)

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