U.S. slaps Japan with 100% car tariff

WASHINGTON — WASHINGTON -- Living up to its threat to impose harsh sanctions on Japan, the Clinton administration has placed a 100 percent tariff on 13 luxury car models that accounted for $5.9 billion in sales in the United States last year, including the flagship products of Toyota, Nissan and Honda.

The tariff ordered yesterday, the largest ever imposed by the United States against any trading partner, is tentatively set to go into effect at 12:01 a.m. Saturday. Customs inspectors will be instructed to double the wholesale price of every Toyota Lexus, Nissan Infiniti and a number of other cars that roll off Japanese transport ships -- an increase that would make the cars all but unsalable.


But administration officials said the sanctions would be rescinded if Japan and the United States could reach an accord by June 28, giving the two countries six weeks to resolve a dispute that has gone far beyond the immediate issue of the openness of Japan's market for U.S.-made cars and car parts.

As the argument has broadened tremendously in recent weeks, both sides have warned that the alliance of the world's two largest economies is being badly corroded.


"We've put ourselves pretty far out on this one, and there is no backing away now," one of Mr. Clinton's top trade officials said yesterday.

"We came to the conclusion that either we draw the line here, or throw in the towel on Japan."

Japanese officials contended yesterday that the sanctions violated international trade laws, and they said that within days they would bring an action against the United States at the new and still-fragile World Trade Organization in Geneva.

Ryutaro Hashimoto, minister of international trade and industry, whose prospects of becoming prime minister rest largely on his handling of the trade dispute, accused Washington of imposing "numerical targets" that Japan must meet "under the threat of unilateral actions, which is nothing but government intervention in private business activities and poses a serious challenge to the free trade system."

Japanese automakers were more direct. "The U.S. government conducts its trade policy in a coercive manner completely beyond our comprehension," said the executive vice president of Toyota Motor Co., Masaharu Tanaka.

In private, Japanese government officials contended that Mr. Clinton was simply playing presidential politics, trying to shore up his support among labor unions and middle-class voters who see their jobs threatened by Japan's long reach into the U.S. market.

It is unclear how long Japan's automakers could endure the huge loss of sales that would come from a tariff that would add $20,000 to $40,000 to the cost of each car. After years of battling their way into the U.S. luxury market, they would suddenly be surrendering it to Mercedes-Benz, BMW, Jaguar and some competitive U.S. models.

Toyota Motor Corp. said yesterday that at least for the next month, it would not pass on to its dealers or customers the cost of U.S. tariffs.


This means that in the short term, Toyota is willing to risk losing tens of thousands of dollars for each Lexus it sells rather than sacrifice its market share.

Likewise, a spokeswoman for Nissan North America, the importer of cars sold by Infiniti, said, "At this time, we don't have any plans to pass any proposed tariffs on to consumers."

The list of targeted cars announced yesterday by U.S. Trade Representative Mickey Kantor was more a political masterpiece than an economic one. All the cars on the list are produced in Japan, and they all make minimal use of U.S. parts; no vehicles made at Japanese plants in the United States are affected.

All of the cars involved cost more than $25,000, enabling Mr. Clinton to argue that he has not hurt middle-class U.S. consumers.

There are several possibilities for what could happen next. The simplest is that Japanese officials, concluding that they have misread Mr. Clinton's determination, try to patch together the minimal concessions necessary to resolve matters before the June 28 deadline.

Presumably, most of the talking would take place before Mr. Clinton and Prime Minister Tomiichi Murayama meet at the conference of the Group of Seven nations in Halifax, Nova Scotia, which begins June 15.


The second possibility is that no agreement will be reached until Japanese automakers feel enough pain to press the politicians to solve the problem.

A third -- and probably less likely -- possibility is that Japan will decide to tough it out, for fear that caving in on autos would lead to similar pressure regarding other industries.