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Ford ends US model over tariffs; other carmakers under threat

Its Focus Active not expected to be big seller and levies would make it unprofitable; major risk looms for industry

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Mr Trump also threatened Canada with auto tariffs this week if the country failed to join his trade deal with Mexico to replace Nafta.

Southfield, Michigan

FORD Motor is unlikely to be the last to say "forget it" to a vehicle that doesn't make financial sense for the US market anymore because of US President Donald Trump's trade wars.

The second-largest US carmaker has pulled the plug on plans to import a new small crossover from China called the Focus Active.

Mr Trump was the culprit behind the decision: his administration started imposing an additional 25 per cent tariff on vehicles imported from the country he's portrayed as America's biggest trading foe in July.

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The move will barely make a difference for Ford's sales or profits, as the company was expecting to sell fewer than 50,000 Focus Actives a year. But the decision looms larger as a potential first of several autos to be aborted as a result of duties that render them unaffordable for consumers or unprofitable for manufacturers.

A major risk looming for the industry lies in the investigation that the US Commerce Department started in May of the national security peril posed by imported cars and components.

The administration is said to have been considering tariffs of as much as 25 per cent and could do so by invoking the same Section 232 trade law used to justify steel and aluminum levies earlier this year.

Concern that those levies would come to pass eased in July, when the European Union's Jean-Claude Juncker reached an agreement with Mr Trump that both sides would refrain from new tariffs as long they are negotiating a trade accord. But Mr Trump's remarks in an Oval Office interview with Bloomberg News last week cast doubt on the longevity of that deal.

After the EU's trade chief said on Thursday that the bloc was willing to drop its car tariffs to zero, if the US does the same, Mr Trump dismissed the offer as "not good enough".

"The Trump Administration seems very intent on imposing the 232 tariffs," said Kristin Dziczek, vice-president of industry, labour and economics at the Center for Automotive Research. "That would mean that a lot of models would be withdrawn from the US market."

The trade danger doesn't stop there. Mr Trump also threatened to hit Canada with auto tariffs this week if the country failed to join his trade deal with Mexico to replace Nafta. Talks with the US' northern neighbour stalled just hours before a deadline, and negotiations will resume Wednesday.

Hanging in the balance amid all of Mr Trump's battles are the economics of some of the most popular vehicles in the US.

Both Toyota Motor and General Motors source some of their best-selling sport utility vehicle models, the RAV4 and Chevrolet Equinox, from Canadian plants. BMW and Daimler import tens of thousands of 3-Series sedans, GLC crossovers and other models from Germany every year.

While big tariffs would be hugely disruptive for these models, the ones with greater risk of getting dropped altogether from the market are marginal sellers like Ford expected the Focus Active would be.

GM president Dan Ammann said on Aug 3 that the only way the China-built Buick Envision SUV will be available in the US market is if it gets an exemption from the levies.

Volvo piggy-backed off GM's request by asking that its similar-size XC60 SUV also be immune from Mr Trump's China tariffs. The Zhejiang Geely-owned Swedish automaker faces significant risk from import duties, because the only vehicle it's slated to produce in North America is the S60 sedan.

Ford announced the decision that it wasn't worth investing more money in a vehicle that would sell in low volumes in the US just two days after Moody's Investors Service lowered its credit rating to one step from junk status. Its stock dipped below US$10 in July for the first time in almost six years. BLOOMBERG