Saying the sector was "critical to our strength as a nation", President Donald Trump has ordered the Department of Commerce to open the probe. The influential lobbying group's head urged the administration to reverse course.
"There is evidence suggesting that, for decades, imports from overseas have eroded our domestic auto industry", Commerce Secretary Wilbur Ross said in a statement, promising a "thorough, fair and transparent investigation".
"You'll be seeing very soon what I'm talking about", he said before his trip to Long Island. "This course of action will undermine the health and competitiveness of the US auto industry". "We are extremely concerned".
The move would be a massive blow for Germany's luxury carmaker Volkswagon.
The report caused USA automaker shares to jump and hit those of overseas companies like Toyota Motor Corp., with its New York-traded shares falling 0.67 percent.
"If these reports are true, it's a bad day for American consumers", said John Bozzella, chief executive of Global Automakers, which represents several foreign carmakers.
A more likely scenario is that the current negotiations drag on into next year, or beyond looming elections in Mexico and the U.S.
German vehicle behemoth Volkswagen condemned Washington's "one-sided protectionism", saying "only free and fair trade secures increased prosperity".
"From Canada's side, higher tariffs mean higher prices and also less demand", she said. Such Trumpian tariffs would cause upheaval in an otherwise mature industry, forcing automakers to tear down and rebuild global supply lines.
There is evidence suggesting that, for decades, imports from overseas have eroded our domestic auto industry. A 1960s-era law allows the president to impose tariffs and other protectionist measures for industries deemed vital to national security.
Last year, 13 domestic and worldwide automakers made almost 12 million vehicles in the United States, it said, and " the sector remains the leading exporter of manufactured goods in our country".
A vehicles tariff also would hurt US automakers with operations in Mexico and Canada.and other places The United States imported $192 billion in passenger vehicles past year, with Mexico the leading source, followed by Canada, Japan and Germany.
Currently, the U.S. charges just 2.5% on auto imports, which is lower than the European Union's 10% and China's 25% - although the latter country will lower its tariff to 15% from 1 July.
Trudeau also predicted talk of the tariffs will likely disappear if slow-moving negotiations to update the North American Free Trade Agreement - now stuck on autos issues - are successful. Treasury Secretary Steven Mnuchin has said that efforts to renegotiate the trade agreement could spill into next year. "No other country has higher absolute losses to fear than Germany", said Gabriel Felbermayr, foreign trade expert at Ifo.
German automakers Volkswagen AG, Daimler AG and BMW AG all have large US assembly plants. It is seen as part of Trump's " America First" promise to win back manufacturing jobs lost to overseas competitors.
Trump's public emphasis on auto workers points to his hope that the issue will be a victor with voters in November, even if Republican elected officials remain opposed. "The Republican Congress and Senate, they have totally ignored the needs of working men and women in this country", Williams said.
'We don't want trade with China any which way at any cost. But given the importance of the US market to these firms-and the fact.
Yet despite his criticism of the United States for arguing that auto imports might be a national security issue, Trudeau defended Canada's decision to block a proposed C$1.51 billion ($1.18 billion) takeover of construction company Aecon (ARE.TO) by a Chinese state builder, also on national security grounds.
"If the European Union wants to further increase their already massive tariffs and barriers on U.S. companies doing business there, we will simply apply a Tax on their Cars which freely pour into the U.S.", Trump wrote on Twitter in March.