The Commerce Department on Wednesday said the probe would investigate whether vehicle and parts imports were threatening the industry's health and ability to research and develop new, advanced technologies.
“There is evidence suggesting that, for decades, imports from abroad have eroded our domestic car industry,” said Commerce Secretary Wilbur Ross, promising a “thorough, fair and transparent investigation”.
Higher tariffs could be particularly painful for Asian carmakers including Toyota, Nissan, Honda and Hyundai, which count the US as a key market.
The announcement sparked a broad sell-off in carmakers’ shares across the region.
Japan and South Korea said they would monitor the situation, while Beijing, which is increasingly eyeing the US as a potential market, added that it would defend its interests.
“China opposes the abuse of national security clauses, which will seriously damage multilateral trade systems and disrupt normal international trade order,” said Gao Feng, spokesperson at the Ministry of Commerce. “We will closely monitor the situation under the US probe and fully evaluate the possible impact and resolutely defend our own legitimate interests.”
The probe comes as Trump courts voters in the US industrial heartland ahead of midterm elections later this year, and opens a new front in his “America First” trade agenda aimed at clawing back manufacturing jobs lost to overseas competitors.
Earlier this month it was reported that Ford’s imported vehicles were being held up at Chinese ports, adding to a growing list of US products facing issues at China's borders.
The majority of vehicles sold in the US by Japanese and South Korean carmakers are produced there but most firms also export from plants in Asia, Mexico, Canada and other countries. Roughly one-third of all US vehicle imports last year were from Asia.
In addition to recently imposed 25percent tariffs on steel and 10percent tariffs on aluminium imports, the administration has threatened tariffs on $50 billion (R622bn) worth of Chinese goods over intellectual property complaints, and Beijing has vowed to respond.
The administration is also trying to renegotiate the North American Free Trade Agreement to return more car production to the US.
In a separate statement, President Donald Trump said: “Core industries such as automobiles and automotive parts are critical to our strength as a nation.”
The US imported 8.3million vehicles worth $192billion last year.