Canadian impact of American auto tariffs
The procession of industry groups and foreign governments lining up to oppose President Donald Trump’s car tariffs is starting to look like a rush-hour traffic jam.
The Commerce Department will hold public hearings Thursday on its probe into whether imports of passenger vehicles imperil U.S. national security. Judging from the list of speakers, the administration will find little if any support for the idea that foreign cars undermine America’s ability to defend itself.
That’s a stark contrast from the U.S. investigation into steel and aluminum imports earlier this year. In that case, American steel producers and steelworker unions lobbied for tariffs, giving Trump political cover to eventually slap duties on foreign shipments.
“This one is much more of an uphill climb for the administration,” said Edward Alden, a senior fellow and trade expert at the Council on Foreign Relations in Washington. “We’re starting to see the damage from the steel and aluminum tariffs and the various retaliations. The impact of this action is so much larger than those that the opposition is going to be far better mobilized and far stronger.”
The stakes are high for the world economy and the global auto industry. In recent weeks, investors have been focused on the potential impact of U.S. tariffs on Chinese imports. But tariffs on car imports could do even more damage -- more than double the amount of all other U.S. tariffs already implemented or proposed, according the IMF.
A U.S. assault on foreign cars would further strain relations with allies such as Germany and Canada as Trump questions pillars of the Western order such as the Group of Seven and NATO. The president is scheduled to meet European Commission President Jean-Claude Juncker next week as Europe pushes for a global deal to cut auto tariffs.
With midterm elections in Congress looming in November, members of Trump’s own Republican party are pleading with him to avoid duties on cars. In a letter released Wednesday, 149 lawmakers from both parties urged the administration to drop the car probe, arguing that imports don’t pose a security risk.
None of this may deter the president. Last month, Trump threatened to slap tariffs of 20 percent on all cars coming into the U.S. from the European Union. On a trip overseas last week, the president called the EU a “foe” on trade issues.
The Commerce Department didn’t immediately reply to an emailed request for comment.
An auto-trade war would be a body blow to automakers from General Motors Co. to Toyota Motor Corp., which have fine-tuned their supply chains to take advantage of countries with low duties, such as the U.S. America’s trade in cars and car parts with the rest of the world amounted to more than $470 billion last year. The nation imported about $135 billion more in passenger cars than exported.
Industry groups are stepping up efforts to sway the president. This week, a coalition of groups representing most major automakers said in an open letter to Trump that duties on cars and car parts “would be a massive tax on consumers who buy or service their vehicles -- whether imported or domestically produced.”
“These higher costs will inevitably lead to declining sales and the loss of American jobs, as well as increasing vehicle service and repair costs that may result in consumers delaying critical vehicle maintenance,” the group said.
Commerce has until February next year to report its findings to Trump, who has the final say on any tariffs. The probe covers imports of automobiles, including SUVs, vans and light parts, and auto parts. The administration is reviewing the security impact under section 232 of the 1962 Trade Expansion Act, the same provision the president used to impose steel and aluminum tariffs.
Speakers representing more than 40 auto-industry groups and foreign governments are scheduled to speak Thursday at the Commerce department, from the American Automotive Policy Council to the European Union. Based on reviews of their submissions and interviews, few appeared prepared to support car tariffs.
“As far as we know, no U.S. automaker or parts manufacturer has been clamoring for relief,” Philipp Schramm, chief financial officer of Webasto, which makes parts including sunroofs, said in a submission last month on the investigation. “The auto industry has been thriving in recent years and such action, adding to market uncertainty, will certainly reverberate strongly and have negative consequences for long-term industry growth and recovery.”
Among the more supportive written comments were from UAW, the primary union for vehicle factory workers in the U.S. It said an investigation of manufacturing losses in the U.S. and their effect on security and economic strength was “long overdue.” Offshoring has hurt workers and begun to erode the technological advantage that the U.S. has long enjoyed, the union wrote. Yet it called for “targeted measures” to strengthen U.S. manufacturing, stopping short of advocating in favor of new vehicle and component tariffs.
“We caution that any rash actions could have unforeseen consequences, including mass lay-offs for American workers,” the UAW wrote.
GM said in a submission that the biggest U.S. automaker would face a stark choice if Trump goes ahead with tariffs: increase prices for consumers and hurt sales, or swallow the tariff cost and move plants. Either way, it would mean job cuts and lower wages for employees, and “a smaller GM” with “a reduced presence at home and abroad,” said the company.
--With assistance from Mark Niquette