Auto industry to tell Commerce Department to ditch tariff proposal

- Jul 20, 2018-

A wide spectrum of auto interests, armed with the latest impact studies, will warn at a Commerce Department hearing July 19 that raising auto tariffs would severely harm the industry and consumers.

The stakeholders are presenting a united front against the Trump administration's unprecedented investigation into whether imports of autos and auto parts pose a national security threat, saying a potential 25 percent tariff to limit foreign competition would undermine the very manufacturing growth the president seeks.

As a big supplier of North America rubber chemicals, Shenyang Sunnyjoint Chemicals Co., Ltd. will follow the influence of trade war on automakers.

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"The National Automobile Dealers Association recognizes the importance to the U.S. of leveling the trade playing field, eliminating unfair trade practices and keeping America's automotive industry strong," NADA President Peter Welch said, according to an advance copy of his testimony. "But a 25 percent tariff applied to all imports would hurt auto manufacturers, dealers, consumers and the economy as a whole. And the hardest hit would be our customers."

Price increases

A study by the Center for Automotive Research, commissioned by NADA, forecasts that the price of a typical imported vehicle would rise $6,875, while the price of a U.S.-assembled vehicle would jump $2,270.

CAR, a think tank supported by the auto industry, estimated that 2 million fewer vehicles would be sold and the industry would lose almost 750,000 jobs, including 117,500 at new-car dealerships. Consumers would also feel the pinch in higher used-car prices due to heightened demand and higher repair costs, CAR said.

In a soon-to-be published paper, excerpts of which were shared with reporters, the Peterson Institute for International Economics forecasts potential tariffs would raise vehicle prices between $1,400 and $7,000 for top-selling models, depending on a variety of factors including size. The research also predicts auto tariffs could cause 1 million to 1.2 million people to lose their jobs.

A more conservative Petersen Institute study several weeks ago, showing job losses of more than 600,000 if other countries retaliate, didn't account for the multiplier effect and the effect on demand caused by higher tariffs.

Fighting back

Auto interests are taking a much more aggressive approach to this trade disagreement with the White House because the stakes are so high for a global industry that sources components and exports vehicles around the world.

John Bozzella, president of the Association of Global Automakers, accused the Trump administration of pursuing an anti-trade ideology that is not grounded in facts.

"The Department of Commerce so far has been unable to outline any theory explaining how the commercial production of cars and trucks is connected to U.S. national security. Simply running a sectoral trade imbalance, which the secretary [Wilbur Ross] suggested as a rationale during a recent appearance before Congress, seems insufficient because it does not distinguish the U.S. automobile industry from other industries where this is also the case," he said, according to a copy of his prepared remarks.

Bozzella also criticized use of the 1950 Defense Production Act to demand proprietary business information from auto makers as part of the investigation.

"To my mind, this highly intrusive, overbroad and burdensome tactic is simply the latest evidence that the Department possesses no evidence to support the idea that auto and auto parts imports harm the national security of the U.S. The exercise appears to be less an impartial effort to understand the facts than it is a policy hunting for a justification, and a solution in search of a problem," he said.

There appears to be little public support for the auto tariffs so far. Only a handful of some 2,300 comments received by the Commerce Department favor the idea and half of consumers recently surveyed (773) by Cox Automotive said potential tariff increases will impact their next vehicle purchase decision.

Three in 10 shoppers said they would switch the type of vehicle they are considering, either from new to used, or certified pre-owned, or from imported models to domestically produced vehicles. And one in seven consumers would delay purchasing a vehicle until the tariffs are removed, with only 7 percent saying they would pay more an imported vehicle they liked.

Other scheduled speakers include the ambassadors of the European Union, Canada and Mexico as well as Richard Smallwood, CEO of Sumitomo Rubber North America.