Trump takes aim at the family car with new tariff threat

- Mei 24, 2018

Americans could see a 25 percent spike in the price tag on their family cars if President Donald Trump goes through with a threat to slap tariffs on imported automobiles, trucks and parts, sparking a wave of outrage from Trump’s own political allies.

Acting on instructions from Trump, Commerce Secretary Wilbur Ross late Wednesday launched an investigation into whether automotive imports pose a national security threat, a move that could lead to penalties boosting the cost of a $20,000 car by $5,000. With a price shock like that, the real threat would be to Americans’ financial security, business and GOP leaders said.

Senate Finance Chairman Orrin Hatch (R-Utah), who worked closely with Trump to pass last year’s tax reform bill, called the new investigation “deeply misguided.”

“Taxing cars, trucks and auto parts coming into the country would directly hit American families who need a dependable vehicle, whether they choose a domestic or a global brand,” Hatch said.

Sen. Pat Toomey (R-Pa.) criticized the Trump administration for launching the probe under the “false pretense” that car imports pose a threat to national security, which he said “invites retaliation and weakens our credibility on actual trade disputes.”


It was just the latest in a series of trade moves that’s straining Trump’s relations with fellow Republicans. He’s already raised tariffs on steel and aluminum, threatened to withdraw from NAFTA if Canada and Mexico don’t agree to new terms and brought the United States to the brink of a trade war with China.

The president says he’s shielding American industries with his latest protectionist move. But in an era when manufacturers rely on supplies from multiple countries to make complex products like cars, business leaders worry his tactics could backfire.

“If this proposal is carried out, it would deal a staggering blow to the very industry it purports to protect and would threaten to ignite a global trade war,” Chamber of Commerce President Tom Donohue said in a statement.

Instead of going through normal trade mediation channels, Trump is using authority under Section 232 of the 1962 Trade Expansion Act to impose penalties if imports are deemed a threat to national security. He used that authority already to slap a 25 percent tariff on steel and 10 percent tariff on aluminum. The Commerce Department said the imports of those metals undermined the long-term viability of domestic industry and were therefore a security threat.

Ross is now launching a similar probe on autos and auto parts, which could take up to 270 days to conclude. In an interview on CNBC on Thursday, the former businessman acknowledged it might not seem immediately obvious why someone's desire to buy a Honda or BMW poses a national security threat.

But under Section 232, "national security is broadly defined to include the economy, to include the impact on unemployment, to include a very big variety of things that one would not normally associate directly with military security," Ross said. "It is also the case that economic security is military security, and without economic security, you can't have military security."

Some analysts believe Trump’s move is a ploy to scare Canada and Mexico into agreeing to U.S. demands in the NAFTA talks by threatening the possibility that they could be hit with steep new tariffs on their auto and auto part exports to the United States.


But that would “really screw up” supply chains built between the three countries over the last 24 years of NAFTA, with the effect of making North America a much more expensive region to produce cars than Europe or Asia, said Chad Bown, a senior fellow at the Peterson Institute for International Economics.

Canadian officials on Thursday blasted the national security excuse for imposing tariffs.

The idea that cars made in Canada, very often by U.S. companies using U.S. parts, “could in any way pose a national security threat to the United States is frankly absurd," Canadian Foreign Minister Chrystia Freeland told reporters in Ottawa.

Even U.S. business leaders and trade experts said the push to expand U.S. production makes no sense.

“In fact, the U.S. auto industry is prospering as never before,” the Chamber’s Donohue added in his statement. “Production has doubled over the past decade, it exports more than any other industry, and it employs nearly 50 percent more Americans than it did in 2011. These tariffs risk overturning all of this progress.”

Last year, the United States produced nearly 11 million vehicles — nearly half of which were built by foreign brand manufacturers at facilities in the United States.

The U.S. imported about 8.3 million cars. Top suppliers were Mexico (2.44 million) and Canada (1.83 million), followed by Japan (1.73 million), South Korea (929,419), Germany (491,587) and the United Kingdom (213,321) — all key allies of the United States.

It also exported 1.98 million vehicles, including 912,277 to Canada, 267,473 to China, 165,556 to Germany and 159,768 to Mexico.

Trump did find some cautious support — from unions. “I’m not going to say that I'm 100 percent behind it because I don't know what all those mechanics are yet,” but American workers have been getting the "short end of the stick" on trade for many years, said United Auto Workers President Dennis Williams, who leads a union of 430,000 members.

Adam Behsudi and Megan Cassella contributed to this report.


 

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