Auto-import tariff called bad idea

Saying Trump lacks industry savvy, analysts fear U.S. harm

Chinese customs officials inspect cars being loaded for export at a port in Qingdao in eastern China in this 2015 file photo. China said Thursday it will “fi rmly defend” its rights and interests after U.S. President Donald Trump ordered an investigation into whether tariffs are needed on automobile imports on national security grounds.
Chinese customs officials inspect cars being loaded for export at a port in Qingdao in eastern China in this 2015 file photo. China said Thursday it will “fi rmly defend” its rights and interests after U.S. President Donald Trump ordered an investigation into whether tariffs are needed on automobile imports on national security grounds.

DETROIT -- Auto industry analysts and advocates say American consumers will be hurt if President Donald Trump follows through on using "national security" concerns about declining manufacturing jobs to justify adding a major tax on imported trucks, cars and auto parts.

They say his call for tariffs reflects a lack of understanding of the intricacy of the auto-supply chain, and expressed alarm at Trump's move Wednesday to order a Commerce Department investigation of the possibility.

"This is a huge deal," said Kristin Dziczek, vice president of Industry, Labor and Economics at the Center for Automotive Research in Ann Arbor, Mich. "U.S. sales were 17.3 million last year, but the country only produced 11 million light vehicles."

About 2.4 million of those vehicles were exported, mostly to Canada and Mexico, so, Dziczek noted, 8.7 million, or 44 percent of the cars, SUVs and light trucks sold in the United States last year were imported.

"Many of the Canadian and Mexican imported vehicles have U.S.-made engines, transmissions and other major parts and components," Dziczek said. "The biggest exporters from the U.S. to both EU and China are BMW and Daimler."

John Bozzella, chief executive officer of the Association of Global Automakers, called it "a bad day for American consumers."

His group, which represents foreign automakers and parts makers doing business in the United States plus some domestic suppliers, issued a statement immediately condemning Trump's order.

"The U.S. auto industry is thriving and growing," he said. "Thirteen, soon to be 14 companies, produced nearly 12 million cars and trucks in America last year. To our knowledge, no one is asking for this protection. This path leads inevitably to fewer choices and higher prices for cars and trucks in America."

Trump, who used the same provision of trade law, Section 232 of the Trade Expansion Act of 1962, to impose tariffs on steel and aluminum, revealed that plan with steelworkers by his side. This plan, auto executives say, blindsided them.

Trump in March rolled out 25 percent tariffs on steel imports and 10 percent on aluminum, but offered temporary exemptions to the European Union, Canada, Mexico and a number of other allies. India and China are challenging the tariffs before the World Trade Organization, Reuters reported.

Analysts wondered whether Trump's auto announcement wasn't an effort to gain leverage in stalled trade negotiations and a play for votes in the industrial North -- Michigan, Pennsylvania, Ohio and Illinois -- as political parties vie for control of statehouses and the U.S. House as they head into a volatile midterm election cycle.

Others wondered if he was mainly seeking leverage in talks to revise the North American Free Trade Agreement with Canada and Mexico, a deal he has deemed unfair and has vowed since the 2015-16 campaign to renegotiate.

Trump teased the announcement in a tweet Wednesday morning, promising "big news" for U.S. autoworkers.

"After many decades of losing your jobs to other countries, you have waited long enough!" he wrote.

A spokesman for the United Auto Workers declined to comment.

The president announced late Wednesday that he asked Commerce Secretary Wilbur Ross to investigate whether auto imports are a threat to national security.

"Core industries such as automobiles and automotive parts are critical to our strength as a Nation," Trump said in a short statement released by the White House press office.

Imposing tariffs through Section 232 is not fast. He ordered the Commerce Department to investigate steel imports in April 2017, 11 months before he imposed tariffs.

Detroit automakers General Motors, Ford and Fiat Chrysler and others deferred to their advocacy group, the Alliance of Automobile Manufacturers, which declined to put out a statement immediately. It represents a group that's concerned about antagonizing the president.

Still, said Michelle Krebs, executive analyst for Autotrader website, "It is unclear if this will reach fruition as there clearly will be loud objections from many."

Dave Sullivan, manager of product analysis at AutoPacific Inc., said the call for tariffs reflects a lack of understanding about how the industry works.

"There is no vehicle manufactured in the U.S. today that doesn't have at least one part from outside the U.S.," he said. "Every vehicle assembled today requires a logistical symphony due to the far corners of the world that some parts come from. With the exception of Tesla, every vehicle manufacturer imports and exports vehicles based on U.S. consumer demand. GM and Ford have vehicles that come from Asia or Europe. Some are so low volume that they don't warrant manufacturing capacity in the U.S. to support it."

Sullivan said, "This has the potential to reach far and wide and provide little to no benefit to U.S. consumers. This could also be the last straw for an all out trade war, as many countries are growing tiresome of threats."

Fact is, there are also some jobs that Americans just don't want to do, analysts said, such as hand stitching the leather of steering wheels or soldering printed circuit boards in a job market that is already strained with low unemployment.

"This could really backfire," Sullivan said. "Also, the auto industry is very cyclical and if more manufacturing was moved to the U.S., we'd just increase our dependence and exposure to the waves of auto manufacturing and demand."

American automaking is thoroughly integrated into a global system of vehicle and parts production now.

"Republicans used to be supporters of free trade. I'm not sure where that got lost in this administration," Sullivan said.

Information for this article was contributed by Todd Spangler of the Detroit Free Press.

Business on 05/25/2018

Upcoming Events