Big day for auto tariffs

 In Politics

BIG DAY FOR AUTO TARIFFS — The Commerce Department is holding a day-long hearing on Thursday to hear from 45 witnesses in their investigation into whether imported automobiles and parts present a national security threat and should be subject to tariffs of up to 25 percent. It is not likely to go well for proponents of such tariffs. Per POLITICO trade ace Doug Palmer, all but one of the scheduled witnesses will testify AGAINST the tariffs. The U.S. automotive industry almost uniformly opposes the tariffs.

Republican lawmakers also hate the idea and are mounting a bi-partisan effort to block them, led by Sens. Doug Jones (D-Ala.) and Lamar Alexander (R-Tenn.). Both states feature lots of automobile plants.

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From Doug: “Just one of out 45 witnesses today is expected to testify in favor of imposing tariffs on autos and auto … The lone exception is Jennifer Kelly, research director of the United Automobile Workers, which revealed its support in public comments filed last month with the department.

“Nearly all of the 44 other witnesses filed comments expressing opposition to President Donald Trump’s threat to impose a 20 or 25 percent duty on foreign-made autos and parts. Those include the Alliance of Automobile Manufacturers, which represents Ford, GM, Fiat-Chrysler, as well as foreign brands such as Mercedes-Benz, Honda, Toyota, Hyundai, Volkswagen, Nissan and Subaru.

Auto dealers and parts manufacturers also will testify in opposition to the tariffs, which a forthcoming paper by the Peterson Institute for International Economics estimates would raise car prices by $1,408 to $2,057 for a $17,000 vehicle; $2,093 to $3,066 for a $22,500 vehicle and $4,708 to $6,972 for a $35,000 vehicle.

THE NUMBERS — Last year, the United States imported $360 billion worth of autos and auto parts from more than a dozen countries. Mexico accounted for $116 billion, about half of which was parts, followed by Canada ($62 billion), Japan ($56 billion), Germany ($31 billion), South Korea ($24 billion), China ($19 billion) and the United Kingdom ($10 billion).

MM HEARS that there is very little support within the White House and even at USTR for the unilateral auto tariffs with many senior advisers believing they would be both a political and economic loser.

The hope is that when EU President Jean-Claude Juncker visits the White House next week he will bring a proposal strong enough on reducing EU import tariffs on American cars that it will dissuade Trump from pushing forward. Plenty of rumors floating around about what Juncker might offer but nothing solid.

SPEAKING OF TARIFF IMPACTS — From the latest Fed Beige Book: “[M]anufacturers in all Districts expressed concern about tariffs and in many Districts reported higher prices and supply disruptions that they attributed to the new trade policies.”

FIRST LOOK: GRIM OUTLOOK ON CREDIT — Via release this a.m. from the Int’l Association of Credit Portfolio Managers: “Respondents to the latest IACPM Credit Outlook Survey forecast wider credit spreads and rising credit defaults across the globe. The IACPM Three Month Credit Spread Outlook Index is minus -66.0 in the latest reading, while the Aggregate 12 month Credit Default Outlook Index is negative -51.1.

“The results are the most negative since the Credit Spread Index was minus -69.1 in the second quarter of 2008 and the Credit Default Index was negative -52.8 in the second quarter of 2016.”

KRANINGER’S BIG DAY — Via POLITICO’s Katy O’Donnell: The Senate Banking Committee will consider the nomination of Kathy Kraninger to lead the CFPB this morning. Kraninger is a relatively unknown quantity with no record on financial policy, so it’s possible Democrats will bait her with a few financial questions right off the bat.

Otherwise, they’re expected to focus on Kraninger’s management experience – the GOP’s big selling point for her nomination. A staff report for Sen. Elizabeth Warren released Wednesday suggested Democrats will attack three areas of Kraninger’s tenure as an OMB associate director: her role in the development of the “zero-tolerance” border policy, her handling of disaster aid for Puerto Rico, and her views on affordable housing and the administration’s rent reform proposal.

KRANINGER PLEDGES COST-BENEFIT REVIEW – Per POLITICO’s Zachary Warmbrodt: Kraninger will tell senators this morning that one of her top priorities as director of the CFPB will be to make the bureau “fair and transparent,” which she says can be accomplished in part by “robust use of cost-benefit analysis,” according to prepared testimony for her Senate Banking Committee hearing.

Kraninger’s words will likely delight GOP senators who see the CFPB as federal bureaucracy run amok. Kraninger will go on to tout the importance of taking public feedback on regulations to ensure “the proper balancing of all interests” and to help with the consideration of tailoring rules “to reduce the burden of compliance, particularly on consumers and smaller marketplace participants.” Kraninger will also pledge to take aggressive action against fraudsters and to limit data collection.

NOT LIKELY TO BE A FRIENDLY HEARING — Per a banking lobbyist: “I would not expect to see addresses for holiday cards exchanged after the hearing. Unfortunately, the Bureau remains the most political regulatory agency in perception and in reality.

“Ms. Kraninger’s extensive qualifications to effectively manage the CFPB’s 1600 employees and over half billion dollar budget must obviously stand on their own. It is not lost on many that those questioning Ms. Kraninger’s resume never voiced the same concerns regarding Acting Deputy Director English, a person with little budgetary or administrative experience.”

GAS PRICES AND THE MIDTERMS — Bloomberg’s Liam Denning: “It is 110 days to the midterms, and you will likely visit the gas station many times between now and then. Hence there’s an all-hands effort to keep a lid on pump prices. Pushed by the tweeter-in-chief, Saudi Arabia has executed a supertanker-size u-turn, pushing barrels back onto the market.

“Congress, meanwhile, threatens new legislation allowing lawsuits against OPEC (not for the first time). And there is now open debate about … Trump dipping into the Strategic Petroleum Reserve for a little relief … A close look at the most competitive House races shows why Trump may well do so. Higher pump prices are especially painful if you drive more and earn less than average – which happens to be more common in red states”

GOOD THURSDAY MORNING — One more day until baseball returns! Email me on [email protected] and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver on [email protected] and follow her on Twitter @AubreeEWeaver.

JUST RELEASED: View the latest POLITICO/AARP poll to better understand Arizona voters over 50, a voting bloc poised to shape the midterm election outcome. Get up to speed on priority issues for Hispanic voters age 50+, who will help determine whether Arizona turns blue or stays red.

What role will Hispanic voters over 50 play in Arizona this fall? Read POLITICO Magazine’s new series “The Deciders” which focuses on this powerful voting bloc that could be the determining factor in turning Arizona blue.

** A message from the Bank Policy Institute: The Bank Policy Institute (BPI) launches this week. BPI is a public policy, research and advocacy group. BITS is the technology policy division of BPI, serving as the industry’s executive forum on cybersecurity, innovation, technology and related regulation. Learn more about us at **

THIS MORNING ON POLITICO PRO FINANCIAL SERVICES — Zachary Warmbrodt on lawmakers’ struggle to reach a deal that would keep that National Flood Insurance Program up and running. To get Morning Money every day before 6 a.m., please contact Pro Services at (703) 341-4600 or [email protected]

DRIVING THE DAY— Trump at 3:00 p.m. hosts a “Pledge to the American Worker” event at the White House that may include some kind of executive order on re-skilling. It’s at least partly an Ivanka Trump production … Senate Banking holds a hearing for CFPB nominee Kathy Kraninger at 10:00 a.m. … Commerce hearing on auto tariffs begins at 8:30 a.m. … Index of Leading Indicators at 10:00 a.m. expected to rise 0.4 percent …

ALSO TODAY — CNBC is live from the White House ahead of the workers event and will feature interviews in the morning with Wilbur Ross, Peter Navarro, Ivanka Trump, Kevin Hassett and Mick Mulvaney.

FIRST LOOK— New Bloomberg Businessweek Cover: “Ready for This? What Trump’s Trade War Really Means.” Story by Peter Coy: “There are two reasons to expect that Trump’s impact on the world order will be lasting. One is that his actions are eroding trust among both allies and rivals. Once gone, trust is hard to reestablish, even if the next president turns out to be a devoted internationalist.

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