U.S. allies warn of retaliation if Trump imposes auto tariffs
America’s oldest allies warned Thursday they could retaliate against hundreds of billions of dollars of U.S. exports if President Donald Trump imposes tariffs on imported automobiles and auto parts to protect national security.
“Should this investigation ultimately result in the application of tariffs on autos, Canada will once again be forced to respond in a proportional manner,” said Kirsten Hillman, Canada’s deputy ambassador to the U.S., at a Commerce Department hearing.
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That threat was magnified by European Union Ambassador David O’Sullivan, who said the retaliation would probably hit far more American goods than countries have already targeted with import taxes in response to Trump’s new duties on steel and aluminum.
“Import restrictions resulting from the present investigation could result in countermeasures on a significantly higher volume of U.S. exports, which we estimate at $294 billion, around a fifth of total U.S. exports in 2017,” O’Sullivan said. “For its part, the EU is proceeding with internal preparations in the event the U.S. were to adopt trade-restrictive measures.”
Trump wants to start taxing imports of foreign cars prior to the midterm elections this fall, seeing it as a good political play in Rust Belt states like Michigan and Ohio. To do that, he’s relying on the same rarely used law, known as Section 232 of the 1962 Trade Expansion Act, that he used to hit steel and aluminum imports. But the planned move has drawn sharp opposition from Trump’s fellow Republicans in Congress, and it’s even said to be controversial among Trump’s own advisers.
It’s also opposed by both auto manufacturers and makers of auto parts, who warned on Thursday it would drive up the price of cars by thousands of dollars and cause the loss of anywhere from 200,000 to 600,000 jobs, depending on the extent of trade retaliation.
The American Automotive Policy Council, which represents Ford, GM and Fiat Chrysler, said its analysis showed that increased auto tariffs, combined with the higher aluminum and steel duties Trump has already imposed, would hurt, not help, the industry.
“By increasing the cost to manufacture a car, the tariffs will lead to higher vehicle prices for all automakers — foreign and domestic,” Matt Blunt, the auto group’s president, told administration officials. “These higher costs will, in turn, lead to lower demand and lower U.S. auto sales and production. Ultimately, this will lead to fewer jobs in the auto industry.”
Auto-state lawmakers, such as Sen. Doug Jones (D-Ala.) and Rep. Jackie Walorski (R-Ind.), took part Thursday in a rally on Capitol Hill to oppose higher duties on foreign cars.
Jones said at the rally that he and Sen. Lamar Alexander (R-Tenn.) would introduce legislation next week “to try to put the brakes on these tariffs because, at the end of the day, tariffs are taxes, and what the administration is trying to do today is to impose new taxes on the American people.”
Walorski on Wednesday sent Commerce Secretary Wilbur Ross a letter, signed by 149 lawmakers from both parties, urging the administration to proceed with caution in its investigation of whether imported automobiles and parts negatively affect national security.
“I agree with President Trump that we need to ensure a level playing field with America’s trading partners, but imposing costly tariffs on this vital industry does threaten our nation’s economic growth and puts our nation’s manufacturing jobs at risk,” Walorski said.
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 that sum in 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).
A forthcoming paper by the Peterson Institute for International Economics estimates that the potential new tariffs would raise car prices from $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.
Ross, in opening remarks at the all-day hearing, sought to reassure automotive companies, industry groups and trading partners that the Trump administration has yet to make a decision as to whether to impose new tariffs.
“It’s clearly too early now to say if this investigation will ultimately result in a Section 232 recommendation on national security grounds, as we did earlier with steel and aluminum,” Ross said. “But President Trump does understand how indispensable the U.S. automobile industry is.”