Trump considers tariffs on vehicle imports
Washington — President Donald Trump said Wednesday he is considering imposing tariffs on vehicle imports, capping a day of speculation prompted by a promise of “big news” for the U.S. auto industry.
The announcement, which came hours after a morning tweet that touched off speculation in Detroit and Washington, sets up a fight that could embroil foreign automakers who tout the millions of cars they build in the United States and Detroit manufacturers who import cars from other countries themselves.
“Today, I met with Secretary of Commerce Wilbur Ross to discuss the current state of our automobile industry,” Trump said in a statement. “I instructed Secretary Ross to consider initiating a Section 232 investigation into imports of automobiles, including trucks, and automotive parts to determine their effects on America’s national security. Core industries such as automobiles and automotive parts are critical to our strength as a Nation.”
The move, following study by the Commerce Department, likely would mirror the steel and aluminum tariffs Trump enacted under a section of federal law that allows the president to impose tariffs if he determines a national security threat exists. A proposal to do the same for imported cars would likely encounter stiff resistance from Congress, from automakers and from key constituencies, including car dealers and employees of foreign-owned automakers around the country.
Even the likes of Detroit’s Big Three could be impacted, as each import their own foreign-made vehicles from China, Germany, South Korea, Italy and Brazil for sale to American consumers. Foreign-owned automakers, most of them rooted in states that helped deliver Trump to the presidency, produce the majority of cars, trucks and SUVs sold to Americans.
General Motors Co. and Ford Motor Co. declined comment Wednesday.
Trump touched off the furor with a morning tweet that said, “there will be big news coming soon for our great American Autoworkers. After many decades of losing your jobs to other countries, you have waited long enough!”
The tweet fueled confusion with broad implications for the global auto industry, its shareholders and its employees.
White House legislative director Marc Short told Bloomberg the announcement was related to a reduction in Chinese tariffs on imported cars to 15 percent that industry analysts have said makes little difference to U.S. automakers.
There also was speculation Wednesday in Detroit and Washington that Trump’s announcement could be related to a deal with Canada and Mexico that would boost the percentage of domestic parts that will be required for a car to qualify for duty-free treatment under the North American Free Trade Agreement.
Trump initially did little to tamp down the speculation. During a question-and-answer session with reporters at the White House later Wednesday morning, Trump declined to say if the tweet was related to NAFTA. The administration wants to renegotiate NAFTA so automakers would have to increase the domestic parts content in vehicles assembled in North America — or face tariffs.
“I think the auto workers and the auto companies of this country are going to be very happy with what is going to happen,” Trump said. “You’ll see very soon what I’m talking about. NAFTA is very difficult. Mexico is very difficult to deal with, Canada has been very difficult to deal with it. They have been taking advantage of the United States for a long time.”
Trump continued: “I am not happy with their requests. I will tell you in the end, we win. We’ll win big. We’ll get along with Mexico, we’ll get along with Canada. I will tell you they have been very difficult to deal with. They’re very spoiled because nobody has done this. But I will tell you that what they asked for is not fair. Our autoworkers are going to be extremely happy.”
China is the world’s largest automobile market with more than 25 million in car sales last year, compared with 17.23 million in the United States. But most major automakers build cars for Chinese customers in China due to rules requiring global automakers to work through state-owned partners, effectively forcing foreign players to share technology with potential competitors. Last year, only 267,473 new cars and trucks were exported to China from the U.S., according to the Statista.com.
“If you give us a level playing field, we want to compete and win based on merit,” General Motors Co. CEO Mary Barra told Goldman Sachs CEO Lloyd Blankfein at a “Talks at GS” session Wednesday in New York. “There’s opportunity there to create a level playing field, which we don’t have today. I’d like to see it be level — the same going back and forth. Just open up the markets and let us compete.”
John Bozzella, CEO of the Washington-based Association of Global Automakers that represents foreign-based manufacturers, offered a starkly different take: “If these reports are true, it’s a bad day for American consumers. The U.S. auto industry is thriving and growing. Thirteen, soon to be fourteen 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 has had a hot and cold relationship with automakers during his first two years in office. He sided with them largely over auto emissions standards that resulted in a move to relax rules requiring that automakers’ fleets average of more than 50 mpg by 2020. But they clashed with Trump when it comes to trade. And he has hectored foreign owned manufacturers about building more cars in the United States — a line of attack he repeated in a recent White House meeting with industry CEOs.
Global Automakers has noted through its “Here For America” campaign that internationally based carmakers employ 110,000 people in plants that are mostly located in states that voted for Trump. Among them are Honda in Alabama, Georgia, Indiana and Ohio, as well as Toyota in Alabama, California, Indiana, Kentucky, Mississippi, Missouri, Tennessee, Texas and West Virginia.
Additionally, Volkswagen builds cars in Trump-friendly Tennessee; Hyundai and Kia build autos in Alabama and Georgia; BMW builds vehicles in South Carolina, where Volvo Cars is planning to open a production facility; Mercedes-Benz builds cars in Alabama, Indiana and South Carolina, and has its U.S. headquarters in Georgia.
Automakers have pushed back against Trump’s efforts to change rules for duty-free treatment under NAFTA that would result in higher requirements for car parts made in the U.S., saying it would increase vehicle prices and lead to lost U.S. jobs as carmakers find it less expensive to build cars in other countries.
Trump pressed automakers in a recent White House meeting that included CEOs from each of Detroit’s Big Three to build more vehicles in the U.S. The session was the first joint trip by automakers to the White House since January 2017. GM’s Barra, Ford’s Jim Hackett and Fiat Chrysler Automobiles NV’s Sergio Marchionne were there. Also attending were executives from Toyota, Nissan, Mercedes-Benz, BMW, Honda, Hyundai and Volkswagen.
The White House said initially the topic of the meeting would be gas-mileage rules that are currently under review. But Trump used his audience with the auto chiefs to demand they produce more of their products in the U.S. and he prodded them to import fewer cars.
“So these are the biggest in the world and we’re going to be talking to them. And we want them to build more cars in the United States,” Trump said in the meeting. “And also, build them here and ship them overseas. We’re doing a reverse act, and that’s going to be something, I think, that’s happening, and we see it happening. A lot of it has to do with the great tax cuts and tax incentives that people have been given. And we have other incentives coming.”