Carmakers to Trump: Tariffs would raise prices, kill jobs

Keith Laing
The Detroit News

Washington — The auto industry implored the Trump administration on Thursday to pump the brakes on a proposal to impose tariffs as high as 25 percent on imported cars and auto parts under the guise of boosting national security. Such levies, they warned, would result in higher car prices and industry-wide job losses. 

Speaking at an all-day comment hearing hosted by the U.S. Department of Commerce, Jennifer Thomas, vice president of federal affairs at the Washington-based Alliance of Automobile Manufacturers, which lobbies for most major automakers — domestic and foreign —  was emphatic. "Higher auto tariffs will harm American families and workers, along with the economy," she said.

In this Jan. 25, 2018 file photo, an employee of Hyundai Motor Co. waits for customers at the company's showroom in Seoul, South Korea. Hyundai Motor Co.'s labor union said Thursday, July 12, 2018, steep auto tariffs that the U.S. is considering could cost tens of thousands of U.S. jobs.


"Simply put, auto tariffs are a massive tax on consumers," she said. "Industry analyses show that a 25 percent tariff would raise the price of an imported car nearly $6,000 and the price of a U.S.-built car $2,000. This would equate to an $83 billion tax on U.S. consumers that would trigger a domino effect on the industry and economy. When vehicle prices rise, demand drops. Lower demand means less production. And when production declines, job losses follow." 

At the request of President Donald Trump, the U.S. Commerce Department is conducting an investigation of the national security impact of allowing imported cars to come into the U.S. In making the request, Trump cited a section of federal law that allows the president to impose tariffs if he determines a security threat exists. 

The tariff investigation process, known as a Section 232 investigation in reference a trade law passed in 1962, was used recently by the Trump administration to propose tariffs on imported aluminum and steel. The Trump administration has argued that auto imports pose a similar threat.

The investigation and implementation could take up to a year, if the example of the metals tariff is any indication.

The Commerce Department received 2,356 mostly negative written comments ahead of Thursday's hearing. 

Groups that lobby for automakers in Washington questioned on Thursday the idea that imported cars pose a national security threat. 

"Our companies are extremely proud of the contributions they've made to the United States in peace and war, and from our perspective, there is no evidence that automotive imports pose a threat to our national security," said Matt Blunt, president of the American Automotive Policy Council, which lobbies for Ford Motor Co., General Motors Co. and Fiat Chrysler Automobiles.

"We do fully understand that economic security is a vital part of our nation's national security, and in fact, we have concluded that tariffs under Section 232 would diminish the economic contributions that FCA, Ford and GM make to our nation's economy today," Blunt continued. "This is an outcome that would be counterproductive to the administration's intended goals for the domestic auto industry."   

Peter Welch, president of the National Automobile Dealers Association, added that his organization's members believe "there is no basis for a finding by the department that the importation of autos or auto parts to the United States threatens the country's national security."  

Welch cited a Center for Automotive Research study commissioned by his group that showed that a 25 percent on vehicle imports and parts would cause the price of a typical vehicle sold in the United States to rise by $4,400. It found that prices of U.S.‐assembled vehicles would also rise by $2,270 due to an increase in the cost of imported vehicle parts, adding $2,270 to the price. For a typical imported vehicle, tariffs would raise consumer prices by $6,875.

Jennifer Kelly, research director at the United Auto Workers union, cheered the Trump administration for investigating the impact of vehicle imports on the nation's economy, but stopped short of fully endorsing the idea of imposing tariffs under the guise of national security. 

She said the UAW hopes that the Trump administration will take "targeted measures to boost domestic manufacturing" at the conclusion of the tariff investigation. 

"We know the auto industry is a global industry with long, complicated, well-established, supply chains," Kelly said. "We know that any rash actions could have unforeseen consequences including mass layoffs of American workers, but that doesn't mean that we should do nothing."  

John Hall, an engine maintenance team member for Hyundai Motor Manufacturing Alabama, traveled to Washington on behalf of South Korean automakers to inform the Trump administration of its commitment to U.S. workers. 

“I’ve worked for Hyundai since 2005," Hall said. "Since then Hyundai and its suppliers have invested billions of dollars, and I’ve seen firsthand how these investments have transformed the Alabama economy and created thousands of good manufacturing jobs.

"Like any businesses, ours has faced challenges and downturns," Hall continued. "But Hyundai didn’t abandon its American workers during difficult times. Instead, Hyundai stuck with American, stuck with Alabama and stuck with the American worker through good times and bad.”

U.S. Commerce Secretary Wilbur Ross said at the beginning of Thursday's hearing that the Trump administration has not made a final decision.

"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 and as we have initiated regarding the uranium industry," Ross said. "But President Trump does understand how indispensable this industry is." 

While the Commerce Department was taking testimony about the tariff proposal, the Association of Global Automakers, which represents international carmakers, conducted a "drive-in" in which domestic workers at foreign-owned plants drove cars they build to Capitol Hill to draw attention to the potential negative impact of tariffs. The auto workers were joined by U.S. Sen. Doug Jones, D-Ala., and U.S. Reps. Drew Ferguson, R-Ga., and Jackie Walorski, R-Ind. 

“The broad U.S. auto industry is flourishing and highly competitive, employing almost ten million Americans. We do not need and did not ask for these tariff protections,” said John Bozzella, president and CEO of Global Automakers, who also testified Thursday. “There is no national security justification for taxing imports of vehicles and parts or discriminating between global companies headquartered here or in allied countries. If the Commerce Department’s investigation leads to tariffs, retaliation against U.S. exports is inevitable.”

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Twitter: @Keith_Laing