Carmakers fret latest round of U.S.-China tariffs

Keith Laing
The Detroit News

Washington — Automakers stand to be exposed to new tariffs on goods ranging from tires to transmission and brake parts that have been announced by President Donald Trump and China in a burgeoning trade war.

The Trump administration levied a new 10 percent tariff on $200 billion worth of Chinese goods on Monday night. The tariffs, set to take effect on Sept. 24, are scheduled to increase to 25 percent on Jan. 1. China retaliated with $60 billion worth of new tariffs of its own.

Workers install an engine on a BAIC SUV chassis frame at the Chinese automaker BAIC ORU assembly plant in Beijing in August. Their tariff war with the U.S. grabs headlines, but China faces bigger economic challenges than U.S. President Donald Trump. Communist leaders who are trying to nurture more sustainable growth in the world’s No. 2 economy clamped down on bank lending to rein in surging debt.

Automakers have decried the new tariffs. They say the new levies on both sides will hamper their ability to import or export cars and the parts needed to repair them, a complaint that so far has failed to gain traction with the Trump White House.

"Applying an additional $200 billion in tariffs on China’s exports to the United States will further harm the U.S. auto industry and American workers and consumers," John Bozzella, CEO of the Association of Global Automakers, which lobbies for foreign-owned car manufacturers, said in a statement. 

"Retaliation by China to tariffs already in place has made U.S. auto exports uncompetitive and will eliminate our bilateral auto trade surplus," Bozzella continued.  "We support the administration’s efforts to negotiate long-term solutions to the serious issues of (intellectual property) protection and investment restrictions but are concerned that escalating trade tensions will not produce the desired results.”

Among the new tariffs announced by the Trump administration are "gaskets, washers and other seals, of noncellular vulcanized rubber other than hard  rubber, for use in automotive goods" and "wastes of metal-pickling liquors, hydraulic fluids, brake fluids and anti‐freeze fluids." 

The new round of U.S. levies also includes "transmission shafts and cranks other than camshafts and crankshafts" and "new pneumatic radial tires, of rubber, of a kind used on motor cars (including station wagons and racing cars)." 

Michigan's agricultural sector also stands to take another hit under the latest round of tariffs. Commodities such as soybeans, wheat and corn starch are included in the Trump administration's list of goods that are going to be slapped with new tariffs on Sept. 24. China has previously targeted U.S. goods like coffee, honey and industrial chemicals, which would also affect Michigan companies such as Midland-based Dow Chemical Co. 

Trump defended the tariffs as a bid to protect American workers and businesses: "When you have $375 billion in trade deficits, and then many billions of dollars of other liabilities of all different types, you have to do something about it," he said in a press conference Tuesday.

"We are the piggy bank to the world," Trump continued. "We’ve been ripped off by China, we’ve been ripped off by … the European Union … we’ve been ripped off by everybody. I want to protect the American worker, the American farmer, the ranchers, the companies." 

China’s Finance Ministry said its tariff increases are aimed at curbing “trade friction” and the “unilateralism and protectionism of the United States.”

There was no word on whether China would back out of trade talks it said it was invited to by the United States. But a Chinese Commerce Ministry statement said the U.S. increase “brings new uncertainty to the consultations.”

The two countries have already imposed import taxes on $50 billion worth of each other’s goods. President Trump threatened to add an additional $267 billion in Chinese imports to the target list if China retaliated for the latest U.S. taxes. That would raise the total affected by U.S. penalties to $517 billion, covering nearly everything China sells to the United States.

The American Chamber of Commerce in China warned Tuesday that Washington is underestimating Beijing’s determination to fight back: “The downward spiral that we have previously warned about now seems certain to materialize,” said William Zarit, the chamber’s chairman.

At the root of the trade war are U.S. complaints about China’s plans to try to overtake U.S. technological supremacy. Those plans include “Made in China 2025,” which calls for creating powerful Chinese entities to compete in robotics and other fields. The U.S. says the plans are based on stolen technology, violate China’s market-opening commitments and might erode American industrial leadership.

American companies and trading partners, including the European Union and Japan, have longstanding complaints about Chinese market barriers and industrial policy. But they object to Trump’s tactics and warn the dispute could chill global economic growth and undermine international trade regulation.

Charlie Chesbrough, senior economist and senior director of industry insights for Cox Automotive, said the latest tit-for-tat on tariffs between the U.S. and China is "more bad news" for the auto industry. 

"Certainly parts are going to go up across the board," he said. "It seems like every vehicle will be impacted in some form or fashion, and that is bad news for consumers." 

Car buyers will likely start feeling the pinch at U.S. dealerships, he added, especially if the tariffs increase to 25 percent next year as scheduled. Already there are signs of new car buyers making purchases earlier than they normally would to avoid higher sticker prices that are expected after the tariffs take effect, he said. Additionally, used car prices are rising as the new car market tightens. 

"If there's a tariff tax on new cars, used vehicle perceived values are going to be higher as well," he said.  

Chesbrough said there is still hope among some economic observers that the U.S. and China will back away from the trade war before it gets to that point, however. 

"Wall Street is still expecting this all just bluster," he said. "The stock market is up today because they thought the retaliation from China was going to be worse. There's plenty of room for everyone to back away. It also could go the other way, though." 

Business groups have pleaded with Trump to dial back the temperature on trade with China, even though they generally agree with his points about intellectual property theft and other trade issues that have been raised by the administration. 

U.S. Chamber of Commerce CEO Thomas Donohue said in a statement that Trump's decision to move ahead with the tariffs over the objection of the business community "makes clear that the administration did not heed the numerous warnings from American consumers and businesses about rising costs and lost jobs on Main Street, in factories, and on farms and ranches across the country.

“The U.S. economy runs on pro-growth policies, but that’s not what tariffs on $200 billion worth of Chinese goods deliver," Donohue added. "The administration has serious issues to resolve with China on market access, unfair subsidies, technology theft, and cybersecurity. But there are less harmful ways to truly achieve free and fair trade with China."

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Twitter: @Keith_Laing

Associated Press contributed.