Carmakers on edge as Trump keeps import-tariff report secret

Keith Laing
The Detroit News
President Donald Trump has floated the possibility of placing 25 percent tariffs on imported vehicles

Washington — The auto industry is on edge as it awaits the verdict of the probe ordered by President Donald Trump into whether imported vehicles pose a national security threat, which could lead the U.S. to impose tariffs as high as 25 percent.

Commerce Secretary Wilbur Ross has submitted his recommendations to the president, the department said in a statement Sunday. It offered no insights into the findings. Trump has 90 days to decide whether to act.

Trump has floated the possibility of placing 25 percent tariffs on imported vehicles, most recently in retaliation for a decision by General Motors Co. to idle four U.S. plants as it continues production in Mexico. The premise of the investigation is being mocked in foreign capitals, and European Union leaders signaled Monday such a move would prompt immediate retaliation. 

John Bozzella, CEO of the Association of Global Automakers that represents foreign-based manufacturers, said uncertainty is "freezing investment" as automakers anxiously wait to see if they will be hit with more tariffs. He noted that automakers already have been hurt by tariffs on foreign steel and aluminum put in place by Trump last year after imports of those commodities were deemed threats to the nation's security.

"American auto workers and consumers both who serve to be harmed by tariffs deserve to know what it's in the report," he said. "The bottom line is tariffs would increase the cost of every car sold in America. And we're certain to see retaliation." 

European Union spokesman Margaritis Schinas said Monday that if the U.S. goes ahead with “actions detrimental to European exports, the European Commission would react in a swift and adequate manner.”

German Chancellor Angela Merkel dismissed the idea that German-made automobiles present a national security threat to the United States.

German Chancellor Angela Merkel dismissed the idea that German-made automobiles present a national security threat to the United States.  In a speech at the Munich Security Conference on Saturday she pointed out that BMW's largest plant is in South Carolina, not Bavaria. 

"So when these cars, because they're built in South Carolina, are now becoming less threatening rather than the ones built in Bavaria that are supposed to be a threat to the national security of America, it's a bit of a shock."

Bozzella said he fully expects other U.S. trading partners to consider retaliatory tariffs if Trump moves ahead with the levies on imported cars. "We've already seen that with steel and aluminum," he said. 

Matt Blunt, president of the American Automotive Policy Council, which lobbies in Washington for Ford Motor Co., General Motors Co. and Fiat Chrysler Automobiles NV, said Detroit manufacturers are also opposed to additional tariffs on imported cars. They fear their vehicles exported to other nations will be hit with higher duties. 

"We believe the imposition of higher import tariffs on automotive products under Section 232 and the likely retaliatory tariffs against U.S. auto exports would undermine – not help – the economic and employment contributions that FCA US, Ford and General Motors make to the U.S. economy," Blunt said in a statement. 

The review process is referred to as a Section 232 investigation in reference to a 1962 trade law that allows the president to impose tariffs if he determines a security threat exists. It was used by the Trump administration to impose tariffs on imported aluminum and steel.

The Center for Automotive Research said in a report released Friday that a 25 percent tariff on imported cars and parts would increase the average cost of all new cars sold in the U.S. by as much as $2,750 if Canada, Mexico and South Korea are exempted due to trade agreements. The price of vehicles imported from places other than Canada, Mexico and South Korea would go up an average of $3,700.

The average price of a new car was $37,149 in January 2019, according to Kelley Blue Book. Assuming a $3,000 down payment and a 4.7 percent interest rate on a five-year loan, the average monthly payment for a new car sold in Michigan would increase by $73 if $3,700 in tariffs were added to that price.

The Center for Automotive Research estimates the proposed duties would reduce car sales by 1.3 million per year in the U.S.

Bozzella chided the Trump administration for keeping the Commerce Department's report on the national security impact of imported cars secret, noting that a similar report about steel and aluminum was made public immediately last year. 

"Uncertainty in this case is not a neutral or a positive here," he said. "The report hanging over the head of the industry is bad for the investment climate, and that in and of itself is a problem." 

Cody Lusk, president of the American International Automobile Dealers Association, which lobbies for internationally branded dealers in Washington, also chided the Trump administration for keeping the Commerce Department's finding secret. He called the entire investigation "bogus."

"Dealers, their employees and the communities they serve are being treated like pawns by their government," he said in a statement. 

Kristin Dziczek, vice president of the Center for Automotive Research, said the uncertainty is hurting the entire industry.

"It doesn't matter what the rules are, just tell us," she said. "If I had to guess, the report probably says there's national security harm. The president will want to load some tariffs up and hold them over people's heads. That raises the question of 'is this the new normal?'"

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Twitter: @Keith_Laing