Howes: Trump auto tariffs answer a question the global industry is not asking
President Donald Trump thinks we need tariffs, perhaps as high as 25 percent, on foreign-made vehicles to safeguard “national security.”
How many trucks do the Russians sell in the United States? Zero. How many cars do the North Koreans export to the States? Zero. How many Iranian-built crossovers, bristling with spyware, ply our suburban streets? Zero. And how many Chinese-brand cars sit in U.S. showrooms? Essentially zero.
The president’s proposed tariffs aren’t a “national security” move against the country’s most active geo-strategic adversaries, whatever his invocation of Section 232 of the Trade Expansion Act of 1962 enabling just that. They're not "protecting" domestic automakers, more profitable now in the United States than anytime in the past 50 years.
They’re a clumsy slap to the collective faces of America’s most stalwart allies and largest trading partners, a sweeping move with the potential to break the industry’s global supply chain, limit choices for consumers and increase prices for everyone.
“I have the growing impression that the U.S. no longer believes in the competition of ideas, but only the law of power," Eric Schweitzer, president of the Association of German Chambers of Commerce and Industry, said in a statement. "We have to consider this as something of a provocation. It fills me with grave concern.”
It should. Because the latest jab in Trump's flailing Trade Wars looks more like a bullying negotiating tactic than a strategy informed by deep understanding of the global auto industry's complexity, capital flows and human resources developed over the past generation.
And there’s no guarantee the brave new world conjured by the president and Commerce Secretary Wilbur Ross would reconstitute the worker’s paradise they envision — not for Detroit automakers who import their own foreign-made vehicles for sale to Americans, not for the diminished United Auto Workers, and not for the 130,000 people working for foreign-owned automakers operating mostly in Trump Country.
They're Americans, too. They vote. Their employers produce and sell the majority of cars, trucks and SUVs bought by American consumers. Their assembly plants are cornerstones of state economies stretching from South Carolina, Alabama, Georgia, Tennessee and Mississippi in the southeast to Ohio and Indiana in the Midwest and Texas further west.
Details naturally are scarce, a by-product of the administration's haphazard decision-making. Hours before the White House confirmed the president's tariff plan, its legislative director, Marc Short, told Bloomberg that Trump's "good news" for autoworkers tweet referred to China's pledge to cut auto import tariffs to 15 percent from 25 percent -- not sweeping tariffs on foreign-made metal coming into the States.
Section 232 investigations typically take months (roughly 11 in the case of the steel and aluminum tariffs levied by the president earlier this year). They include deep analysis by Commerce Department economists, and collect public comment likely to be voluminous and vociferous, according to a senior-level official in a previous administration who is familiar with the process. And they're intended to empower the president to protect vital industries amid a national emergency.
"There is no reason to use this provision to consider imposing tariffs on the automobile industry," U.S. Sen. Bob Corker, R-Tenn., said in a tweet. "And this appears to be either an attempt to affect domestic politics ahead of the election or for some other transactional purpose regarding ongoing trade discussions. This is a dangerous course and should be abandoned immediately."
Without specifics, worst-case scenarios emerge. Would General Motors Co.'s Chinese-built Buick Envision or its Mexican-built full-size pickups get slapped with tariffs that maybe wouldn't apply to Toyota's Texas-built Tundra pickup, Nissan's Mississippi-built Titan pickup or Volkswagen's Tennessee-built Passat sedan?
What about Ford Motor Co.'s all-new Focus, a version of which is set to be imported from China? Or Fiat Chrysler Automobiles NV's Pacifica minivan, the pride of Windsor? Has an administration that struggles to think to next week, much less next year, considered the optics of designing tariffs that penalize GM and reward Toyota, that shame Ford and credit Honda?
Confused doesn't begin to describe what could happen here, if anything happens at all. If the steel and aluminum tariffs are any indication, the press for exemptions from America's closest allies (which happen also to be most of the world's major auto-producing countries) would begin in earnest.
Britain and Germany through the European Union, Japan and South Korea separately, would be certain to seek exemptions, as would Italy, the de facto home of FCA. Grant them because of longstanding ties and current geo-political pressures (North Korea) and who's left to collect auto tariffs from? Canada and Mexico? They're allies, too.
No exemptions, and tariffs levied deep into the global supply chain, could have potentially staggering implications for costs shouldered by the industry and prices raised on consumers. No exemptions would penalize domestic automakers as foreign ones, all of whom could change product allocation decisions overtime.
None of it would change overnight, except perhaps sentiment: for America to win, apparently everyone else needs to lose, big.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.