The Trump administration’s contention that imported vehicles and auto parts are a threat to U.S. national security received scant support and widespread opposition during the first day of Commerce Department hearings in Washington.
Instead, industry executives, researchers and lobbyists presented reams of anecdotes, forecasts and data showing why President Trump’s proposal to slap a 25% tariff on auto imports would wipe out hundreds of thousands of jobs, slash new vehicle sales and contract one of the nation’s most vital economic engines.
The Center for Automotive Research released a 20-page analysis that estimated job losses of at least 750,000, and 2 million fewer autos sold annually, if the 25% tariff on imported vehicles and parts is imposed. The research gave less dire job and sales predictions if the tariff was reduced to 10% or if imports from Canada and Mexico are exempt.
Prices will increase by between $455 and $6,875 per vehicle, depending on the assembly location and the level of imported content, the report projected.
Here’s the rub. Only 52% of the cars, SUVs and pickup trucks sold in the U.S. are assembled in the U.S. About half of those, or 25% of all sales, are produced in the U.S. plants of Asian and European automakers.
Then half of the 48% of all imported vehicles are assembled in Canada and Mexico, where the North American Free Trade Agreement has minimized tariffs in order to allow a free flow of parts across borders multiple times. Trump administration trade officials have indicated no interest in extending NAFTA. While bi-lateral talks could continue with Canada and Mexico on separate paths, they are currently suspended.
Many of the jobs at risk are American jobs at plants that Japanese and German automakers own through the Southeast and Midwest.
Dozens of workers from Toyota's 10 U.S. assembly plants showed up in Washington to oppose the tariffs.
Toyota estimates the cost of the Kentucky-built Camry will increase by $1,800, the Texas-built Tundra truck by $2,800 and the Indiana-built Sienna minivan by $3,000.
In a Trumpian world all vehicles sold in the U.S. would be assembled here. So that vision would require all vehicles imported from outside the U.S. to be shifted to assembly plants inside our borders.
Not only is that impractical and costly. It ignores market trends.
For example, all automakers in the U.S. have a collective capacity to make 14 million vehicles, said Kristin Dziczek, vice president of industry, labor and economics at Ann Arbor-based CAR. Last year they produced 11 million. So there’s 3 million units of potential production that could be converted.
Except most of it is owned by General Motors, Ford and Fiat Chrysler, and the vast majority of it is now dedicated to making passenger cars as consumers continue shifting to SUVs, crossovers and pickups.
“Converting an under-utilized factory to a new product typically take a year or more,” Dziczek said. “And establishing a new assembly plant requires, on average, two years from the start of construction to the beginning of production.”
Dziczek also warned that her group’s analysis may understate the negative impact from tariffs because it didn’t take into account retaliatory tariffs imposed by trading partners on U.S. exports. Last year U.S. automakers, including the Asian and European companies, and their suppliers exported more than $100 billion of vehicles and parts to 88 other countries.
But the impact on American consumers would come quickly because prices will increase just as the average new vehicle is selling for a record high of more than $35,000. Even without tariffs, interest rates are rising.
“In the past year interest rates on new car loans have risen (0.86 percentage points) and now average 5.82%, with more increases on the horizon,” said Peter Welch, president of the National Automobile Dealers Association. “The average monthly car payment for a new vehicle now stands at $533 per month with an average loan term of 69 months. Our customers are already strapped to make those payments.
“A $4,400 tariff on top of that would increase new car payments to $611 per month (a $78 per month increase) – and put the purchase of a new car out of the reach of many Americans.”
The CAR report estimated that if the full 25% tariff is levied, 117,500 jobs in auto dealerships, or about 11% of all current dealership jobs, could disappear.
One of the few voicing limited support for tariffs was the United Auto Workers union, which has struggled to organize workers at U.S. plants owned by Japanese, German and South Korean automakers.
“It’s our hope the Trump administration will take targeted measures to protect domestic manufacturing,” said Jennifer Kelly, director of the UAW’s research department, but she added that broad tariffs or quotas “could cause harm.”
The hearings continue Friday.
The Commerce Department declined to say when it will decide, but Dziczek said she expects President Trump to decide by late August or early September. The tariffs would take effect 15 days after a decision if he finds the current market situation is a national security threat.
